Small Business

The ABI Subchapter V Task Force unveiled its final report of recommendations, revealing that subchapter V of chapter 11 of the U.S. Bankruptcy Code is achieving its objective of helping more small businesses reorganize efficiently in bankruptcy while also offering best practices and potential statutory amendments for policymakers, judges and practitioners to consider. The key recommendation highlighted by the Task Force’s Final Report was the support for permanently maintaining the filing eligibility limit of $7.5 million in aggregate noncontingent, liquidated debt for small businesses looking to reorganize under subchapter V.

To download the Final Report, please visit https://subvtaskforce.abi.org/.

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.

The Task Force was created in April 2023 with a nine-member expert panel comprised of judges, practitioners, trustees and academics that examined case law and statistical data under subchapter V since its enactment through the present. The Task Force’s Final Report is the result of nine months of public hearings, roundtable discussions and an industry survey inviting comment on subchapter V.

Key recommendations in the Final Report centered on the following subchapter V issues:

·      Eligibility

·      The Role of the Subchapter V Trustee

·      Case Administration

·      Plan and Confirmation Issues

·      Post-Confirmation Administrative Matters

To download a copy of the full report, please click here.

The Task Force is grateful for the financial support it received from ABI’s Anthony H.N. Schelling Endowment Fund.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.

ABI APPLAUDS INTRODUCTION OF BIPARTISAN LEGISLATION PROVIDING A TWO-YEAR EXTENSION TO MAINTAIN GREATER ACCESS TO BANKRUPTCY FOR STRUGGLING SMALL BUSINESSES AND CONSUMERS

April 18, 2024, Alexandria, Va. — 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.

Members of the press can attend a special briefing on the Final Report by members of the Task Force live tomorrow at 2:00 p.m. EDT on location at ABI’s Annual Spring Meeting by contacting ABI Public Affairs Officer John Hartgen at [email protected], or by clicking on the following link to attend remotely via Zoom.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.