On November 10, 2026, the Bankruptcy Threshold Adjustment Act (H.R. 7730) was signed into law, permanently enlarging the debt eligibility limit for Subchapter V of Chapter 11 bankruptcy to $7.5 million. The legislation expands access to Subchapter V’s streamlined reorganization process, making it more accessible small businesses.
The prior debt limit was $3,424,000, which was temporary expanded as part of the Federal Covid relief measures, but that temporary increase lapsed in June 2024 without Congressional action. By restoring the higher limit, Congress has broadened the availability of Subchapter V relief for businesses that may have previously been ineligible based on their debt obligations. The new debt threshold applies to any otherwise qualifying bankruptcy case filed on or after November 10, 2026.
Key Takeaways:
- Expanded eligibility for small businesses: The debt threshold increased from $3,424,000 to $7.5 million, allowing more qualifying businesses to pursue Subchapter V reorganization. The limit applies to eligible noncontingent, liquidated debts, whether secured or unsecured, excluding debts owed to affiliates or insiders.
- Permanent increase: Unlike previous temporary extensions, the higher debt limit has no sunset date, providing greater certainty for businesses evaluating restructuring alternatives.
- Implications for creditors: Broader Subchapter V eligibility may make bankruptcy a more accessible and affordable alternative for financially distressed companies, impacting restructuring negotiations and recovery strategies for creditors and lien holders on the other side.
The legislation also increases the Chapter 13 eligibility threshold to a combined debt limit of less than $2.75 million for qualifying individual debtors.
While the expanded debt threshold makes Subchapter V available to more businesses, other statutory eligibility requirements remain in place. Businesses and creditors should carefully evaluate how these changes may affect their restructuring options and legal strategies.
This development reinforces the importance of understanding the restructuring alternatives available under the Bankruptcy Code, particularly for businesses navigating financial distress and creditors seeking to protect their interests.
Read the full legislation here: Bankruptcy Threshold Adjustment Act (H.R. 7730)
For more information on how this legislation may affect your business or interests, please contact a member of Bast Amron’s Bankruptcy and Restructuring team.
This client alert is provided for informational purposes only and does not constitute legal advice.