There is a bankruptcy bill moving through Congress that has received little public attention, but it could significantly expand who qualifies for two important forms of bankruptcy relief: Subchapter V of Chapter 11 and Chapter 13.
It’s called the Bankruptcy Threshold Adjustment Act of 2026. The Senate passed S. 3977 by unanimous consent on August 3, 2026. In the House, companion bill H.R. 7730 was reported with an amendment by the House Judiciary Committee on August 27 and now awaits further House action. It has not become law.
If enacted, the legislation would substantially increase the debt limits used to determine who can qualify for Subchapter V and Chapter 13 bankruptcy.
The Bankruptcy Threshold Adjustment Act of 2026 is a bipartisan proposal that would change two important eligibility thresholds in the Bankruptcy Code. Those numbers affect who can use Subchapter V and Chapter 13 bankruptcy.
S. 3977 was introduced on March 3, 2026, by Sen. Chuck Grassley with bipartisan cosponsors Richard Durbin, John Cornyn, Sheldon Whitehouse, Lindsey Graham and Christopher Coons. The House companion, H.R. 7730, was introduced on February 26, 2026, by Rep. Ben Cline with bipartisan cosponsors and was reported with an amendment by the House Judiciary Committee on August 27.
These proposed changes would not determine the outcome of a bankruptcy case. Instead, they would expand the debt thresholds used to determine whether certain debtors are eligible to use these bankruptcy options.
Right now, the Subchapter V debt limit is $3,424,000.
Subchapter V is a streamlined form of Chapter 11 bankruptcy designed for qualifying small business debtors. It was created to make reorganization more efficient for eligible small businesses and includes features such as shorter deadlines, greater flexibility in developing a restructuring plan and no U.S. Trustee quarterly fees.
But there is a debt ceiling. A business that exceeds the current Subchapter V eligibility threshold may instead have to consider a traditional Chapter 11 case, which can involve greater complexity and expense.
The proposed legislation would increase the Subchapter V limit to $7.5 million without the temporary expiration date that applied to prior increases.
That does not mean every business with $7.5 million or less in debt would automatically qualify. Subchapter V has additional eligibility requirements involving the type and amount of debt, the debtor’s business activities and other factors.
Chapter 13 bankruptcy currently has two separate debt limits, and that distinction can make a significant difference for someone considering filing.
Under the current limits effective April 1, 2025, an individual generally must have less than $1,580,125 in secured debt and less than $526,700 in unsecured debt.
Secured debt generally includes obligations tied to collateral, such as a mortgage or car loan. Unsecured debt can include obligations such as credit cards, medical bills and personal loans.
Here is the part that can surprise people: those limits are measured separately. Exceeding either threshold can affect Chapter 13 eligibility even when the debtor is well below the other limit.
For example, a homeowner with a substantial mortgage balance could exceed the secured-debt threshold while carrying a much smaller amount of unsecured debt.
The proposed legislation would eliminate that separate secured-versus-unsecured structure and instead allow an individual with regular income to qualify based on aggregate noncontingent, liquidated debts of less than $2.75 million, subject to the other requirements of Chapter 13.
Subchapter V — Small Business Chapter 11
Current: $3,424,000 in qualifying debt
Proposed: Up to $7.5 million
Chapter 13 — Individual Repayment Plan
Current: Less than $1,580,125 in secured debt and less than $526,700 in unsecured debt, measured separately
Proposed: Less than $2.75 million in aggregate qualifying debt
Because Congress has used higher versions of these thresholds before.
Subchapter V became effective in February 2020 with a debt limit of approximately $2.7 million. Shortly after the COVID-19 pandemic began, Congress increased the limit to $7.5 million. That increase was temporary and was subsequently extended before expiring on June 21, 2024.
After the temporary increase expired, the applicable Subchapter V debt limit returned to the original statutory framework, adjusted for inflation. The current limit is $3,424,000.
Chapter 13 went through a similar temporary change. Congress previously replaced the separate secured and unsecured debt limits with a combined $2.75 million threshold. That provision also expired in 2024.
The Bankruptcy Threshold Adjustment Act of 2026 would restore versions of those higher thresholds without the same temporary expiration provisions.
Small business owners with higher debt loads. Restaurants, contractors, medical practices, transportation companies and other businesses can accumulate several million dollars in debt while still operating viable businesses. A company with $4 million or $5 million in qualifying debt may exceed today’s Subchapter V ceiling even when reorganization could otherwise be worth exploring.
For some business owners, the added cost and complexity associated with a traditional Chapter 11 case can make reorganization considerably more difficult. Expanding Subchapter V eligibility could give more qualifying businesses access to a streamlined reorganization process.
