Subchapter V bankruptcy was initially added to the Bankruptcy Code in February 2020 through the Small Business Reorganization Act of 2019, as an innovative restructuring platform for small businesses with noncontingent liquidated debt of $2,725,625 or less. That debt ceiling was short-lived and quickly increased in March 2020 to $7.5 million as a COVID-19 relief measure implemented through the CARES Act, and subsequently extended through March 27, 2022. The increase of the debt ceiling to $7.5 million increased the number of eligible candidates for subchapter V. After the debt limit was tripled with the passage of the CARES Act in March 2020, subchapter V bankruptcy became widely accepted as a cost-effective and streamlined process for small business debtors to restructure.

However, the CARES Act provisions expired on March 27, 2022 which caused the debt ceiling to revert from $7.5 million back to the original limit of $2,725,625 (which was adjusted for inflation to $3,024,725 on April 1, 2022). The lowered debt limit has raised concerns throughout the bankruptcy community and prompted calls for Congress to act quickly to restore or even increase the $7.5 million debt ceiling.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]