Subchapter V Debt Limit & MCA Eligibility: What New York Small Businesses Need to Know in 2026

The Subchapter V debt limit in 2026 is $3,424,000, not $7.5 million.

For New York small businesses carrying merchant cash advances, commercial loans, tax obligations, judgments, lease liabilities, and other debt, the calculation matters.

MCA obligations need to be considered as part of the business’s overall debt picture when determining Subchapter V eligibility.

That is especially important for businesses in retail, food service, construction, professional services, and other industries that have taken multiple MCA positions to manage cash flow.

The question is not simply how much the business owes to one MCA funder.

The business needs to understand its total qualifying debt under the Subchapter V eligibility rules.

The Number New York Businesses Need to Know

The Subchapter V debt limit in 2026 is $3,424,000.

Subchapter V is a streamlined form of Chapter 11 bankruptcy created by the Small Business Reorganization Act of 2019 for qualifying small business debtors.

For businesses evaluating this option, the debt limit is one of the first eligibility questions.

The temporary $7.5 million threshold that applied during the COVID-era period expired on June 21, 2024. The applicable Bankruptcy Code amount was

subsequently adjusted to $3,424,000 effective April 1, 2025.

A business evaluating Subchapter V therefore needs to calculate its qualifying debt under the current threshold rather than rely on an eligibility analysis performed when the $7.5 million limit was still in effect.

Merchant cash advance obligations can be part of that calculation along with other qualifying secured and unsecured debts.

For a New York business that qualifies, Subchapter V can provide a framework for restructuring debt while continuing operations. Filing also generally triggers the automatic stay, which restricts many covered collection actions while the bankruptcy case proceeds.

Subchapter V can also provide a path toward confirming a reorganization plan under the Bankruptcy Code, including circumstances in which a plan can be confirmed without the consent of every creditor if the applicable statutory requirements are satisfied.

That does not mean every business under the debt limit qualifies or that every plan will be confirmed.

The debt limit is one part of the eligibility analysis.

What Is the Subchapter V Debt Limit in 2026?

The current Subchapter V debt limit is $3,424,000 after the temporary $7.5 million COVID-era threshold expired and the limit was adjusted for inflation.

Subchapter V was designed to give qualifying small businesses a more streamlined Chapter 11 restructuring process.

For an owner dealing with stacked MCA payments, creditor pressure, judgments, or other business debt, the difference between qualifying and not qualifying can materially change the restructuring options available.

That is why the debt calculation should happen early.

Waiting until the business faces multiple enforcement actions can make the restructuring analysis more difficult.

How the Debt Limit Has Changed Over Time

The Subchapter V debt limit has changed several times since the Small Business Reorganization Act created Subchapter V:

• 2019: The Small Business Reorganization Act established the original small-business debt framework that applied when Subchapter V took effect.
• 2020: The CARES Act temporarily increased the applicable Subchapter V debt threshold to $7.5 million.
• 2021: Congress extended the elevated threshold.
• 2022: The Bankruptcy Threshold Adjustment and Technical Corrections Act again established the temporary $7.5 million threshold through June 21, 2024.
• June 21, 2024: The temporary $7.5 million threshold expired.
• April 1, 2025: The applicable Bankruptcy Code amount was adjusted to $3,424,000.
• 2026: The $3,424,000 threshold remains the number businesses need to use when evaluating the debt-limit component of Subchapter V eligibility.

The progression matters because a business that evaluated Subchapter V when the $7.5 million threshold applied cannot assume the same eligibility conclusion still holds.

If the business’s debt picture has changed, or the earlier analysis relied on the temporary threshold, it must recalculate the numbers under the current rules.

What Happened to the $7.5 Million Subchapter V Limit?

The $7.5 million threshold was temporary.

Congress increased the limit during the COVID-era period and later extended it, but the temporary increase expired on June 21, 2024.

That means businesses should not use $7.5 million as the current Subchapter V eligibility threshold.

For a business carrying substantial MCA obligations and other debt, the difference is significant.

A company that would have fallen comfortably below the temporary $7.5 million threshold can now be close to or above the current $3,424,000 limit.

That makes timing part of the restructuring analysis.

Before assuming Subchapter V is available, calculate the debt under current eligibility requirements and review the business’s full financial picture.

Planning around an expired threshold is not a restructuring strategy.

