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ARTICLE · 01 JULY 2024

It Just Got More Difficult To Qualify For Subchapter v Bankruptcy

Ward and Smith, P.A
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Popular from the jump, under the original law to be eligible for Subchapter V, a debtor (whether an entity or an individual) had to be engaged in commercial activity and its total debts...

United StatesInsolvency/Bankruptcy/Re-Structuring
Lance Martin
Lance Martin

Subchapter V of Chapter 11 of the Bankruptcy Code, which took effect four years ago, creates a more streamlined and less expensive Chapter 11 reorganization path for small business debtors.

Popular from the jump, under the original law to be eligible for Subchapter V, a debtor (whether an entity or an individual) had to be engaged in commercial activity and its total debts—secured and unsecured—had to be less than $2,725,625. At least half of those debts had to come from business activity.

In March 2020, in response to the COVID-19 pandemic, Congress raised the Subchapter V debt ceiling to $7.5 million for one year. Congress extended the higher limit twice, with the last expiration date on June 21, 2024.

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