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Turn that Frown Upside Down
The current $7.5 million debt cap which a debtor cannot exceed, pursuant to Bankruptcy Code §1182, to qualify to elect Subchapter V treatment (under Code §103) is well understood: the amount doesn't include debts that are owed to an affiliate or an insider; for purposes of calculating the cap, the debts of the particular debtor must be aggregated with the debts of any affiliate that is also in bankruptcy; and the cap is determined as of the Petition Date.
These limitations suggest that Subchapter V will be of no use to all but very small companies, smaller than those likely to be advised by readers of this publication. That may be so, but before turning completely away from the topic, consider two things. First, debts that are contingent or unliquidated do not count toward the cap. Second, consider your client's owner — if the owner has provided credit enhancements to company creditors in the form of personal guarantees.
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