Small-Business Bankruptcy Rules Offer Creditors a Boost, Too (1)

A popular bankruptcy law meant as a boon to small businesses is also helping their creditors.

Congress created the program, known as Subchapter V, about five years ago to make it easier and cheaper for small businesses to to shed debt through bankruptcy—then keep their businesses open. But critics of the law, including banking trade groups, have argued it risks “severely curtailing” creditors’ rights.

A task force at the American Bankruptcy Institute sought to study how businesses and creditors have fared under the program, which risks a drastic narrowing this summer if Congress fails to extend certain pandemic-era modifications.

“The ...