Will Subchapter V’s $7.5 Million Eligibility Limit Be Extended In Time?

By: Donald L Swanson

March 27, 2021, is the sunset date for Subchapter V’s eligibility debt limit of $7.5 million.  At the stroke of midnight, that coach will turn back into a $2.7 million pumpkin.

So . . . where is the action in Congress to extend that $7.5 million limit?  Is it happening?

There are rumors, of course: that Congress will have hearings and that bankruptcy organizations are lining up to support the extension.

But where’s the actual action?  There doesn’t seem to be any.  And the sunset is a month away!

It’s starting to look grim. 

How can this be?

The increase of Subchapter V’s debt limit from $2.7 million to $7.5 million came as a bi-partisan effort in response to the pandemic: surprisingly, it occurred during a highly-partisan time and amid a divided government (i.e., a different party controlling each house of Congress).

Moreover, within the past few months, another bi-partisan effort related to the pandemic addressed bankruptcy issues in a bi-partisan manner—but that effort failed to address the $7.5 limit.

Back to the same old prejudices?

 It’s hard to understand and believe.  But during the four decades of the Bankruptcy Code’s existence, the reality is this:

• formerly successful small businesses and formerly successful entrepreneurs are the most-despised of all people in bankruptcy.

Congress has always refused to provide meaningful bankruptcy relief to formerly-successful small businesses and their owners.  Congress has always refused to give this class of potential debtors a break.

Congress loves to talk about small businesses and helping them succeed.  But Congress despises those of that class who become the victims of market forces, and Congress seeks to punish them at every turn.  Why is this?  I have no idea.    

The Subchapter V debt limit increase to $7.5 million stands as a lone exception to that prejudice.  But it is now set to expire.

That is a shame!

Judiciary Committee Members

Judiciary Committee members in the U.S. Senate are listed at this webpage.

Judiciary Committee members in the U.S. House of Representatives are listed at this webpage.

Conclusion

The $7.5 million debt limit for Subchapter V eligibility needs to be extended beyond its March 27, 2021, sunset date.

But it’s looking less likely that the extension will happen and increasingly likely that the bankruptcy world will be stuck with a $2.7 million debt limit for Subchapter V.  And that will be a shame!

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