New Amendments to U.S. Bankruptcy Code: Modifications to Previous Dollar Amount Thresholds

June 15, 2022

PREFERENCE-RELATED ADJUSTMENTS

Minimum Amount of Suit – The minimum dollar thresholds for preference claims brought against a creditor in a bankruptcy case, where the debtor has primarily non-consumer debts, has increased to $7,575 (from $6,825).
“Hometown” lawsuits – Legal proceedings brought by a trustee or debtor to recover a consumer debt of less than $22,700 (increased from $20,450), or to recover a non-consumer debt of less than $27,750 (increased from $25,000), should be filed in the defendant’s home-town federal district or bankruptcy court.
For more information on these defenses to preference claims asserted against creditors, please review our article, “Preference Defenses: Update on the BAPCPA Reforms.”

DEBTOR-RELATED ADJUSTMENTS

Small Business Debtor – A small business debtor is now defined as one that (among other things) has aggregate noncontingent liquidated secured and unsecured debt as of the petition that are not more than $3,024,725 (increased from $2,725,625).¹ This increase is significant as more businesses may qualify as small business debtors. Under Subchapter V of Chapter 11, where the debtor is a “small business debtor,” there is no unsecured creditors’ committee to represent the interests of the debtor’s unsecured creditors, and only the debtor can file a plan. On the upside, there is greater administrative oversight because a Subchapter V Trustee is appointed in every case with a specific duty to facilitate a consensual plan of reorganization.
For more information and detail on Subchapter V of Chapter 11, created by the Small Business Reorganization Act of 2019, please see our Subchapter V article here.
Chapter 13 Debtor – A person may file a Chapter 13 case if (among other things) the person has noncontingent, liquidated, unsecured debts of less than $465,275 (increased from $419,275), and noncontingent, liquidated, secured debts of less than $1,395,875 (increased from $1,257,850). This increase is important as debtors that previously did not qualify to be debtors under Chapter 13 had to turn to Chapter 7 or 11. Now, more debtors may qualify under Chapter 13, which may require more active and/or frequent participation of creditors.
Involuntary Chapter 7 or 11 Petition – The minimum aggregate claims needed to commence an involuntary chapter 7 or 11 petition is $18,600 (up from $16,750). For more information and detail on the filing of an involuntary petitions, please see our Involuntary Petitions article here.

¹ Legislation is currently pending in Congress to increase this limit to $7,500,000, which would return the limit to the pandemic-related temporary increase under the CARES Act, which expired at the end of March, 2022.

CLAIMS

Administrative Priority for Real Estate Deposits – A claim arising from the pre-petition deposit of money in connection with the purchase, lease, or rental of property or the purchase of services for the personal, family, or household use of such individuals, for property that was not delivered or provided, is entitled to administrative priority up to $3,350 (increased from $3,025). This increase entitles more claims to be bumped up to administrative priority (which get paid before unsecured creditors).

EXEMPTIONS

Many of the federal exemption amounts have increased, including the homestead, wildcard, individual retirement account, and household items exemptions. For a more detailed list of the exemption adjustments, please review our article here.

CHAPTER 7 DISMISSAL – Presumption of Abuse

The court may dismiss a Chapter 7 case whose debts are primarily consumer debts (or convert it to a Chapter 11 or 13) if the court finds the granting of relief would be an abuse of the provisions under Chapter 7.

Means Test – The court shall presume abuse exists if the debtor’s current monthly income (less certain deductions) and multiplied by 60 is greater than (a) the lesser of 25% of the debtor’s nonpriority unsecured claims or $9,075 (increased from $8,175) or (b) $15,150 (increased from $13,650).

For more information on this article or other bankruptcy-related matters, please contact KMK Attorneys Samuel C. Wisotzkey (swisotzkey@kmksc.com), or Eric R. von Helms (evonhelms@kmksc.com). Both can be reached at (414) 962-5110.