Spencer Fane attorney Elizabeth Lally, a Subchapter V Trustee and member of the American Bankruptcy Institute’s (ABI) Subchapter V Task Force, conducted a year-long evaluation of the Small Business Reorganization Act of 2019, codified as Subchapter V of the Chapter 11 bankruptcy code. The nine-member Task Force’s work culminated in the release of their final Report emphasizing Subchapter V’s holistic benefit to small business filers and their creditors during the ABI’s Annual Spring Meeting on April 19 in Washington, D.C. The Task Force’s efforts were formally recognized during the meeting with the ABI Annual Service Award.
The Report, which compiled empirical input from industry leaders, including bankruptcy judges, academics, and insolvency professionals; data from public hearings, trade group roundtables, and surveys; and thorough consultation of relevant case law confirmed that Subchapter V is functioning as Congress intended. Further, the Task Force pinpointed Subchapter V’s flexibility and focus on creditors’ rights as core guiding principles and suggested minor reforms to increase the subchapter’s effectiveness.
Subchapter V’s initial debt ceiling of $2.75 million was increased to $7.5 million in March 2020, where it will remain until June 2024 and which the Task Force recommends making permanent. In addition to the comprehensive Report, the Task Force drafted a supplemental letter to key members of Congress highlighting a lack of evidence that larger businesses were abusing Subchapter V through affiliate and insider debt and, notably, that eligibility requirements would disqualify most small business filers.
Elizabeth is a partner at Spencer Fane who focuses on complex bankruptcy matters and serves as a Subchapter V Trustee in Regions 12 and 13. Elizabeth’s critical work within the ABI’s Midwest Board and Subchapter V Task Force provides an additional lens to navigate particularly complicated and intricate insolvency matters.
Learn more about the ABI’s groundbreaking nonpartisan insolvency work and dedicated network of nearly 10,000 bankruptcy professionals here.
Download Subchapter V Task Force’s full report here and read the members’ letter to Congress here.
