Due to priorities and procedural issues, the Senate was not able to address proposed legislation to extend/permanently set the eligibility limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. The debt limit had been raised from $2,725,625 two years ago and was extended last year, with a March 27 sunset. While work continues in Congress on this issue, the debt-eligibility limit has now returned to the original $2,725,625 threshold that had been established under the “Small Business Reorganization Act of 2019” (SBRA).
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 debt-eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” which expired on Sunday.
Sen. Charles Grassley (R-Iowa) introduced the bipartisan S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act,” on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million and remove the distinction between secured and unsecured debt for that calculation, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas) co-sponsored the legislation.
There appears to be no opposition to the bill, and congressional efforts are being made this week to get it passed. ABI will continue to provide additional information on legislative news and developments in the ABI Daily Headlines. For more information on subchapter V and SBRA, be sure to visit ABI's SBRA Resources site.
