Thomas Walper is a renowned name in the market for his wide-ranging expertise on bankruptcies, with recent work including the chapter 11 cases of Toys “R” Us and iHeartMedia.

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On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the first in a series that summarizes and condenses the Task Force’s Final Report into “a nutshell.” This article:

• provides background information and data on Subchapter V.[Fn. 1]

Overall

In 2019, Congress enacted the Small Business Reorganization Act, which created subchapter V within chapter 11 of the Bankruptcy Code. Congress’ intent was to create a more cost-efficient and streamlined restructuring process for small businesses by modifying certain provisions of chapter 11 for debtors with claims below a specific debt cap. In particular, because creditors typically have smaller claims against these small businesses, the new subchapter takes into account the likelihood that there will be no or minimal meaningful creditor participation.

The American Bankruptcy Institute’s Subchapter V Task Force has issued its “Preliminary Report” on “Maintaining the $7,500,000 Debt Cap for Subchapter V Eligibility.” This article quotes from and summarizes the Report.

Recommendation

The Task Force recommends making permanent the $7,500,000 debt cap for Subchapter V eligibility, which is set to expire and revert to $3,024,725 on June 21, 2024.

Supporting Factors