The U.S. Senate is considering an extension of the current Subchapter V debt sublimit within Chapter 11 bankruptcy filings following the introduction of legislation that would push out the expiration date for the $7.5 million threshold to 2026.
Senator Richard Durbin of Illinois introduced the legislation on April 17 and the bill is now under consideration with the Committee of the Judiciary. In addition to Durbin, the sponsor of the bill, a bipartisan group served as co-sponsors, including Senators Sheldon Whitehouse, Chuck Grassley, Christopher Coons, John Corryn and Lindsey Graham.
“We commend Sen. Durbin and the co-sponsors on the introduction of this important legislation and look forward to working with members of Congress to having it signed into law so that struggling small businesses and consumers continue to have greater access to bankruptcy and achieving a financial fresh start,” Soneet Kapila, president of the American Bankruptcy Institute, said in a press release. “Maintaining the $7.5 million eligibility limit is consistent with the findings of ABI’s Subchapter V Task Force to help more small businesses keep their doors open, save jobs and benefit the overall economy.”
In addition to maintaining the Subchapter V debt sublimit at $7.5 million, if enacted, the proposed legislation would ensure a continuation of the $2.75 million sublimit for Chapter 13 bankruptcy filings, with secured and unsecured debt accounted for similarly, according to a press release from the ABI.
The ABI has been studying Subchapter V filings under the current debt sublimit, which went into effect as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), forming a task force to look into the matter last year. The task force published a preliminary report of its findings and recommendations to continue with the $7.5 million sublimit in December and sent a letter to Congress in March to provide additional evidential support.
Prior to releasing its final report today, the ABI disclosed some of its findings in a press release, noting that more than 25% of Subchapter V filings in the four years following the passage of the Cares Act would not have been possible without the increased sublimit, with total Subchapter V filings accounting for nearly a third of Chapter 11 filings in that time.
