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The Bankruptcy StrategistFeaturesBankruptcyLegislation

Subchapter V Filings Plummet After Senate Fails to Keep Higher Limit Intact

By Alexander Lugo
November 01, 2024

[Editor's Note: This is a follow-up to the article on the October 2024 issue which provided a deep analysis of Congress allowing the COVID era higher limit to expire (see, "Congress' Failure to Extend Subchapter V Debt Limit Hurts Small Businesses") to show the effect that the fall back to the original dollar amount restriction.]

Subchapter V Filings for a recently crafted bankruptcy option meant to help small businesses overcome financial distress have plummeted after the U.S. Senate failed to pass a law that would keep its restrictions in place.

When the Subchapter V option was crafted in 2019, the federal government determined that businesses with $2.7 million could qualify for the filing. But in 2020, the federal government lifted that limit to $7.5 million to help more businesses qualify and escape financial distress brought on by the pandemic. The COVID-19 experiment made a lot of attorneys in the space realize how vital of a lifeline it proved to be for many small businesses facing financial trouble.

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