Does MCA Debt Count Toward the Subchapter V Eligibility Threshold?

When evaluating the aggregate non-contingent, liquidated debt used to determine Subchapter V eligibility, include merchant cash advance obligations along with commercial loans, tax obligations, judgments, lease liabilities, and other qualifying debt.

This is an important issue for business owners who have been told that an MCA does not count because the agreement is structured as a purchase of future receivables rather than a traditional loan.

That distinction can matter in litigation, but it does not mean an outstanding MCA obligation should be left out of the Subchapter V debt analysis.

A merchant cash advance is a form of alternative commercial financing in which a funder provides money to a business in exchange for a percentage of future receivables.

MCA agreements are commonly written as purchases of future receivables rather than loans. But New York courts can look beyond the agreement's label and examine how the transaction actually operates.

Whether a particular MCA is treated as a true purchase of receivables or recharacterized as a loan depends on the agreement's terms and the facts surrounding the transaction.

For a business evaluating Subchapter V, the practical point is straightforward.

Do not assume an outstanding MCA balance disappears from the debt calculation simply because the agreement calls the transaction a purchase of

receivables.

Identify and evaluate the obligation as part of the business’s complete debt picture.

How MCA Obligations Are Classified for Debt Calculation Purposes

The secured or unsecured status of an MCA obligation can affect how a claim is treated in bankruptcy. Still, both secured and unsecured non-contingent, liquidated debts are considered when determining whether a debtor falls within the Subchapter V debt limit.

An MCA funder that filed a UCC-1 financing statement can assert a security interest in specified business assets, subject to the underlying agreement, perfection, priority, and other applicable requirements.

Another MCA obligation could be unsecured.

Either way, the business needs to identify the obligation when calculating its aggregate debt.

The recharacterization question adds another layer to the analysis.

New York courts examining whether an MCA operated as a true receivables purchase or a loan look at the transaction's substance rather than relying solely on the contract language.

That analysis can include whether the agreement provides a meaningful reconciliation mechanism, whether the repayment term is finite, and whether the funder has recourse if the merchant declares bankruptcy.

If a court determines that an MCA actually operated as a loan, New York lending and usury laws can become relevant depending on the facts and the parties involved.

That does not mean a high factor rate automatically makes an MCA a usurious loan.

First, you must analyze the transaction to determine whether it is legally a loan before applying a usury analysis.

For a business considering Subchapter V, you should not evaluate these issues in isolation.

The MCA agreements, outstanding balances, UCC filings, judgments, payment history, and overall debt structure can all affect the restructuring analysis.

Calculating Your Total Debt Load Before Filing

The calculation sounds simple in theory.

In practice, it can become complicated quickly when a business has several MCA positions, commercial loans, tax obligations, judgments, and other liabilities at the same time.

Start by identifying:

• All outstanding MCA obligations, including every position and funder
• Commercial term loans and lines of credit
• Tax obligations and tax liens at the federal, state, and local levels
• Judgments, including applicable confessions of judgment
• Lease obligations that qualify as non-contingent and liquidated debt
• Other secured and unsecured obligations that need to be included in the eligibility calculation

The Subchapter V eligibility analysis focuses on non-contingent, liquidated debt.

Whether a particular obligation is contingent or unliquidated is a legal question that depends on the nature of the liability and whether the amount is sufficiently determined.

That distinction matters when a business is close to the $3,424,000 threshold.

A company carrying several MCA positions should not estimate its eligibility from a rough balance sheet or look only at the largest creditors.

Identify and evaluate each obligation.

If the aggregate debt is approaching the current Subchapter V limit, the timing of the analysis becomes increasingly important.

A business that qualifies today cannot assume it will remain eligible after taking another MCA position, incurring additional debt, or having a disputed obligation reduced to judgment.

Likewise, a business should not assume that exceeding the Subchapter V threshold leaves it without a restructuring option.

Traditional Chapter 11 bankruptcy can provide a reorganization framework for businesses that do not qualify for Subchapter V, although the structure, procedures, costs, and confirmation requirements differ.

The first step is knowing the actual debt amount.

For a New York business with MCA obligations, that means reviewing the entire debt structure before deciding which restructuring path fits.

