Following our recent alert reporting on the Senate’s passage, the House has now passed legislation permanently restoring higher debt limits for Chapter 11 cases under Subchapter V – the focus of this alert – and Chapter 13.
What You Need to Know:
- Subchapter V, an efficient form of Chapter 11, will be available to more small businesses pending Executive approval.
- Small business creditors should be educated on the process, too.
Where Things Stand
The Bankruptcy Threshold Adjustment Act of 2026 now heads to the President’s desk. If approved, the Subchapter V debt limit would be restored to $7.5 million and apply to all cases filed after enactment.
Subchapter V Usage
An increased debt limit allows those that might have had to file a “traditional” Chapter 11 to choose Subchapter V, or for other small businesses to choose Subchapter V over not filing at all. They would be able to take advantage of features including likely cost savings, accelerated timeline, generally no creditors committee, and payment of administrative expense and cure claims over time.
Creditor Preparations
Small businesses work with a large variety of counterparties such as landlords, vendors, professional services companies, and lenders. They should all be well versed on the attributes of Subchapter V, which would allow them to more accurately assess their credit risk.
Brief Note on Chapter 13
The bill would also restore the Chapter 13 debt cap to $2.75 million, consolidating the secured and unsecured limits into a single ceiling. That broadens access to supervised repayment plans for households managing higher housing and living costs.
Next Steps
Saul Ewing’s Bankruptcy & Restructuring group regularly represents debtors, creditors, and other stakeholders in bankruptcy cases across the country, including those under Subchapter V. We will continue to monitor the bill through signing but in the meantime, feel free to contact our team with any questions.
