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Congress Passes Bankruptcy Threshold Adjustment Act to Help Small Businesses
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Key points
- The bill permanently raises the Subchapter V small business debt limit to $7.5 million.
- It simplifies Chapter 13 bankruptcy by establishing a single aggregate debt limit of less than $2.75 million.
- The bipartisan legislation passed the House and Senate in September 2026.
NewsWK — American small business owners facing financial distress will soon find it easier to reorganize their debts. Newly passed federal legislation provides this relief.
Why it matters
This legislative change directly impacts American entrepreneurs and families struggling with debt. By raising the limits, the government allows more local businesses to restructure under streamlined rules rather than facing costly liquidation. This helps keep local jobs and businesses alive across the United States.
How does the Subchapter V debt limit increase help small businesses?
The newly passed HR 7730 permanently raises the small business bankruptcy limit 7.5 million. This is up from the previous threshold of $3.424 million. This change allows larger small businesses to access Subchapter V. This path offers a faster, less expensive way to reorganize debts.
To qualify, at least half of the business’s noncontingent liquidated debts must arise from commercial or business activities. Additionally, this calculation excludes any debts owed to affiliates or insiders.
Who qualifies under the new Chapter 13 bankruptcy debt limit 2026?
Under the Bankruptcy Threshold Adjustment Act, individuals seeking to reorganize their personal finances face a simplified system. The bill eliminates separate limits for secured and unsecured debts. Instead, it establishes a single aggregate limit of less than $2,750,000 for Chapter 13 filers.
This adjustment ensures more individuals can restructure their liabilities. They will not be forced into more complex corporate bankruptcy chapters. The new rules apply to any case commenced on or after the official date of enactment.
What is the legislative history of HR 7730?
Representative Ben Cline (R-VA) introduced the bill on February 26, 2026. The House Judiciary Committee reported it favorably on August 27, 2026. After passing the House by a voice vote, the Senate approved the bill on September 28, 2026.
A bipartisan coalition backed this effort, including:
- Representative Ben Cline (R-VA)
- Representative J. Luis Correa (D-CA)
- Representative Laurel M. Lee (R-FL)
- Representative Joe Neguse (D-CO)
- Representative Lance Gooden (R-TX)
- Representative Zoe Lofgren (D-CA)
- Representative David J. Taylor (R-OH)
This article was produced with the assistance of AI and reviewed by our editorial team.
Sources
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