Why Subchapter V Can Be a Powerful Tool for NYC Businesses With

MCA Debt

For a qualifying New York business, Subchapter V can provide a way to restructure MCA obligations, obtain the protections of the automatic stay, and pursue confirmation of a reorganization plan while the business continues operating.

For a business owner dealing with daily MCA remittances, stacked UCC liens, judgments, and the possibility of additional collection activity, Subchapter V can change the structure of the problem.

Instead of addressing each MCA funder separately while trying to keep the business operating, the debtor can use a federal bankruptcy process to address qualifying creditor claims through a reorganization plan.

That does not mean every MCA obligation receives the same treatment or that every proposed plan will be confirmed.

The outcome depends on the claims, collateral, business finances, plan terms, and Bankruptcy Code requirements.

But for a viable business carrying an unsustainable MCA debt load, Subchapter V can provide a structured path for addressing the debt while the company continues to operate.

The Automatic Stay and MCA Enforcement Actions

When a Subchapter V bankruptcy petition is filed, the automatic stay under 11 U.S.C. § 362 generally takes effect.

The stay restricts many covered collection and enforcement actions against the debtor or the bankruptcy estate's property.

For a business facing MCA collection activity, the stay can affect efforts involving judgments, bank accounts, liens, and other enforcement actions, depending on the circumstances.

The automatic stay is broad, but it is not unlimited.

Certain actions fall outside the stay, and creditors can ask the bankruptcy court for relief from the stay when they meet the statutory requirements.

That is why a business facing active MCA enforcement should evaluate the specific collection activity rather than assume that filing automatically resolves every prepetition action or reverses every transfer that already occurred.

Confessions of judgment require the same careful analysis.

New York changed its confession of judgment procedures in 2019, including restrictions affecting the use of New York’s COJ process against certain out-of-state debtors.

For a New York business already facing a judgment or enforcement activity arising from a confession of judgment, the bankruptcy analysis needs to account for both the judgment itself and the effect of the automatic stay on further covered collection activity.

Singer Law Group handles confession of judgment defense as part of the broader analysis of MCA enforcement and business restructuring.

The goal is to understand what has already happened, what collection activity is still underway, and what legal options remain before the next enforcement step.

Cramdown: Restructuring MCA Debt Over a Funder’s Objection

Cramdown is one feature that can make Subchapter V particularly important for a business with MCA debt.

Under 11 U.S.C. § 1191, a bankruptcy court can confirm a nonconsensual Subchapter V plan when the applicable statutory requirements are satisfied.

In practical terms, unanimous creditor approval is not always required.

A debtor can propose a plan addressing the treatment and timing of creditor claims, including MCA-related claims, and seek confirmation even when one or more creditors object.

But cramdown is not automatic.

The debtor must still satisfy the requirements for confirmation, including the standards that apply to a nonconsensual Subchapter V plan.

The treatment of a particular MCA funder also depends on whether the claim is secured or unsecured, the value and nature of the collateral, the amount of the allowed claim, and the terms of the proposed plan.

That is why MCA and bankruptcy analyses need to work together.

A business with several MCA positions needs to understand the agreements, UCC filings, outstanding balances, judgments, and payment obligations before it can build a realistic restructuring proposal.

For some businesses, merchant cash advance restructuring can involve negotiations outside bankruptcy.

For others, Subchapter V can provide the legal framework needed to address multiple creditor claims through one reorganization process.

The right approach depends on the business’s complete financial picture.

Debtor Retains Control and a Creditors’ Committee Is Not Ordinarily Appointed

One practical difference between Subchapter V and traditional Chapter 11 is how the case is administered.

In Subchapter V, the debtor generally remains in possession of the business and continues operating during the case.

A Subchapter V trustee is appointed, but the trustee’s role is generally focused on oversight, facilitation, and helping the parties work toward a confirmable plan rather than taking over day-to-day management of the company.

An unsecured creditors’ committee is also not ordinarily appointed in a Subchapter V case unless the bankruptcy court orders otherwise.

That can reduce some of the administrative complexity associated with a traditional Chapter 11 case.

For a small business already dealing with tight cash flow and substantial MCA obligations, those differences can matter.

The business still has significant responsibilities.

It needs accurate financial records, realistic cash flow projections, a complete picture of creditors, and a reorganization plan that meets applicable

Bankruptcy Code requirements.

But the Subchapter V structure is designed to provide qualifying small businesses with a more streamlined reorganization process.

