Subchapter V bankruptcy provides businesses with a more efficient and affordable process to reorganize. The Bankruptcy Code says that in order to be eligible for Subchapter V bankruptcy, an individual or business debtor must be engaged in a commercial activity with total debts of less than $2,725,625. However, in response to the COVID-19 pandemic, the CARES Act temporarily amended the Bankruptcy Code to increase the debt eligibility ceiling for Subchapter V chapter 11 case up to $7.5 million for a one-year period currently scheduled to expire on March 26, 2021.
When is the Deadline to File a Subchapter V Chapter 11 Bankruptcy – Debt Limit
The benefits that were made the Bankruptcy Code as part of the CARES Act, including the increased debt limit, are set to expire on March 26, 2021. It is possible that additional changes or further stimulus relief may extend the deadline beyond that point, but small business owners considering bankruptcy are not advised to assume this will occur. There may not be a further extension. The Consolidated Appropriations Act (CAA), that was signed into law in December of 2020, provided for a number of temporary changes to the Bankruptcy Code, designed in large part to provide additional relief for Debtors faced with the results of the pandemic. The CAA notably failed to extend the debt limit beyond its current sunset date. This is a glaring omission and may indicate the higher debt limit will not be extended before the March deadline.
