Munsch Hardt Shareholder Thomas Berghman spoke with The Texas Lawbook about proposed federal legislation that would significantly expand the number of small businesses eligible to restructure under Subchapter V of Chapter 11.

The Bankruptcy Threshold Adjustment Act would increase the Subchapter V debt limit from approximately $3.4 million to $7.5 million. Berghman told The Texas Lawbook that the current threshold does not reflect the financial realities facing many small businesses today, which may carry significant bank debt, merchant cash advance obligations and tax liabilities.

“The problem is that the current debt cap does not match the reality of what today’s small businesses look like,” Berghman said.

Berghman also noted that raising the threshold could encourage struggling businesses to seek bankruptcy protection earlier, while there is more value to preserve.

Read the full article in The Texas Lawbook.