Subchapter V Small Business Reorganizations
The Small Business Reorganization Act of 2019 (SBRA) was enacted on August 23, 2019, with an effective date of February 19, 2020. Upon enactment, small business debtors with less than about $2.75 million in debts could voluntarily elect to proceed under a new subchapter V of chapter 11 of the Bankruptcy Code if they met certain eligibility criteria. Pursuant to the CARES Act, the SBRA debt limit was temporarily increased to $7.5 million for bankruptcy cases filed on or after March 27, 2020, and this temporary increase was further extended with the passage of the Bankruptcy Threshold Adjustment and Technical Corrections Act (BTATCA) in 2022. Currently, the temporary $7.5 million debt limit applies for all small business debtor cases filed on or after March 27, 2022, for a period of two additional years. Subchapter V imposes shorter deadlines for filing reorganization plans, allows for greater flexibility in negotiating restructuring plans with creditors, and does not require the payment of United States Trustee quarterly fees. Unlike in other chapter 11 cases, the United States Trustee Program appoints a trustee in each subchapter V case. The trustee works with the small business debtor and the creditors to facilitate the development of a consensual plan of reorganization, which may include evaluating the viability of the debtor’s business and investigating the debtor’s financial condition and conduct if directed by the court.
The USTP publishes a summary of statistical results from subchapter V cases.