Bipartisan bill extending higher debt cap introduced. Key U.S. legislators are supporting a two-year extension of a favorable provision in the bankruptcy law that offers more small businesses a faster and cheaper way to restructure their debt.
Companies with less than $7.5 million in liabilities have been able to file under a section of the code that took effect in 2020 as part of the Small Business Reorganization Act. Originally, small businesses had to have less than roughly $2.7 million in debt to file under what is known as subchapter V. But, in response to the distress caused by the Covid-19 pandemic, Congress shortly thereafter authorized a temporary increase in eligibility.
The higher cap is due to revert to the lower limit in June, a sunset that would make fewer small businesses eligible for the more streamlined reorganization process. On Wednesday, Sen. Richard Durbin, D-IL, who is judiciary committee chairman, introduced Senate bill 4150, which would extend the $7.5 million cap by two years.
Sen. Lindsey Graham, a South Carolina Republican who is a ranking member of the Senate judiciary committee, is a co-sponsor. Other backers are Sheldon Whitehouse, D-RI; Chuck Grassley, R-Iowa; Chris Coons, D-Del.; and John Cornyn, R-Texas.
The American Bankruptcy Institute said it applauds the legislation. The trade group has been writing to members of Congress asking them to make permanent the $7.5 million cap. —Becky Yerak
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