As described in a previous alert, Subchapter V is a part of Chapter 11 of the Bankruptcy Code meant to make the process more expedited and accessible, primarily for small businesses. Subchapter V and “traditional” Chapter 11 cases share the requirement that administrative claims (i.e., claims at the top of the priority hierarchy by virtue of having accrued during the case and provided benefit to the debtor) must be paid in full to confirm a plan unless otherwise agreed between the parties. Once a plan is confirmed, the debtor may seek to modify it given a change in circumstances, but that is not always successful.
In the case of Sticky’s Holdings LLC, et al. (d/b/a Sticky’s Finger Joint, a New York City–based fast-casual restaurant chain specializing in gourmet chicken fingers and unique sauces), the Bankruptcy Court for the District of Delaware denied, in part, the Subchapter V debtors’ proposed plan modifications. While a change in circumstances following the November 2024 plan confirmation—including cost increases and congestion pricing—was found to merit certain plan modifications, the proposal to pay administrative creditors less than 100 percent of their allowed claims without their consent was rejected. In a June 9, 2025, bench ruling, Bankruptcy Judge Stickles made it clear that landlords, vendors, and others with allowed administrative claims that provided goods or services utilized by the debtors post-petition must be paid in full, citing this requirement as a bedrock bankruptcy principle.
In a traditional Chapter 11 case, this issue likely would not have arisen months after plan confirmation, and it might not be as important. Administrative claimants in traditional Chapter 11 cases are generally required to be paid by plan confirmation, the post-confirmation period typically deals with unsecured claims, and ownership of the debtors isn’t usually at stake. In a Subchapter V case, though, administrative creditors are permitted to be paid their allowed claims over time as part of a three- to five-year plan, and the owners of the debtor’s business may be able to retain their equity interests even if a class of unsecured creditors who are not repaid in full vote against confirmation of the plan. If the Sticky’s debtors can’t pay allowed administrative claimants in full under the plan or otherwise reach agreements with those creditors, their plan may fail and the cases may be dismissed, opening the debtors to a flood of litigation. Alternatively, the cases may be converted with a Chapter 7 trustee in charge of liquidating the debtors and, likely, the owners holding worthless equity.
This is a good reminder that, while Subchapter V is part of Chapter 11, there are significant differences that must be considered to preserve certain core bankruptcy principles. Experienced counsel will be able to provide guidance to ensure these factors are properly taken into account.
For more detail on Subchapter V as it relates to retail bankruptcies specifically, check out Issues 14 and 15 of Bankruptcy Basics for Retail Landlords.
The Thought Leadership Committee of Barclay Damon’s Restructuring, Bankruptcy & Creditors’ Rights Practice Area issues alerts and blogs on an ongoing basis to keep clients, colleagues, and friends up to date on important developments in the insolvency space. If you have any questions regarding the content of this alert, please contact the author, Scott Fleischer, partner, at sfleischer@barclaydamon.com; Janice Grubin or Jeff Dove, Restructuring, Bankruptcy & Creditors’ Rights Practice Area co-chairs, at jgrubin@barclaydamon.com and jdove@barclaydamon.com; or Robert Wonneberger, Thought Leadership Committee chair, at rwonneberger@barclaydamon.com.