For an owner trying to keep a viable New York business operating while addressing an unsustainable MCA debt load, that structure can provide a path forward without automatically surrendering control of the company.

Where New York Businesses File Subchapter V Cases

New York businesses generally file bankruptcy cases in the federal judicial district connected to their location, domicile, principal place of business, or principal assets, subject to the federal bankruptcy venue rules.

For New York City businesses, that commonly means the U.S. Bankruptcy Court for the Southern District of New York or the U.S. Bankruptcy Court for the Eastern District of New York.

The $3,424,000 Subchapter V debt threshold is a federal eligibility requirement. It does not change based on whether a qualifying New York business files in the SDNY or EDNY.

For a business carrying MCA debt, however, where the case is filed still matters.

Local procedures, the facts of the case, the creditor structure, pending litigation, judgments, and existing enforcement activity can all factor into the restructuring analysis.

Southern District of New York: Manhattan, Bronx, and Westchester

Businesses in Manhattan, the Bronx, and Westchester can fall within the Southern District of New York.

The U.S. Bankruptcy Court for the Southern District of New York hears Chapter 11 and Subchapter V cases involving businesses throughout the district.

Jeb Singer, Managing Partner of J. Singer Law Group, previously served as a law clerk to the Honorable Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York.

That experience is part of the firm’s broader background in bankruptcy, restructuring, MCA disputes, and commercial litigation.

For a business with MCA obligations, the bankruptcy analysis can involve more than determining whether the company is below the Subchapter V debt limit.

The business also needs to understand how its MCA agreements are structured, whether funders claim security interests, whether judgments have already been entered, what collection activity is underway, and how those obligations fit into a potential reorganization.

Those issues become especially important when the business is considering Subchapter V bankruptcy in New York while MCA enforcement is already affecting day-to-day operations.

Eastern District of New York: Brooklyn, Queens, and Long Island

Businesses in Brooklyn, Queens, Nassau County, and Suffolk County can fall within the Eastern District of New York.

The U.S. Bankruptcy Court for the Eastern District of New York maintains courthouses in Brooklyn and Central Islip.

The same federal Subchapter V debt threshold applies.

A Queens business with stacked MCA positions is not subject to a different debt limit from a Manhattan business simply because the cases would be filed in different federal districts.

The eligibility calculation still starts with the debtor’s qualifying non-contingent, liquidated secured and unsecured debts.

Singer Law Group partner Ira Reid previously served as a law clerk to the Honorable Cecelia H. Goetz of the U.S. Bankruptcy Court for the Eastern District of New York.

He later spent approximately 20 years as a restructuring partner at Baker McKenzie before joining Singer Law Group.

That restructuring experience is relevant when a business’s MCA problem has moved beyond one agreement or one creditor.

A company can be dealing with several MCA funders, UCC filings, tax obligations, commercial loans, judgments, leases, and operating expenses at the same time.

Subchapter V eligibility is only the first question.

The business also needs a restructuring plan that works with its actual revenue, expenses, creditor claims, and ability to continue operating.

Subchapter V for Businesses Outside New York

Subchapter V is part of the federal Bankruptcy Code, so qualifying businesses outside New York can also use the process when they satisfy the applicable requirements.

The federal debt threshold does not change simply because a business operates in another state.

The filing district, local procedures, business structure, debt profile, and circumstances of the individual case still need to be evaluated.

For businesses with MCA debt, that distinction matters because MCA financing is not limited to New York companies.

Businesses in Florida, Maryland, Virginia, Washington, D.C., and other markets can face the same underlying problem: multiple MCA positions are pulling cash from the business while other debts continue to accumulate.

The Subchapter V analysis still begins with the fundamentals.

Calculate the qualifying debt.

Identify every MCA position.

Determine which obligations are secured and unsecured.

Review UCC filings and judgments.

Understand the business’s current cash flow.

Then determine whether Subchapter V is available and whether a reorganization plan is financially realistic.

The $3,424,000 threshold answers one part of the eligibility question.

It does not answer whether Subchapter V is the right restructuring strategy for the business.

That decision requires reviewing the debt, business operations, creditor activity, and what the company can realistically support going forward.

