The expiration of the Subchapter V bankruptcy protection filing, which made it easier for small businesses to seek relief, will now complicate the process for those with more than $3 million in debt. This filing type, introduced in 2020 and temporarily expanded during the pandemic, offered a cheaper and less time-consuming alternative to traditional Chapter 11 bankruptcy. It provided benefits such as shorter deadlines, greater flexibility in restructuring plans, and no U.S. Trustee quarterly fees. Data shows that Subchapter V filers had a higher rate of plan confirmation and fewer dismissals compared to other bankruptcy types. The reversion to the lower debt threshold may significantly impact small businesses seeking bankruptcy protection.