Homeowners with substantial secured debt. A homeowner can exceed the current Chapter 13 secured-debt limit because of a large mortgage balance even when unsecured debts such as credit cards or medical bills are comparatively modest.
For an individual who cannot qualify for Chapter 13 because of the current debt limits, personal Chapter 11 bankruptcymay be one alternative, depending on the circumstances. However, Chapter 11 is generally more complex than Chapter 13.
Florida business owners and families. For Florida individuals and businesses carrying substantial debt, these eligibility thresholds can directly affect which bankruptcy options are available. The proposed changes could expand access to Subchapter V and Chapter 13 for some Florida debtors who exceed today’s limits.
Current filing activity also shows continued interest in Subchapter V. According to Epiq AACER bankruptcy filing data, Subchapter V elections reached 302 in August 2026, up 63 percent from 185 filings in August 2025.
If your business or household debt places you above today’s eligibility limits but below the proposed thresholds, you may be among the people most directly affected by this legislation.
Debt amount is only one part of bankruptcy eligibility, however. Subchapter V has additional requirements involving the nature and source of a debtor’s obligations, while Chapter 13 is generally available to individuals with regular income who meet the applicable eligibility requirements.
A few things are worth considering now.
Get an accurate debt total, not an estimate. Bankruptcy eligibility calculations involve specific types of debt. The proposed legislation, for example, refers to noncontingent, liquidated debts. The number used for bankruptcy eligibility may not always be as simple as adding every balance that appears on a personal financial statement.
Know your options under current law. The Bankruptcy Threshold Adjustment Act has not become law. Individuals and businesses facing financial pressure should understand the bankruptcy and debt-relief options available under today’s law rather than relying on legislation that has not yet passed.
Understand how filing timing could affect eligibility. As currently written, the legislation states that the amendments would apply to any bankruptcy case commenced on or after the date of enactment.
If the legislation becomes law, the date a case is filed could therefore determine which eligibility thresholds apply.
What is the Subchapter V debt limit right now?
The current Subchapter V debt limit is $3,424,000 for cases commenced on or after June 21, 2024. The Bankruptcy Threshold Adjustment Act of 2026 would increase the limit to $7.5 million.
What are the Chapter 13 debt limits right now?
Under the current thresholds, an individual generally must have less than $1,580,125 in secured debt and less than $526,700 in unsecured debt to qualify based on the debt limits. Other Chapter 13 eligibility requirements also apply.
Would the Bankruptcy Threshold Adjustment Act change Chapter 13 debt limits?
Yes. As currently written, the legislation would replace the separate secured and unsecured debt limits with a single threshold requiring aggregate noncontingent, liquidated debts of less than $2.75 million.
Has the Bankruptcy Threshold Adjustment Act of 2026 become law?
No. As of September 11, 2026, the Senate has passed S. 3977 by unanimous consent. The House companion, H.R. 7730, was reported with an amendment by the House Judiciary Committee on August 27 and awaits further House action.
Would the new bankruptcy limits apply if I already filed my case?
As currently written, the legislation would apply to bankruptcy cases commenced on or after the date of enactment. A case filed before that date would therefore not receive the proposed new thresholds under the current bill language.
What is Subchapter V bankruptcy?
Subchapter V is a streamlined form of Chapter 11 bankruptcy for qualifying small business debtors. It includes procedures intended to make small business reorganization more efficient than a traditional Chapter 11 case.
Why does the secured and unsecured debt split matter in Chapter 13?
Under current law, Chapter 13 has separate secured and unsecured debt thresholds. An individual who exceeds either applicable limit may be ineligible for Chapter 13 even if the amount in the other category is relatively low.
The Bankruptcy Threshold Adjustment Act of 2026 could expand access to two important bankruptcy tools for small business owners and individuals who exceed today’s debt limits.
The Senate has passed its version of the legislation, and the House Judiciary Committee has advanced the House companion bill. But as of September 11, 2026, the proposed limits are not yet law.
A pending bill does not change the bankruptcy options available today. But if your debts place you near or above the current Subchapter V or Chapter 13 eligibility limits, it may be worth understanding both your options under current law and how a future change could affect you.
Van Horn Law Group’s Florida bankruptcy attorneys help individuals, families and businesses understand their bankruptcy and debt-relief options. Since 2012, the firm has helped Florida clients navigate complex financial situations, including business bankruptcy, Chapter 11 and Chapter 13 matters.
If you’re trying to determine which bankruptcy chapter may fit your circumstances—or whether the current or proposed debt limits could affect your options—our team can help you understand the next steps.
Ready to learn more? Book a free consultation with Van Horn Law Group.
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