Step-by-Step: How to Assess Subchapter V Eligibility When You Have MCA Debt

To assess Subchapter V eligibility with MCA debt, start by calculating the business’s qualifying non-contingent, liquidated secured and unsecured debts, confirm whether the total falls within the $3,424,000 threshold, evaluate the applicable business activity requirements, and determine whether the business has a realistic path to reorganization.

The order matters.

A business owner looking at Subchapter V needs a clear picture of the debt before deciding whether the restructuring path fits.

For a company with several MCA positions, that means going beyond the balance owed to the largest funder.

Identify every qualifying obligation so the eligibility analysis reflects the business’s actual financial position.

Step 1: Aggregate All Debt Obligations

Start with every MCA position and its current outstanding balance.

Then identify the rest of the business’s debt, including commercial term loans, lines of credit, federal, state, and local tax obligations, judgments, and qualifying lease liabilities.

For a business with stacked MCA positions, this can take more work than expected.

MCA balances can change as remittances are collected. New positions can be added. Judgments can be entered. Tax obligations and other liabilities

can also change the overall debt picture.

That is why an old eligibility calculation should not automatically be treated as the current number.

The analysis also needs to distinguish between debts that count toward the Subchapter V threshold and obligations that do not.

The statutory calculation focuses on non-contingent, liquidated secured and unsecured debt.

Whether a particular obligation is contingent or unliquidated depends on the nature of the liability and the facts surrounding it.

For a business close to the $3,424,000 threshold, those distinctions can affect the eligibility analysis.

At this stage, the goal is to build an accurate debt inventory.

Do not estimate.

Do not count only the MCA positions.

And do not rely on a calculation prepared months earlier if the company’s debt has changed.

Step 2: Confirm the Business Activity Requirement

The debt limit is not the only Subchapter V requirement.

The debtor must also satisfy the business-related eligibility requirements under the Bankruptcy Code.

That means the analysis should address what the debtor does, whether it is engaged in commercial or business activities, and whether any statutory exclusion applies.

Single-asset real estate debtors are excluded from the Subchapter V small business debtor definition.

That distinction can matter when a business owner holds real estate in an entity that also carries commercial debt.

The existence of real estate does not by itself answer the eligibility question.

You need to evaluate the debtor's structure, the nature of its business activities, its assets, and its debts as a whole.

If real estate is a significant part of the financial problem, the business can also have separate commercial real estate issues that need to be considered alongside the restructuring analysis.

For a company carrying MCA debt, this step ensures the business fits within Subchapter V before building a restructuring strategy around it.

Step 3: Consult a Subchapter V Attorney and Evaluate Plan Feasibility

Eligibility gets a business into the Subchapter V analysis.

Feasibility determines whether the restructuring can actually work.

Under 11 U.S.C. § 1189, a Subchapter V debtor generally must file a reorganization plan within 90 days after the order for relief. The bankruptcy court can extend that period when the need for an extension is attributable to circumstances for which the debtor should not justly be held accountable.

For a voluntary Subchapter V case, the petition generally constitutes the order for relief, which means the plan timeline begins with the filing.

That is a short period for a business that still needs to identify creditors, reconcile MCA balances, analyze liens, build cash flow projections, address

disputed claims, and determine how creditor obligations can be treated under a proposed plan.

Whenever possible, preparation should begin before filing the petition.

A business does not want to enter Subchapter V knowing only that its debt falls below $3,424,000.

It should also understand what the reorganization needs to accomplish.

For a business carrying stacked MCA positions, that can mean determining what cash flow looks like without the existing daily or weekly remittance structure, what secured claims need to be addressed, how unsecured claims fit into the plan, and whether projected operations can support the proposed treatment of creditors.

The numbers need to work.

A business that qualifies for Subchapter V but cannot support a feasible reorganization plan has a different problem from a viable company whose operations are being overwhelmed by its current debt structure.

That is why the eligibility calculation and the financial analysis should happen together.

Before filing, Singer Law Group looks at the business’s MCA obligations, other creditor claims, cash flow, assets, pending enforcement activity, and realistic operating projections.

The goal is to answer two separate questions:

Does the business qualify for Subchapter V?

If it qualifies, can the business build a reorganization plan with a realistic path to confirmation and performance?

Those are not the same question.

A business owner dealing with stacked MCA debt should understand both before deciding whether to file.

