AmiSight 11/1: Small Business Bankruptcies on the Rise: Leveraging New Subchapter V

A recent article in the Wall Street Journal talks about how small-business bankruptcy filings are rising this year, indicating that factors like increased interest rates, stricter lending standards, and higher operating costs are putting pressure on entrepreneurs. Additionally, some government aid programs that supported businesses during the COVID-19 pandemic have ended.

The increase in small-business bankruptcies is seen in filings under Subchapter V, a newer provision in the federal bankruptcy code that facilitates financial restructuring for distressed small businesses. Nearly 1,500 small businesses filed for Subchapter V bankruptcy in 2023 through September 28, closely matching the total for 2022.

Other signs of financial stress among small businesses include rising loan delinquencies and defaults and a decline in small-business owners' confidence, with many expressing concerns about the economy.

The Subchapter V bankruptcy option, created in February 2020, offers small businesses a more accessible and flexible bankruptcy process.