Bloomberg Law
March 3, 2021, 11:01 AM

Expiring Debt Cap to Limit Small Business Bankruptcy Fast Lane

Leslie A. Pappas
Leslie A. Pappas
Staff Correspondent

A temporary Covid-era measure that lets small businesses with up to $7.5 million in debt file Chapter 11 under a new, streamlined process is set to expire this month, stirring attorneys’ anticipation that more companies will declare bankruptcy before the window closes.

Businesses that meet the current debt threshold qualify for expedited bankruptcies as outlined in Subchapter V of the bankruptcy code. The debt cap was $2.7 million until Congress raised it via temporary legislation last year to allow more struggling business owners to use bankruptcy protection measures to deal with the pandemic’s economic fallout. The threshold is set to ...

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