Senate proposes raising the debt limit on Subchapter V filings to $7.5 million
The Senate introduced an amendment to raise the debt limit for Subchapter V bankruptcy filings from $3 million to $7.5 million. Subchapter V of Chapter 11 of the U.S. Bankruptcy Code offers small businesses an alternative to filing for a traditional bankruptcy that is more expedited and cost-efficient but shifts some of these burdens onto credit managers.
The debt limit was initially $2.7 million when Subchapter V was created under the Small Business Reorganization Act (SBRA) of 2019, but it was raised to $7.5 million in 2020 in response to the COVID-19 pandemic. The heightened debt limit was extended twice before lapsing back to $3 million in June 2024.
SUBCHAPTER V: Essential Insights for Credit Professionals
Key Points
Subchapter V makes Chapter 11 more attractive to the “small business” debtors that are eligible to file under Subchapter V, but in many respects do so at the expense of unsecured trade creditors. While Subchapter V provides small business debtors with most (if not all) of the same benefits of a “traditional” Chapter 11 filing, it strips away certain elements of traditional Chapter 11 that benefit unsecured trade creditors.
Small business filings under Subchapter V dropped by 45% from June to July 2024 due to the reversion of the temporarily enhanced debt limit from $7.5 million to $3,024,725.
While Subchapter V has been praised for its efficiency, there are concerns over whether it truly facilitates successful reorganizations or merely delays inevitable failures.
Congress Aims for Timely Funding Deal
Ash Arnett, NACM’s Washington Representative, PACE Government Affairs
It looks like Congress made a New Year's Resolution of its own: getting its homework done on time!
Congress appears to have reached a tentative deal to keep the government open and fund it through Sept. 30. This is in stark contrast to the last two times (October and November of last year) in which a last-minute extension was passed with little notice and less than a day to spare.
New Law Requires Business Ownership Transparency
Jamilex Gotay, editorial associate
The Anti-Money Laundering Act of 2020 (AMLA) established the Corporate Transparency Act (CTA), which requires FinCEN to establish and maintain a national registry of beneficial owners of entities that are considered to be reporting companies.
Credit Managers Shed Light on Subchapter V Issues During Meeting with American Bankruptcy Institute
Annacaroline Caruso, NACM editor in chief
Several business-to-business (B2B) credit managers and bankruptcy attorneys from Lowenstein Sandler recently convened with the American Bankruptcy Institute (ABI) Subchapter V Task Force to exchange invaluable insights gleaned from their cumulative experiences in Subchapter V cases.
Debt Ceiling Fallout: Winners, Losers and What’s Next in Congress
After a month of frantic on-again, off-again negotiations between Speaker McCarthy and the White House over the debt ceiling, a bipartisan agreement was reached and eventually signed into law on June 3. Both sides immediately claimed victory and put out two very different narratives about the deal. Here’s the score as we see it:
Will the Collapse of SVB Spark Renewed Interest in Bankruptcy Reform?
Last month’s collapse of Silicon Valley Bank (SVB) saw the first real test of the new bankruptcy procedures put in place for financial institutions under Dodd Frank igniting a new debate on whether the system is working and potentially opening the door for renewed conversation on broader bankruptcy reform.
Legislative Roundup: What Will Impact Trade Credit?
California Senate Bill No. 1235 (SB 1235) Does Not Directly Impact Trade Credit
The California Department of Business Oversight recently released regulations pertaining to the content and enforcement of SB 1235, which amends California’s Financing Law (CFL) and sets forth disclosure requirements for “Commercial Financing Transactions.”
Will This be the Year for Chapter 11 Venue Reform?
More than a decade after Democrats and Republicans first united to introduce bankruptcy venue reform legislation, Congress is still trying to make headway on the issue.
Last month, Congresswoman Zoe Lofgren (D-CA) and Congressman Ken Buck (R-CO) reintroduced H.R. 1017, the Bankruptcy Venue Reform Act, legislation aimed at curtailing bankruptcy “venue shopping” by requiring that bankruptcy proceedings take place in the venue in which the entity has its principal place of business or the majority of its assets.
