The Senate passed S. 3977 on August 3, the “Bankruptcy Threshold Adjustment Act of 2026,” which permanently raises the debt limit to $7.5 million for small businesses filing under subchapter V of chapter 11, and raises the debt limit for individual chapter 13 filings to $2.75 million, also removing the distinction between secured and unsecured debt for the debt calculation. The legislation remains before the House of Representatives in H.R. 7730, and if passed there and signed by the President, the increases would become effective upon enactment.
For Chapter 13 debt limit, section 109(e) of the Bankruptcy Code would be amended to provide:
‘‘(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000 or an individual with regular income and such individual’s spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000 may be a debtor under chapter 13 of this title.’’
For Subchapter V eligibility, section 1182(1)’s definition of “debtor” would be amended to provide:
‘‘(1) DEBTOR.—The term ‘debtor’— ‘‘(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or in siders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and
‘(B) does not include— ‘‘(i) any member of a group of affiliated debtors under this title that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $7,500,000 (excluding debt owed to 1 or more affiliates or insiders);”