Common Myths About the Subchapter V Debt Limit and MCA Debt

One of the biggest misconceptions about Subchapter V is that the debt limit is still $7.5 million. It is not. The current threshold is $3,424,000, and businesses that evaluated eligibility while the temporary higher limit was in effect need to run the numbers again under the current threshold.

For New York business owners carrying MCA debt, the debt-limit number is only part of the picture.

Misunderstandings about which debts count, how MCA claims can be treated, who controls the business during bankruptcy, and when to calculate eligibility can lead an owner to rule out Subchapter V too quickly or assume the business qualifies when additional analysis is still needed.

Myth 1: The Subchapter V debt limit is still $7.5 million.

The temporary $7.5 million threshold expired on June 21, 2024.

The current threshold is $3,424,000.

A business that evaluated Subchapter V when the temporary $7.5 million threshold was in effect should not rely on that earlier calculation. The debt needs to be evaluated under the current eligibility requirements.

This is especially important when a company has taken additional MCA positions, accumulated tax debt, taken on new commercial loans, or had judgments entered since the earlier analysis.

Myth 2: Only secured debt counts toward the Subchapter V eligibility limit.

Subchapter V does not look only at secured obligations.

The eligibility calculation includes qualifying non-contingent, liquidated secured and unsecured debt.

That means a business needs to look beyond obligations backed by collateral or UCC filings.

Unsecured obligations can also affect whether the business falls within the $3,424,000 threshold.

For a company with several MCA positions and other business debt, leaving unsecured obligations out of the calculation can produce an inaccurate eligibility picture.

Myth 3: MCA funders cannot be affected by a Subchapter V plan.

MCA-related claims can be addressed through a Subchapter V case, subject to the Bankruptcy Code and the circumstances of the individual claim.

The treatment depends on factors such as the agreement, claim amount, collateral, secured or unsecured status, and the terms of the proposed reorganization plan.

A Subchapter V debtor can also seek confirmation of a nonconsensual plan under 11 U.S.C. § 1191 when the applicable statutory requirements are satisfied.

That means an MCA funder’s objection does not automatically prevent confirmation.

It also does not mean the debtor can impose any repayment terms it wants.

The proposed plan still needs to satisfy the requirements of the Bankruptcy Code.

Myth 4: Subchapter V is only for failing businesses.

A business does not have to be at the end of its operations for restructuring to matter.

Subchapter V provides a reorganization process for qualifying small business debtors.

For a company with an operating business and meaningful revenue, the problem can be the debt structure rather than the underlying business itself.

That distinction matters when MCA positions are stacked.

A company can have customers, employees, revenue, and a viable business model while still struggling because multiple daily or weekly remittances are

consuming the cash needed to operate.

In that situation, the question is whether the business can reorganize its obligations and support a feasible plan from future operations.

That requires a financial and legal analysis of the actual business, not the assumption that bankruptcy matters only after the company has stopped

functioning.

Myth 5: Filing Subchapter V means losing control of the business.

A Subchapter V debtor generally remains in possession and continues operating its business during the case.

A Subchapter V trustee is appointed, but the trustee does not automatically take over management.

The trustee’s role generally includes oversight, facilitation, and assistance in reaching a consensual plan when possible.

An unsecured creditors’ committee is also not ordinarily appointed unless the bankruptcy court orders otherwise.

The business owner still has significant responsibilities during the case.

Financial reporting, court requirements, creditor issues, plan preparation, and ongoing operations all need careful handling.

But filing Subchapter V does not automatically mean handing day-to-day control of the company to a trustee or creditors.

Myth 6: The debt limit calculation only matters once.

For a business carrying multiple MCA positions, the debt picture can change.

Balances can decrease as you make payments.

New financing can increase total debt.

Tax obligations, judgments, commercial loans, and other liabilities can also change the calculation.

That means a business that was under the threshold during an earlier review should not automatically assume it still qualifies.

The reverse is also true.

A business should not make a restructuring decision from an outdated snapshot of its debt.

Calculate the relevant obligations based on the circumstances in effect when eligibility is evaluated.

For a New York business approaching the $3,424,000 threshold, timing can become an important part of the restructuring analysis.

The goal is not to file simply because the business is currently below a number.

It is to understand the company’s debt, cash flow, creditor pressure, and available restructuring options early enough to make an informed decision before those circumstances change.

Frequently Asked Questions

What is the current Subchapter V debt limit in 2026?

