Small Business

ABI Applauds Introduction of "Bankruptcy Threshold Adjustment and Technical Corrections Act"

March 18, 2022, Alexandria, Va. — The American Bankruptcy Institute (ABI) applauds the introduction of S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act,” which would permanently set the debt limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the bill also would raise the debt limit for individual chapter 13 filings to $2.75 million and remove the distinction between secured and unsecured debt for that calculation. “There is no doubt that the effects of the COVID-19 pandemic and its aftermath continue to put a significant strain on individuals and small businesses,” said ABI Executive Director Amy Quackenboss. “By permanently setting the debt limit for subchapter V at $7.5 million and increasing the eligibility of individuals to access relief under chapter 13, the ‘Bankruptcy Threshold Adjustment and Technical Corrections Act’ provides a greater number of struggling small businesses and families with an efficient path to reorganizing their finances.”

As a direct result of the work of ABI’s Commission to Study the Reform of Chapter 11, the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts. Since then, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the debt eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold is set return to $2,725,625 on March 27, 2022, without further congressional action.

Sen. Charles Grassley (R-Iowa) introduced the bipartisan S. 3823 on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million, remove the distinction between secured and unsecured debt, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. The legislation is co-sponsored by Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas).

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.

Second Circuit Holds that Debtors Are Properly Barred from Receiving PPP Loans

The first court of appeals to reach the issue decides that the SBA properly interpreted the CARES Act to bar chapter 11 debtors from receiving PPP ‘loans.’
Court: 

February Total Bankruptcy Filings Increase 3 Percent from Last Month, Commercial Chapter 11s Decrease 10 Percent

Alexandria, Va. Total bankruptcy filings for February increased 3 percent over January, according to data provided by Epiq. Total filings in February were 26,985, up slightly from the January filing total of 26,200. The total noncommercial filings of 25,565 for February increased 4 percent from the January noncommercial filing total of 24,695. Conversely, February’s commercial filing total of 1,420 represented a 6 percent decrease from the January commercial filing total of 1,505. Commercial chapter 11 filings totaled 203 in February 2022, a 10 percent decrease from the 225 filings recorded the previous month.

“With government stabilization programs and lender deferments tapering off, consumers and businesses are navigating an economic landscape that includes rising inflation, worker shortages and growing supply chain challenges,” said ABI Executive Director Amy Quackenboss. “Congressional consideration of extending or permanently making the expanded eligibility limit of small businesses electing to file for subchapter V under chapter 11 before it expires on March 27 would provide a reliable path for small businesses to successfully restructure, reduce liquidations and save jobs.”

Since the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the debt eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold is set return to $2,725,625 on March 27, 2022, without further congressional action.

ABI’s Annual Spring Meeting, taking place on April 28-30 in Washington, D.C., will feature top bankruptcy experts examining key insolvency trends, including the “Texas Two-Step” strategy, subchapter V developments, senior care facilities in distress and more. For more information and to register, please click here.

Total, consumer and business filings continued their decline in February 2022 compared to last year, according to Epiq’s data. February’s filing total represented a 14 percent decrease from the February 2021 filing total of 31,221. Consumer filings decreased 13 percent, falling to 25,565 in February 2022 from the 29,256 total recorded in February 2021. The 1,420 commercial filings in February 2022 were 28 percent less than the 1,965 registered in February 2021. Commercial chapter 11 filings in February 2022 totaled 203, a 52 percent drop from the 420 commercial chapter 11 filings in February 2021.

The average nationwide per capita bankruptcy filing rate (total filings per 1,000 population) was 1.03 for February, a decrease from the 1.25 rate registered in January. The average daily filing total in February 2022 was 1,420, a 14 percent decrease from the 1,643 total daily filings registered in February 2021. States with the highest per capita filing rates (total filings per 1,000 population) in February 2022 were:

1. Alabama (2.94)

2. Tennessee (2.35)

3. Georgia (2.17)

4. Mississippi (1.99)

5. Nevada (1.83)

For further information about the statistics or additional requests, please contact ABI Public Affairs Officer John Hartgen at 703-894-5935 or [email protected].

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.

Epiq is a leading provider of managed technology for the global legal profession. Epiq offers innovative technology solutions for electronic discovery, document review, legal notification, claims administration and controlled disbursement of funds. Epiq’s clients include leading law firms, corporate legal departments, bankruptcy trustees, government agencies, mortgage processors, financial institutions, and other professional advisors who require innovative technology, responsive service and deep subject-matter expertise. For more information on Epiq, please visit https://www.epiqglobal.com/en-us.

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