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More businesses and business owners can now take advantage of bankruptcy reorganization

A bill recently signed by President Biden raised the debt limits for Chapter 11 and Chapter 13 bankruptcies. The debt limit determines whether or not a business can qualify to seek protection under Subchapter V of Chapter 11. The President signed the Bankruptcy Threshold Adjustment and Technical Correction Act into law on June 21, 2022. The main takeaway from the act is that a large increase in the debt limit will mean a greater number of businesses can qualify to reorganize under Subchapter V, a relatively new section of the Bankruptcy Code that offers streamlined reorganization to small businesses.

The Act increased the amount of liquidated secured and unsecured debt that a business could have and still qualify for Subchapter V protection to $7,500,000 for at least the next two years. This greatly increases the number of businesses that can take advantage of these streamlined reorganization procedures. The Act also increased the debt limit for Chapter 13 to noncontingent, liquidated debts of less than $2,750,000. This is significant as well, making Chapter 13 bankruptcy (a more efficient and much less expensive reorganization process) available to a range of business owners who would otherwise be required to file a much-more-expensive Chapter 11

Jim White
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Jim White helps people and companies facing serious financial injury by bringing and defending lawsuits and representing debtors in bankruptcy. He has successfully taken on banks, large financial institutions and other corporations in “David v. Goliath” cases. You can reach him at 919-246-4676.