US Congress moves to restore $8M debt limit for small business bankruptcies
by@Reuters
Summary
On September 17, Congress advanced legislation to restore expanded access to the Subchapter V small business bankruptcy program by passing bills to increase the debt eligibility limit to $7.5 million, which had expired in 2024. This change, which received broad bipartisan support, aims to assist small businesses in efficiently reorganizing their debts without the added costs and complexities associated with standard Chapter 11 bankruptcies. The initial debt threshold for Subchapter V was set at $2.7 million, but was temporarily raised during the COVID-19 pandemic, which allowed for a significant uptick in its usage; in 2023, Subchapter V filings accounted for 44% of all Chapter 11 cases.
Analysis
US Congress: The United States Congress is the bicameral legislative branch of the federal government, consisting of the House of Representatives and the Senate. It is advancing legislation to restore the higher debt-eligibility threshold for Subchapter V small business bankruptcies after the previous limit expired in 2024. Both chambers have passed related bills with broad bipartisan support to enable the change before final approval and presidential signature. Amy Quackenboss: Amy Quackenboss is the Executive Director of the American Bankruptcy Institute, a professional organization focused on bankruptcy law and practice. She has publicly endorsed the congressional effort, noting that it helps more debtors pursue efficient and cost-effective reorganizations while preserving value for stakeholders. Program Benefits: Subchapter V offers small businesses a streamlined reorganization path without certain costs and oversight mechanisms typical of standard Chapter 11 cases. Legislative Action: The House and Senate have passed nearly identical bills to restore expanded Subchapter V eligibility, requiring final reconciliation before sending the measure to the president. Bipartisan Consensus: The legislation advancing Subchapter V access has drawn broad support from both Republican and Democratic lawmakers.
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