House subcommittee hearing pushes restoring higher debt limits for small business and Chapter 13 eligibility

Chairman Fitzgerald convened a House Judiciary subcommittee hearing to examine reforms to U.S. bankruptcy law, focusing in part on whether debt limits that govern eligibility for streamlined restructuring procedures should be raised.

The hearing featured testimony from bankruptcy scholars and sitting judges who described subchapter V of chapter 11 as a faster, cheaper path for many small businesses and urged returning the subchapter V debt limit to $7,500,000, which had been temporarily in effect from 2020 until it lapsed in mid-2024.

The subchapter V provision, established by the Small Business Reorganization Act of 2019 (SBRA), is intended to let owner-managed ‘‘mom-and-pop’’ firms reorganize without incurring the time and cost of a full chapter 11. Douglas G. Baird, the Harry A. Bigelow Distinguished Service Professor of Law at the University of Chicago and chair of…