Breaking Bankruptcy News: Subchapter V Debt Limit Extension
On February 25, 2021, Sen. Richard Durbin (D-IL) and Sen. Charles Grassley (R-IA), the Chair and Ranking Member of the U.S. Senate Judiciary Committee, respectively, announced the introduction of a bipartisan bill that will provide continued relief to businesses impacted by the ongoing COVID-19 pandemic. The bill, referred to as the COVID-19 Bankruptcy Relief Extension Act, would extend for an additional year—to March 27, 2022—certain bankruptcy-related provisions originally enacted into law in March 2020 as part of the Coronavirus Aid, Relief, and Economic Stabilization Act (“CARES Act”). Under the CARES Act passed on March 27, 2020, Congress increased to $7.5 million the debt limits for debtors seeking relief under the recently-enacted Subchapter V of chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 1181-1195 (Subchapter V, enacted in 2019 through the Small Business Reorganization Act, streamlined chapter 11 cases for businesses with non-contingent, secured, and unsecured debts totaling less than $2,725,625. By proceeding under Subchapter V of the Bankruptcy Code, a debtor may, among other things, solicit disclosure and confirmation in a single-step confirmation process, make use of expedited filing deadlines, and retain equity ownership without those equity holders satisfying the “new value” exception to the absolute priority rule under 11 U.S.C. § 1129(b)). If passed, the COVID-19 Bankruptcy Relief Extension Act will ensure that...