HR7730-119

What This Bill Does

The Bankruptcy Threshold Adjustment Act of 2026 changes debt limits in title 11. For subchapter V small business bankruptcy, it defines an eligible debtor as a person engaged in commercial or business activities with aggregate noncontingent, liquidated secured and unsecured debts of not more than $7,500,000, excluding debts owed to affiliates or insiders, if at least 50 percent of the debt arose from commercial or business activities.

The bill excludes a person whose primary activity is owning single asset real estate, affiliated debtor groups with aggregate qualifying debts above $7,500,000, Securities Exchange Act reporting companies, and affiliates of those public reporting companies. It also rewrites chapter 13 eligibility so an individual with regular income, or an individual and spouse with regular income, may be a chapter 13 debtor if they owe less than $2,750,000 in noncontingent, liquidated debts. Stockbrokers and commodity brokers remain excluded. The amendments apply to bankruptcy cases filed on or after enactment.

Who Benefits and How

Small business debtors benefit because the subchapter V debt ceiling is set at $7,500,000, preserving access to a streamlined reorganization path for larger small businesses. Individual debtors with regular income benefit because the chapter 13 threshold is set at $2,750,000, allowing more high-debt households to use chapter 13 repayment plans. Bankruptcy attorneys benefit from clearer eligibility thresholds for advising business and consumer clients. Bankruptcy courts benefit from updated statutory thresholds that reduce ambiguity in eligibility disputes. Small business creditors benefit from a structured subchapter V process when eligible firms reorganize instead of liquidating.

Who Bears the Burden and How

Creditors of newly eligible small business debtors may bear restructuring delays, plan negotiations, and cramdown risk in subchapter V cases. Creditors of chapter 13 debtors may face repayment plans rather than immediate collection remedies. Public reporting companies and their affiliates remain excluded from the small business debtor definition. Single asset real estate businesses remain excluded from the subchapter V threshold. Bankruptcy trustees must apply the new thresholds in cases filed after enactment. Stockbrokers and commodity brokers remain barred from chapter 13 eligibility.

Key Provisions

• Sets the subchapter V small business debtor debt limit at not more than $7,500,000.
• Requires at least 50 percent of qualifying subchapter V debt to arise from commercial or business activities.
• Excludes single asset real estate businesses, public reporting companies, and affiliates of public reporting companies.
• Sets chapter 13 eligibility for individuals with regular income at less than $2,750,000 in qualifying debts.
• Keeps stockbrokers and commodity brokers outside chapter 13 eligibility.
• Applies the amendments to bankruptcy cases commenced on or after enactment.