Sponsors (6)
The bill expands access to streamlined bankruptcy reorganizations for more small businesses and middle-class debtors—likely preserving jobs and rescues—while raising creditor recovery uncertainty and increasing procedural burdens and transitional fairness challenges for courts and ongoing cases.
Small-business owners with up to $7.5M of certain business debt and individuals/couples with regular income and debts under $2.75M gain broader access to streamlined Chapter 11 (Subchapter V) and Chapter 13 reorganizations, increasing chances to restructure rather than liquidate and helping preserve jobs.
Clarifying exclusions for SEC-reporting companies and their affiliates reduces attempts to game small-business status, focusing streamlined relief on true small businesses and increasing predictability for creditors and regulators.
New bankruptcy cases filed after enactment will operate under the updated rules immediately, giving banks, financial institutions, and future filers clearer legal certainty about the applicable procedures and standards.
More debt shifted into reorganizations could increase losses and recovery uncertainty for unsecured creditors (and ultimately taxpayers in some situations), because higher debt ceilings move more claims into restructurings with lower recoveries.
Broader eligibility combined with immediate rule changes may drive higher caseloads, rush filings near enactment, and greater administrative costs, producing longer delays and heavier burdens on bankruptcy courts, trustees, and attorneys.
Debtors and creditors in ongoing cases filed before enactment may be treated differently than future filers, creating a two-tier system and fairness concerns for parties mid-case.
Based on analysis of 6 sections of legislative text.
Raises small-business bankruptcy debt ceiling to $7,500,000 and Chapter 13 individual debt limit to under $2,750,000, with exclusions for public-reporting companies and affiliates.
Introduced February 26, 2026 by Benjamin Cline · Last progress February 26, 2026
Raises the dollar limits that determine who can use certain bankruptcy procedures. It increases the small-business debtor threshold to $7,500,000 in aggregate noncontingent liquidated debt (with at least half from business activities) and raises the maximum consumer (Chapter 13) debt eligibility to under $2,750,000 for individuals with regular income. The changes do not apply to cases filed before the law takes effect and exclude publicly reporting companies and their affiliates from small-business status.