The current Subchapter V debt limit is $3,424,000.

This is the applicable inflation-adjusted Bankruptcy Code amount after the temporary $7.5 million COVID-era threshold expired on June 21, 2024.

For a business evaluating Subchapter V, the calculation focuses on qualifying non-contingent, liquidated secured and unsecured debts.

The debt limit is an important eligibility requirement, but falling below $3,424,000 does not automatically mean a business qualifies for Subchapter V.

The debtor must still satisfy the other requirements of the Bankruptcy Code.

For New York businesses carrying several MCA positions, that makes a current debt calculation important. An eligibility analysis performed when the $7.5 million temporary threshold was still in effect should not be used as the answer in 2026.

Does MCA debt count toward the Subchapter V debt limit?

Include MCA obligations when evaluating the business’s overall debt picture for Subchapter V eligibility.

Whether a particular MCA-related claim is secured or unsecured depends on the agreement, UCC filings, perfection, collateral, and other facts. Both qualifying secured and unsecured non-contingent, liquidated debts are considered when determining whether the debtor falls within the Subchapter V

threshold.

Whether an MCA is a true purchase of future receivables or should be recharacterized as a loan can affect the legal analysis and treatment of the obligation.

But a business should not simply exclude an outstanding MCA obligation from its eligibility review because the contract describes the transaction as a purchase of receivables.

For a business with stacked MCA positions, it should identify and evaluate each obligation as part of the complete debt calculation.

What happened to the $7.5 million Subchapter V debt limit?

The $7.5 million threshold was temporary.

Congress increased the applicable limit during the COVID-era period and later extended the higher threshold, but that temporary increase expired on June 21, 2024.

The applicable Bankruptcy Code amount was subsequently adjusted to $3,424,000 effective April 1, 2025.

For businesses evaluating Subchapter V in 2026, the important point is simple: do not use $7.5 million as the current debt-limit number.

A business that previously qualified under the temporary higher threshold needs to evaluate its current debt against the $3,424,000 limit and the other eligibility requirements that apply.

Can a New York business with MCA debt use Subchapter V to restructure?

Potentially, yes.

A New York business with MCA obligations can evaluate Subchapter V if it satisfies the applicable eligibility requirements, including the current debt threshold and the business-related requirements under the Bankruptcy Code.

For a qualifying business, Subchapter V can provide a framework for addressing MCA-related claims and other business debt through a reorganization plan.

Filing also generally triggers the automatic stay under 11 U.S.C. § 362, which restricts many covered collection and enforcement actions while the bankruptcy case proceeds.

The automatic stay is not unlimited, and filing does not automatically reverse every collection action or transfer that occurred before bankruptcy.

Subchapter V also provides a process for seeking confirmation of a nonconsensual plan under 11 U.S.C. § 1191 when the statutory requirements are satisfied.

That means an MCA funder’s objection does not necessarily prevent a plan from being confirmed.

The treatment of each MCA-related claim still depends on the agreement, claim status, collateral, applicable bankruptcy rules, and terms of the proposed plan.

Where do New York City businesses file a Subchapter V bankruptcy case?

The appropriate bankruptcy venue depends on federal venue rules and the debtor's circumstances.

For New York City businesses, cases commonly fall within either the Southern District of New York or the Eastern District of New York.

Manhattan and Bronx businesses generally fall within the U.S. Bankruptcy Court for the Southern District of New York.

Brooklyn and Queens businesses generally fall within the U.S. Bankruptcy Court for the Eastern District of New York. Nassau County and Suffolk County are also within the Eastern District.

The $3,424,000 Subchapter V debt threshold is a federal requirement and does not change simply because a business files in the SDNY rather than the EDNY.

The district can still matter for local procedures and administering the individual bankruptcy case.

What is the deadline to file a reorganization plan in Subchapter V?

Under 11 U.S.C. § 1189, a Subchapter V debtor generally must file a reorganization plan within 90 days after the order for relief.

The bankruptcy court can extend that period when the need for an extension stems from circumstances for which the debtor should not justly be held accountable.

In a voluntary Subchapter V case, the petition generally constitutes the order for relief, so the plan timeline effectively begins when the case is filed.

That preparation for filing is important.

