Bankruptcy Legislation Update: Biden Signs Bill Preserving $7.5 Million Eligibility Threshold for Subchapter V

ArentFox Schiff

The President signed legislation raising the eligible debt ceiling for Subchapter V of Chapter 11 to $7,500,000. Small businesses with up to $7,500,000 in noncontingent, liquidated debts are eligible for relief under Subchapter V for another two years.

On June 21, 2022, President Biden signed into law amended S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act.” The Act was previously passed by the United States House of Representatives on June 7, 2022, and by the Senate on April 7, 2022. Biden’s signature represents the successful culmination of a months-long effort to reinstate the heightened debt limit for Subchapter V. With this action, small business debtors can now officially avail themselves of Subchapter V’s streamlined provisions into June 2024 as long as they hold less than $7,500,000 in noncontingent, liquidated debts.[1] The Act also applies retroactively to all cases commenced under Chapter 11 on or after March 27, 2022 that remain pending as of June 21, 2022.

[1] In addition to the debt limit, the bill makes a number of technical modifications concerning debtor affiliates and other clarifications, while also making important changes to eligibility under Chapter 13 by changing the definition of an eligible debtor to “an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts of less than $2,750,000 or an individual . . . and such individual’s spouse . . . that owe . . . noncontingent, liquidated debts that aggregate less than $2,750,000”. Like the Subchapter V increase, the increased debt limits for Chapter 13 will also sunset in two years.

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ArentFox Schiff


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