Congress Takes Steps to Raise Debt Limits for Subchapter V
Subchapter V bankruptcy — which is a subchapter of a traditional Chapter 11 bankruptcy — has only been in existence for a relatively short amount of time. This particular type of bankruptcy, aimed specifically at smaller businesses seeking a reorganization bankruptcy, was created through the Small Business Reorganization Act of 2019 and became effective in February 2020. Since February 2020, small businesses that meet the specific eligibility requirements for Subchapter V have been able to file for this type of reorganization bankruptcy, which initially was enacted with a debt ceiling of $2,725,625 and an understanding that the debt threshold would be reassessed and would increase to adjust for inflation, as occurs with other bankruptcy figures.
What should you know if you own a small business and are considering Subchapter V but currently have too much debt? Our South Florida business bankruptcy lawyers can tell you more.
History of Subchapter V Debt Limit
During the pandemic, the debt threshold for Subchapter V was temporarily increased to $7.5 million, allowing a significantly larger number of small business debtors to qualify. Yet that temporary increase, which was created through the CARES Act, expired in 2024. Since then, small business debtors must not exceed the current debt threshold for Subchapter V of $3,424,000, which will not be readjusted until 2028 unless new legislation co-sponsored by United States Senators Durbin (D-New York) and Grassley (R-Iowa) becomes law.
Bipartisan Legislation Passes Unanimously in the Senate
At the start of August 2026, the Grassley-Durbin Bankruptcy Threshold Adjustment Act of 2026 passed unanimously in the United States Senate. The legislation is bipartisan with additional co-sponsorship by Senators John Cornyn (R-Texas), Sheldon Whitehouse (D-Rhode Island), Chris Coons (D-Delaware), and the recently deceased Lindsey Graham (R-South Carolina).
Unanimous passage in the Senate does not guarantee that the legislation will become law, but it suggests that there is substantial support for it and suggests that the Subchapter V threshold may soon be increased on a permanent basis.
If the legislation becomes law, the Subchapter V debt limit would rise to $7.5 million with no distinction between secured and unsecured debt.
Contact Our West Palm Beach Bankruptcy Lawyers to Learn More About Your Florida Business’s Eligibility for a Subchapter V Bankruptcy
Many businesses are eager to be eligible to file for Subchapter V bankruptcy, but their debt exceeds the currently existing threshold. During the pandemic, as we discussed above, the threshold was temporarily raised to $7.5 million, allowing many more small business debtors to file for Subchapter V bankruptcy. If the Bankruptcy Threshold Adjustment Act of 2026 is passed and becomes law, more smaller businesses in South Florida that are struggling with debt may be eligible to file for this particular type of reorganization bankruptcy. In the meantime, if your business needs to move forward with a reorganization bankruptcy filing, you should get in touch with one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC to discuss a Chapter 11 case or another form of reorganization bankruptcy for your South Florida business.
Source:
congress.gov/bill/119th-congress/senate-bill/3977
