Sponsors (7)
The bill expands streamlined bankruptcy relief and clarifies rules for future filers—benefiting many small businesses and preserving Chapter 13 access for many individuals—while creating bright-line cutoffs and transition differences that may leave some filers worse off and could shift costs onto creditors (potentially raising borrowing costs).
Small-business owners of privately held firms with up to $7.5 million in noncontingent debts gain access to streamlined Subchapter V bankruptcy relief, making reorganizations simpler and more feasible for many small firms.
Individuals (and their spouses) with under $2.75 million in noncontingent debts retain eligibility for Chapter 13 reorganization protections, preserving a bankruptcy reorganization pathway for middle‑class families.
Bankruptcy cases that start on or after enactment will have clearer, current rules to follow, reducing legal uncertainty for new filers and practitioners.
Businesses that are part of affiliated groups whose combined debts slightly exceed $7.5 million can be barred from Subchapter V even when an individual member's debts are below the cap, denying streamlined relief to otherwise eligible small firms.
Raising the Subchapter V debt cap could shift restructuring costs onto creditors, which over time may lead to higher borrowing costs for small firms.
People with active bankruptcy cases filed before enactment may not receive the new benefits, producing unequal outcomes between similarly situated filers.
Based on analysis of 3 sections of legislative text.
Raises small-business eligibility to $7.5M and sets Chapter 13 consumer cap under $2.75M, with exclusions for public-reporting firms; applies to cases filed after enactment.
Official title: To amend title 11, United States Code, to modify certain bankruptcy eligibility requirements, and for other purposes.
Introduced February 26, 2026 by Benjamin Cline · Last progress February 26, 2026
Raises the debt limits that determine who can use certain parts of the Bankruptcy Code. The bill increases the small-business debtor threshold for Subchapter V reorganizations to $7,500,000 (with several exclusions) and sets the Chapter 13 consumer-debtor eligibility cap at less than $2,750,000 in noncontingent liquidated debt, excluding stockbrokers and commodity brokers. The changes apply only to bankruptcy cases filed on or after the law’s enactment. The measure narrows eligibility for publicly reporting companies and their affiliates while expanding eligibility for many businesses and individual debtors to seek reorganizations under the bankruptcy chapters addressed.