A business with MCA debt can need time to reconcile outstanding balances, identify creditor claims, evaluate UCC filings and collateral, organize financial records, prepare cash flow projections, and determine how the proposed plan will address creditor obligations.

The 90-day plan period should not be treated as 90 days to begin figuring out the business’s finances.

A stronger approach is to understand the debt structure, current cash flow, creditor activity, and potential restructuring strategy before filing the petition.

For a business already facing MCA enforcement, that preparation can also help counsel evaluate whether Subchapter V fits the broader situation before the bankruptcy clock starts.

The Strategic Calculation: Why Timing Matters

Subchapter V eligibility isn't something a business should calculate once and assume will remain the same.

For a company carrying stacked MCA positions, the debt picture can move in either direction.

Balances can decrease as payments are made. New MCA positions, commercial loans, tax obligations, judgments, and other liabilities can increase the total.

A business owner who evaluated eligibility six months ago and then took additional financing to cover cash flow could be looking at a very different

number today.

That matters as the business approaches the $3,424,000 Subchapter V debt threshold.

The question is not simply whether the company qualifies today.

The business also needs to understand whether Subchapter V fits its broader financial situation and whether it can support a realistic reorganization

plan.

Singer Law Group approaches MCA debt and business restructuring as connected issues.

A business facing multiple MCA funders can have several problems at once: daily or weekly remittances can affect cash flow, UCC filings can affect business assets, judgments can create additional collection pressure, and other commercial debt can keep accumulating.

Looking at only one MCA agreement does not answer the larger restructuring question.

The analysis needs to account for the entire business.

That includes the MCA agreements, outstanding balances, UCC filings, judgments, tax obligations, commercial loans, available cash flow, assets, current enforcement activity, and the company’s ability to operate under a restructured payment plan.

Depending on that analysis, available strategies can include MCA negotiations, litigation, bankruptcy restructuring, or a combination of approaches.

Singer Law Group handles MCA disputes alongside Subchapter V and Chapter 11 restructuring matters, allowing those issues to be evaluated together rather than as separate financial problems.

Jeb Singer previously served as a law clerk to the Honorable Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York.

Singer Law Group partner Ira Reid previously clerked for the Honorable Cecelia H. Goetz of the U.S. Bankruptcy Court for the Eastern District of New York. He later spent approximately 20 years as a restructuring partner at Baker McKenzie.

That experience shapes the firm’s approach to businesses facing MCA debt, creditor pressure, and restructuring decisions.

Know the Number Before You Need the Filing

For a New York business carrying stacked MCA debt, the $3,424,000 threshold is an important number, but it is not the entire Subchapter V analysis.

The business needs to know what it owes.

It needs to understand which obligations count toward the eligibility threshold.

It needs to determine whether it meets the other Subchapter V requirements.

And it needs to know whether the company’s actual cash flow can support a workable reorganization.

Waiting until MCA enforcement has escalated can narrow the time available to evaluate those questions.

If your business is carrying multiple MCA positions, start with the debt calculation.

Identify every MCA balance and other qualifying obligation. Review the UCC filings and judgments. Look at current cash flow. Then determine whether

Subchapter V, traditional Chapter 11, MCA restructuring, litigation, or another strategy fits the business’s circumstances.

If your MCA stack is growing and you have not calculated your total debt against the current Subchapter V threshold, contact J. Singer Law Group at (917) 905-8280 to discuss the business’s debt structure and restructuring options.

Strategy. Not just defense.

About the Author

Jeb Singer, Esq. is the Managing Partner of J. Singer Law Group, PLLC. He was admitted to practice in New York in 2009 and founded J. Singer Law Group in November 2014.

Earlier in his legal career, Jeb served as a law clerk to the Honorable Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York.

His practice includes merchant cash advance defense, commercial litigation, bankruptcy, and business restructuring. His work with businesses carrying

MCA debt focuses on understanding the full financial picture, including MCA agreements, UCC filings, judgments, creditor activity, cash flow, and the restructuring options available under the circumstances.

That approach matters most when a business is considering Subchapter V. Falling below the debt threshold is only the beginning of the analysis. The business also needs a legal and financial strategy that addresses the creditor structure while giving the company a realistic path forward.

This article is for general informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Subchapter V eligibility, debt classification, automatic stay protections, treatment of MCA-related claims, and plan confirmation depend on the facts of the individual business and the applicable law.