First-Day Motions in Subchapter V: Keeping Your Business Running

Melissa Youngman, PA represents businesses in Chapter 11 and Subchapter V cases before the United States Bankruptcy Court for the Middle District of Florida, including the Orlando, Jacksonville, Tampa, and Fort Myers divisions, with a primary practice footprint in Orange, Seminole, Osceola, Volusia, Lake, and Brevard counties.

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Filing for Subchapter V bankruptcy triggers the automatic stay under § 362, halting collection calls, foreclosure, and most litigation the moment the petition lands. That protection is immediate and comprehensive. What is not automatic is the authority to keep running the business.

On the day of filing, or within the first twenty-four hours, a Subchapter V debtor-in-possession typically files a package of emergency motions asking the court for permission to do what any functioning business must do: pay employees, use operating cash, keep the lights on, and pay the vendors without whom the doors cannot stay open. These are called first-day motions, and in most small business reorganization cases filed in the Middle District of Florida, they are among the most consequential documents of the entire case.

This post covers the first-day motions most commonly filed in a Subchapter V case, what each one does, and how the Subchapter V process handles them differently than traditional Chapter 11.

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The First-Day Window and Why It Matters

First-day motions are not a procedural formality. When a business files for bankruptcy, employees wonder whether their next paycheck will clear, utilities gain new rights to demand deposits, vendors reassess credit terms, and banks may freeze accounts pending review. All of that happens within hours of the public docket entry. The debtor-in-possession's ability to respond quickly to each of those pressures often determines whether the reorganization has any chance to succeed.

Section 1187 of the Bankruptcy Code governs a Subchapter V debtor-in-possession's duties and its authority to operate. That section incorporates much of the traditional Chapter 11 DIP framework into Subchapter V. Consequently, the same legal mechanisms that govern first-day relief in a full Chapter 11 apply in Subchapter V, but the scale is smaller and the timeline is faster. [See our hub page on the Subchapter V Timeline.]

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Cash Collateral: The Motion That Unlocks Operating Cash

For most small businesses, the most urgent first-day issue is cash. A restaurant group in Kissimmee, a specialty contractor in Lake Mary, or a healthcare practice in Winter Park typically holds its operating revenue in an account pledged to a secured lender as collateral. Under § 363(c)(2) of the Bankruptcy Code, a debtor-in-possession may not use that cash collateral without either the secured creditor's consent or a court order expressly authorizing it.

Without a cash collateral order in place, the business cannot make payroll, pay rent, or purchase inventory from the date of filing forward. The cash collateral motion asks the court to authorize that use, sets out what adequate protection the debtor will provide to the secured creditor in exchange (typically replacement liens, periodic reporting, and budget compliance), and proposes a spending budget that governs cash flow during the case.

Given that the first § 1188 status conference is scheduled within 60 days of filing, there is strong practical incentive to obtain cash collateral consent from the senior lender before the petition is filed. Pre-petition outreach to that lender is not an optional step in a well-prepared Subchapter V case.

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Employee Wages: Protecting Payroll From Day One

Employees are priority creditors. Section 507(a)(4) of the Bankruptcy Code grants fourth-level priority to wages, salaries, and commissions earned within 180 days before the petition date, up to a per-employee statutory cap. The wages motion asks the court to authorize payment of pre-petition wages up to that statutory amount so that employees are paid on the next regular pay date and remain focused on the business rather than searching for other employment.

The wages motion typically covers payroll processing fees, employee expense reimbursements, health insurance and benefit premiums, and payroll taxes as well. Courts in the Middle District of Florida regularly grant wage motions on an expedited basis where the amounts are supported by payroll records and the motion is properly noticed to the U.S. Trustee.

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Cash Management and Bank Accounts

Banks and payment processors sometimes freeze accounts on notice of a bankruptcy filing, treating the filing as a default event. A cash management motion authorizes the debtor to maintain its pre-petition bank accounts, continue operating its existing cash management system (which may span multiple accounts, ACH relationships, and payment processors), and run its treasury function without interruption from the first day of the case.

For businesses with more than one operating account, a cash management order prevents having to rebuild those banking relationships in the middle of a reorganization, a disruption that can cascade into payroll failures, vendor holds, and customer-facing service interruptions.

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Utilities: Preventing Service Cutoffs Under § 366

Section 366 of the Bankruptcy Code gives utility providers the right to demand adequate assurance of future payment within 20 days of the bankruptcy filing, before they are required to continue service. If adequate assurance is not provided within that window, the utility may discontinue service.

A utilities motion asks the court to find that a proposed form of adequate assurance satisfies § 366. That assurance typically takes the form of a deposit or letter of credit equal to one to two weeks of average monthly utility costs for each provider. Without this motion, a manufacturing operation in Brevard County, a restaurant in Osceola County, or a professional office in Orange County may lose electricity, water, or internet service before the case has any opportunity to move forward.

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Critical Vendors: A Targeted Motion for Essential Supply Relationships

Not every vendor gets paid outside the ordinary course. Critical vendor motions are selective. The motion asks the court to authorize payment of certain pre-petition unsecured claims to vendors whose continued performance is essential to the debtor's ability to operate, and whose refusal to supply would cause concrete, immediate harm to the reorganization.

The critical vendor analysis is genuinely case-specific. Courts in the Middle District of Florida require the debtor to show that the vendor is actually critical (no adequate substitute, immediate operational need, demonstrable harm from nonpayment), that the vendor has agreed to continue supplying on normal trade terms in exchange for payment of its pre-petition balance, and that the payment is commercially reasonable given the debtor's budget. A general preference for an existing vendor relationship does not meet the standard. The motion should be drafted narrowly, identifying specific vendors, specific pre-petition balances, and specific evidence of essentiality.

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How Subchapter V Simplifies the First-Day Package

In a traditional Chapter 11 case, first-day motions are sometimes opposed by an active unsecured creditors' committee, whose professionals scrutinize proposed budgets, negotiate adequate protection terms, and occasionally file objections on behalf of the unsecured class. That dynamic can delay relief and drive up professional fees before the debtor has even proposed a plan.

Subchapter V under § 1181(b) turns off the § 1102 creditors' committee provisions by default. In the Middle District of Florida, the United States Trustee typically appoints an unsecured creditors' committee only in larger, more complex Chapter 11 cases with a sizeable creditor class. For the small and mid-size businesses that comprise most Subchapter V filings in this district, no committee is formed, and unsecured creditors act individually or not at all. The result is a first-day process that moves faster and involves fewer adversarial parties at the table than a traditional Chapter 11 of equivalent size.

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Central Florida Businesses and the First-Day Timeline

For a business filing in the Orlando Division of the Middle District of Florida, first-day motions are typically set for hearing on an emergency or expedited basis, often within the first few days of the case. Pre-petition preparation (including a complete first-day motion package and, where possible, a signed cash collateral stipulation with the senior lender) is what determines how that first week unfolds. Cases that arrive at the courthouse on day one with organized, well-supported motions tend to get the relief they need with minimal delay.

Melissa Youngman, PA represents businesses in Chapter 11 and Subchapter V cases throughout the Middle District of Florida. For more on the Subchapter V process from filing to plan confirmation, see our cornerstone guide on the Subchapter V Timeline.

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