In re Zhang Med.
PC In 2023, the U.S. Bankruptcy Court for the Southern District of New York held that future lease obligations for a Manhattan fertility clinic were contingent and unliquidated as of the petition date because the debtor had not moved to reject the lease until after the petition date (6). In reaching its conclusion, the Zhang court identified the contingency as the debtor’s election to assume or reject the lease and reasoned that until the debtor decided to assume or reject the lease, future lease obligations are contingent and unliquidated. The Zhang court also questioned whether obligations assumed post-petition could be considered “debts” given that assumption requires a determination that the assumed lease is a net asset that is beneficial to the estate (7). Ultimately, the court determined that the debtor’s future lease obligations were contingent and unliquidated.
In re Macedon Consulting Inc.
Also in 2023, but prior to the Zhang decision, the U.S. Bankruptcy Court for the Eastern District of Virginia adopted a different approach to evaluating subchapter V eligibility. In Macedon Consulting Inc., the court held that a debtor’s future liability under unexpired leases is considered “noncontingent liquidated debt” for purposes of subchapter V eligibility and should be included in the eligibility calculation (8). Unlike the Parking Management and Zhang decisions, which focused on contingencies affecting the timing and amount of future obligations, Macedon instead focused on the definitive obligations that were created the moment the parties executed the lease. The Macedon court explained that the debtor’s liability was established pre-petition upon execution of the lease agreement, and any calculable measure could be ascertained by the terms of the lease agreement and statutory cap (9). Thus, the future lease obligations were noncontingent and liquidated. As a result, the court revoked the debtor’s subchapter V election but allowed the case to proceed as a traditional chapter 11.
What Does Congress Say to a Renewal of the Debt Cap?
“Not today.” While courts wrestle with statutory interpretation, Congress’s decision to let the temporary debt cap increase expire provides a telling policy cue.
In response to the COVID-19 pandemic, Congress temporarily raised the subchapter V debt cap to $7.5 million under the Coronavirus Aid, Relief and Economic Security Act. This increase expired on June 21, 2024. With no renewal, the threshold reverted to its original limit of $3,024,725, which was adjusted to $3,424,000 as of April 1, 2025, per 11 U.S.C. § 104 of the Bankruptcy Code.
Although bipartisan legislation (S. 4150) was introduced in April 2024 seeking to extend the higher limit for another two years, Congress declined to act. The lapse strongly suggests a deliberate narrowing of subchapter V’s reach.
Some courts resisting the inclusion of future rent obligations toward the eligibility cap often cite policy concerns that such an inclusion would “greatly restrict subchapter V eligibility”(10). However, Congress’s decision to let the temporary increase expire suggests a different policy judgment: The restored lower threshold serves as a deliberate filter, reserving subchapter V for truly small businesses, not midsized enterprises capable of navigating standard chapter 11 proceedings. Such decisions as Macedon Consulting, which include full future lease liabilities as noncontingent, liquidated debt, align with this intent by applying the eligibility cap as a meaningful limit rather than an expansive gateway.
Conclusion
As courts continue to interpret eligibility through varying lenses, Congress’s silence looms large. For debtors and creditors alike, understanding both judicial precedent and legislative posture, as well as intentional planning, is more important than ever. For debtors: If you are approaching the subchapter V cap, analyze your leases and working with the counterparties before filing, as rejection may bring you closer to or over the threshold. Thus, timing and venue matter. For creditors: Track subchapter V filings carefully, and if possible, assert rejection-damage claims early, and consider objecting to eligibility if your claim tips the scale.
Whatever side one may choose, this split creates strategic terrain for debtors and creditors alike. Depending on jurisdiction, a debtor may either rise to subchapter V eligibility — or be cast from its protective walls.
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1 In re Zhang Med. PC, 655 B.R. 403, 408-09 (Bankr. S.D.N.Y. 2023); In re Macedon Consulting, Inc., 652 B.R. 480, 485 (Bankr. E.D. Va. 2023); In re Parking Mgmt. Inc., 620 B.R. 544, 554 (Bankr. D. Md. 2020).
2 Zhang Med. PC, 655 B.R. at 409 (citation omitted).
3 Compare Parking Mgmt. Inc., 620 B.R. at 553-54, with Zhang Med. PC, 655 B.R. at 412.
4 See Parking Mgmt. Inc., 620 B.R. at 549.
5 Id. at 553.
6 See Zhang Med. PC, 655 B.R. at 413.
7 Id. at 412.
8 See Macedon Consulting Inc., 652 B.R. at 486.
9 Macedon Consulting Inc., 652 B.R. at 485-86
10 Zhang Med. PC, 655 B.R. at 411.