CommentarY
June 21, 2022
President Biden Signs New Bankruptcy Debt Limits Bill Into Law
Last week, President Biden signed into law the Bankruptcy Threshold Adjustment and Technical Corrections Act (S. 3823), which continues the temporary expansion of subchapter V eligibility while also increasing availability of Chapter 13 for individual debtors.
This was covered in our Mid-Year Bankruptcy Outlook Webinar.
The Corrections Act amends Section 1182(1) of the Bankruptcy Code to include the increased aggregate debt limit of $7.5 million in Subchapter V’s definition of a small business debtor. The legislation would have originally made the debt limit extension permanent but objections from banks and other creditors forced a more temporary extension of two years after enactment.
The new measure also increases availability of Chapter 13 for individual debtors, raising debt limits to $2,7500,000, as opposed to $ 1,677,000 in current law. In addition to increasing the debt limit, the new law allows both secured and unsecured debt to count towards this single limit. Currently, separate limits apply to secured and unsecured debt.
As a result, creditors could see a rise in Chapter 13 filings from higher income/asset debtors.