A record number of mom-and-pop businesses have filed for a special type of bankruptcy this year created to offer small companies a lifeline, new data show. Some 2,200 people and small businesses used Subchapter V rules, designed to help firms with less than $7.5 million in debt obtain fast and affordable credit relief, according to Epiq Bankruptcy Analytics. President Donald Trump’s trade wars have contributed to the growth of the program, which launched in 2020, according to Bloomberg. Last year, the threshold was reduced to $3 million in a bid to reduce the number of qualifying businesses and slow the federal program’s use. Bloomberg reports, “High borrowing costs, cautious consumers and the Trump administration’s trade war are weighing on earnings for the smallest businesses.” Subchapter V cases rose 8 percent to 2,221 year to date in November, according to data from Epiq. Florida court-approved trustee Carol Fox told Bloomberg, “Creditors are just breathing down their necks.” Subchapter V filings are now being registered faster than longer-standing Chapter 11 bankruptcies, which grew 1 percent to around 6,000, according to Bloomberg. Chapter 11s are generally used by businesses and higher net-worth individuals to restructure debt. Epiq collects data from federal courts to analyze bankruptcy filings.
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