Major Changes to Chapter 11 Dollar Amounts Effective in 2025
There have been significant changes to the dollar amounts specified in the Bankruptcy Code, which affect Chapter 11 cases filed on or after April 1, 2025. These changes are part of the mandatory inflation adjustment to the Code that occurs every three years. This year’s adjustment is approximately 13.2 percent, a notable increase compared to the 11 percent rise seen in the previous triennial cycle.
Chapter 11 of the U.S. Bankruptcy Code allows businesses, including corporations and partnerships, to shield themselves from debts while continuing to operate. This form of bankruptcy enables the debtor to create a plan to repay creditors over time while rebuilding finances and eventually emerging in solvent condition.
The following are among the multiple Bankruptcy Code dollar-amount changes announced in the Federal Register:
For small business debtors, the debt limit to seek Subchapter V protection is now $3,424,000, up from $3,024,725. Subchapter V is a reorganization process, with lower costs and fewer procedural hurdles than a normal Chapter 11. Subchapter V previously had a debt limit of $7,500,000, which reverted in June 2024 to $3,024,725.
One of the key changes in 2025 is the increase in the threshold for creditors filing an involuntary petition. Under certain circumstances, creditors can force a debtor into Chapter 11 because they believe the debtor is failing to pay debts that are due. Under this year’s adjustment, a creditor or group of creditors must now claim at least $21,050 in debt to initiate an involuntary bankruptcy, up from the prior figure of $18,600.
Another significant adjustment is the threshold for filing a preference claim, which has increased to $8,575, up from $7,575. In a Chapter 11, creditors can file a preference claim that allows the trustee to void payments made to creditors within a specific period before the filing date. These are deemed to give an unfair advantage to certain creditors over others.
Additionally, there are updates concerning priorities set forth in Bankruptcy Code Section 507. This section gives priority to claims for unpaid wages, salaries or commissions earned within 180 days before the filing of the bankruptcy petition. The dollar cap on these priorities has increased from $15,150 to $17,150. Similarly, the cap on priorities for consumer deposits, namely for the purchase, lease, or rental of property or services for personal, family or household use, has been raised from $3,350 to $3,800.
Chapter 11 is a complex undertaking that requires capable legal guidance. An experienced bankruptcy attorney can advise you on how these dollar changes might impact your case and assist you in developing a strategic approach to reorganization.
The Law Offices of Michael Jay Berger in Beverly Hills has extensive experience representing debtors in Chapter 11 cases, helping to promote their successful emergence from reorganization. Call 310-271-6223 or contact us online for a free consultation.
