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ABI Supports Bipartisan Legislation to Extend Debt Sublimit for Subchapter V

April 19, 2024, 07:46 AM
Filed Under: Bankruptcy

The American Bankruptcy Institute (ABI) supports the recently introduced S. 4150 by Sen. Richard Durbin (D-Ill.) to extend key provisions of the “Bankruptcy Threshold Adjustment and Technical Corrections Act” that were due to sunset on June 21 for an additional two years to 2026. S. 4150, cosponsored by Sens.  Lindsey Graham (R-S.C.), Sheldon Whitehouse (D-R.I.), Chuck Grassley (R-Iowa), Christopher Coons (D-Del.) and John Cornyn (R-Texas), would maintain the debt limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. The bipartisan measure also maintains the debt limit for individual chapter 13 filings to $2.75 million and removes the distinction between secured and unsecured debt for that calculation.

"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," said ABI President Soneet Kapila. “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.”

The Small Business Reorganization Act of 2019 (SBRA) went into effect on February 19, 2020, with a debt eligibility limit of $2,725,625 for struggling small businesses looking for a more economical and efficient way to reorganize their debts within chapter 11 of the Bankruptcy Code. In March 2020, the eligibility limit was expanded to $7.5 million through the CARES Act of 2020, and it received subsequent legislative extensions that are scheduled to sunset in June 2024.

ABI’s Subchapter V Task Force will be releasing its Final Report on April 19, which reveals that nearly 30% of all chapter 11 bankruptcy cases filed since the enactment of the SBRA have been subchapter V cases. Significantly, the Task Force found that more than 25% of these subchapter V debtors would have been ineligible for subchapter V relief under the lower cap.

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