Too Much of a Good Thing: Congress Allows Increased Subchapter 5 Eligibility Level to Expire
Over the past few years, one of the universally celebrated success stories in the bankruptcy and restructuring world has been Subchapter V of the Bankruptcy Code. Created by the Small Business Reorganization Act of 2019 (the “SBRA”), Subchapter V provides a streamlined and (reasonably) economical pathway for the restructuring of a distressed but viable business. Assuming that the outstanding debts fall within a congressionally specified threshold, Subchapter V dramatically simplifies the pathway to a confirmed Chapter 11 plan. Debtors in a Subchapter V case need not file a disclosure statement, enjoy a more lenient plan confirmation process, and can make payments outside of the absolute priority rule. In short, a Subchapter V debtor can get to plan confirmation—the ultimate end point of a successful reorganization—in a quicker, simpler and cheaper manner than a typical Chapter 11 debtor. [1] Given these benefits, we might have reasonably expected Congress to expand the availabili...