Upcoming Change to Affect Subchapter V Eligibility
If you have been considering a Subchapter V bankruptcy filing for your business, it is critical to speak with a West Palm Beach bankruptcy lawyer as soon as possible about your eligibility in advance of an upcoming change to the Subchapter V debt ceiling. In short, if your eligibility is likely to be affected by a change to the debt limit, it will be critical to file your bankruptcy petition as soon as possible, and before the sunset date of June 21, 2024.
What do you need to know about Subchapter V eligibility and the debt ceiling? Our business bankruptcy lawyers can explain the upcoming changes in more detail, and we can begin working with you today on a Subchapter V case for your business.
What is Subchapter V Bankruptcy?
To understand the significance of the upcoming change to the Subchapter V debt ceiling, it is essential to have a clear understanding of Subchapter V bankruptcy and why it can be so beneficial to small businesses in South Florida. Subchapter V is a subchapter of Chapter 11 bankruptcy, and it is a more streamlined and less costly type of Chapter 11 bankruptcy. It is designed primarily for smaller businesses with a limited amount of debt, and is intended to make it easier for those businesses to file and complete a reorganization bankruptcy. It became available with the passage of the Small Business Reorganization Act of 2019.
Debt Limit or Ceiling in Subchapter V Cases
In addition to other eligibility requirements for filing a Subchapter V bankruptcy has a debt limit, or a debt ceiling. Since the passage of the CARES Act during the COVID-19 pandemic, and with the subsequent passage of the Bankruptcy Threshold and Technical Corrections Act in 2022, the debt ceiling for Subchapter V cases has been $7,500,000 (or $7.5 million). However, that debt ceiling will soon be reduced by more than half. The current debt ceiling of $7.5 million is only good through June 21, 2024. After that date, businesses with debt in excess of the new debt ceiling of $3,024,725 will be ineligible for the benefits of Subchapter V bankruptcy.
Unless Congress takes action to extend the increased debt ceiling, the Subchapter V debt limit will revert to $3,024,725 after June 21, 2024. Accordingly, any business that is considering a Subchapter V bankruptcy filing and has debt of $3,024,725 or more should seek immediate advice from an attorney about filing a bankruptcy petition before the extended debt ceiling provision sunsets. According to an article in the Wall Street Journal, there was a 78 percent increase in Subchapter V filings identified in February, which is likely due at least in part to the possible change in the law set to take place after June 21, 2024.
Contact a West Palm Beach Bankruptcy Attorney Today
If you have questions about Subchapter V bankruptcy or need assistance filing for Subchapter V bankruptcy before the debt ceiling changes, one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller, PLLC can assist you. Contact us today.
Sources:
wsj.com/articles/small-business-bankruptcies-surge-ahead-of-potential-law-change-e0c81dbb
justice.gov/ust/subchapter-v
congress.gov/bill/116th-congress/house-bill/3311
