What Does the New Bankruptcy Bill Mean for Small Businesses (with Will Hotze)

When the Subchapter V debt threshold dropped from $7.5 million to $3.4 million in June 2024, many small businesses didn’t migrate into traditional Chapter 11. They liquidated.

On August 4, the Senate voted unanimously to fix that. The Bankruptcy Threshold Adjustment Act of 2026 would permanently restore the Subchapter V eligibility limit to $7.5 million, giving more small businesses access to a faster, cheaper reorganization process with a proven track record. Will Hotze breaks down what you need to know about this new legislation, and why the numbers matter. 

Key takeaways:

• Subchapter V produced a 52% plan confirmation rate vs. 23% in traditional small business Chapter 11
• Cases confirmed nearly four months faster on average
• Businesses with debt between $3.4M and $7.5M had meaningfully better outcomes in Subchapter V than in regular Chapter 11
• A University of Chicago working paper found Chapter 11 filings among affected businesses dropped more than 50% after the 2024 sunset
• Creditor recoveries: the best available research has not found worse outcomes under Subchapter V

The House still needs to act, but this is the closest this legislation has come to becoming permanent law.