September 2026: Recent Developments in Bankruptcy and Restructuring

In an effort to keep you apprised of what’s happening in the world of bankruptcy and restructuring, here are four recent developments to be aware of.

1. Lenders are adding new protections in response to increasingly aggressive liability management transactions.

Borrowers have increasingly used liability management transactions, including J.Crew-style asset transfers and Serta-style uptiers, to move assets beyond lenders’ reach or give new debt priority over existing debt.

New data from Noetica shows that lenders are responding by negotiating stronger protections into credit agreements. J.Crew blockers appeared in 38% of deals in Q2 2025, up from 15% in Q1 2023, while anti-Serta protections appeared in 85% of deals. Broader “omniblockers,” designed to restrict multiple forms of liability management transactions, appeared in only 4% of publicly filed high-yield issuances in 2025.

The data illustrates the continuing back-and-forth between borrowers seeking flexibility to manage distressed balance sheets and lenders seeking to protect collateral and priority.

2. Congress has passed legislation restoring the $7.5 million debt limit for Subchapter V bankruptcy cases.

The Bankruptcy Threshold Adjustment Act of 2026 has passed both the House and Senate and now heads to the President for approval. If enacted, the legislation would permanently restore the Subchapter V debt ceiling to $7.5 million.

The higher limit would make the streamlined Chapter 11 process available to more small businesses. Subchapter V generally provides a faster and less expensive path through Chapter 11, including an accelerated timeline and typically no creditors’ committee.

The legislation would also restore the Chapter 13 debt limit to $2.75 million.

3. LIV Golf has filed for Chapter 11 bankruptcy after its primary financial backer announced it would stop funding the league’s losses.

LIV Golf Holdings and related entities filed for Chapter 11 protection in New Jersey on September 8. According to the company’s first-day declaration, Saudi Arabia’s Public Investment Fund had invested approximately $5 billion in LIV since its launch but announced earlier this year that it would stop funding losses after the 2026 season.

LIV entered bankruptcy with a restructuring agreement that includes a proposed $300 million investment anchored by BC Partners.

The creditor list is unusual. Many of LIV’s largest unsecured creditors are professional golfers owed money under player agreements. Jon Rahm is listed as being owed approximately $7.47 million, followed by Bryson DeChambeau at $5.77 million, Dustin Johnson at $5.49 million, and Cameron Smith at $4.84 million.

4. A new study examines which large companies are most likely to return to bankruptcy after emerging from Chapter 11.

A recently released paper analyzed 696 large public companies with observable post-bankruptcy outcomes and found that 117 returned to bankruptcy within five years.

Retail companies were significantly more likely to re-file than manufacturing companies. Companies that used prepackaged bankruptcies also had higher rates of repeat filings, while firm size was only a marginal predictor.

The findings highlight an important distinction between successfully emerging from Chapter 11 and achieving a durable financial recovery.