Senate Proposal Would Grow Small Business Bankruptcy Eligibility

An expansion of bankruptcy eligibility rules is moving toward a potential revival through a Senate proposal that would bring back a more lenient standard for Chapter 11 relief designed for small businesses.

The language, drafted as an amendment to the annual defense policy bill, would restore higher debt limits and allow more businesses to take advantage of “Subchapter V,” a special section under Chapter 11 of the US Bankruptcy Code that Congress created in 2019. If the previously unreported amendment becomes law, companies with up to $7.5 million in debt could file Subchapter V, compared to the current limit of ...