The Small Business Reorganization Act of 2019 (SBRA), in effect as of February 19, 2020, was enacted to provide Main Street business debtors with a more streamlined path for restructuring their debts. 

 

In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the eligibility limit for small businesses looking to file under SBRA's subchapter V from $2,725,625 of debt to $7,500,000. The threshold was originally scheduled to return to $2,725,625 after 1 year, but was extended to 2022 with the enactment of the "COVID-19 Bankruptcy Relief Extension Act" on March 27, 2021.

 

The “Bankruptcy Threshold Adjustment and Technical Corrections Act” (Public Law No.: 117-151) was signed into law on June 21, 2022 by President Joe Biden. Among other changes, the Act provides greater access for struggling small businesses, individuals, and families looking to achieve a financial fresh start, including by restoring the debt eligibility ceiling to $7.5 million for individuals and small businesses electing to file for bankruptcy under subchapter V of chapter 11, after the prior increase to $7.5 million had sunset in late March 2022. The Act also raises the debt limit for individual chapter 13 filings to $2.75 million and removes the distinction between secured and unsecured debt for that calculation. Although the Act was originally drafted to make these eligibility thresholds permanent, the final version of the Act provides that the increases will sunset two years after enactment, on June 21, 2024.