Important Changes to the Chapter 11 Bankruptcy Process Take Effect on April 1, 2025

Some important changes to the Chapter 11 bankruptcy process are set to take effect on April 1, 2025. These changes impact the dollar-amount thresholds that trigger the applicability of various provisions of Chapter 11. Learn more from an experienced Miami bankruptcy litigation attorney at Edelboim Lieberman:

Changes to Dollar-Amount Thresholds Under Chapter 11

The changes taking effect on April 1, 2025 will apply to Chapter 11 bankruptcy cases filed on or after this date. They will not impact bankruptcy cases that are already pending. The timing of these changes is based on a provision in the U.S. Bankruptcy Code that requires inflation adjustments every three years; although, notably, the impending upward adjustment of more than 13 percent is among the largest in U.S. history.

The full list of changes has been published in the Federal Register (90 F.R. 8941). Here is a look at some of the most notable changes that apply to reorganizations under Chapter 11:

• Priorities for Employee Compensation and Employee Benefit Plan Contributions – Section 507 of the U.S. Bankruptcy Code establishes priorities for certain types of unsecured claims. These priorities mean that certain types of unsecured creditors are entitled to payment before others. Two examples of these priorities are the priorities for employee compensation and employee benefit plan contributions in Sections 507(a)(4) and 507(a)(5). These priorities are subject to a cap (“for each individual or corporation”) that is increasing from $15,150 to $17,150.
• Priority for Consumer Deposits – Another example of the priorities under Section 507 is the priority for consumer deposits. The cap for this priority is increasing from $3,350 to $3,800.
• Threshold for Filing an Involuntary Petition – While most businesses choose to reorganize their debts under Chapter 11 voluntarily, there are circumstances in which creditors can force businesses to reorganize. The threshold for filing an involuntary petition under Chapter 11 is increasing from $18,600 to $21,050.
• Threshold for Filing a Preference Claim – Preference claims provide a means for eligible creditors to seek to void payments and other transfers to other creditors during the Chapter 11 bankruptcy process. The threshold amount for bringing a preference claim against a business debtor under Chapter 11 is increasing from $7,575 to $8,575.
• “Small Business Debtor” Eligibility – The “small business debtor” provisions of Chapter 11 allow eligible businesses to pursue a streamlined process that minimizes the time and costs involved. This is known as a Subchapter V bankruptcy. The debt limit for businesses seeking to file under Subchapter V is increasing from $3,024,725 to $3,424,000.

Speak with a Miami Bankruptcy Litigation Attorney at Edelboim Lieberman

At Edelboim Lieberman, we guide businesses of all sizes through the Chapter 11 bankruptcy process. We also represent businesses in pursuing alternatives to bankruptcy, and we assist creditors with protecting their rights during debtors’ Chapter 11 (and Subchapter V) bankruptcy cases as well. If you would like to speak with a Miami bankruptcy litigation attorney at our firm, please call 305-768-9909 or request a free and confidential consultation online today.