119-HR-7730 Journalist Public Summary

Headline Summary

Raises bankruptcy debt limits so more small businesses and individuals can reorganize instead of liquidate, aiming for quicker, cheaper cases.

What It Does

H.R. 7730, the “Bankruptcy Threshold Adjustment Act of 2026,” updates who can use streamlined bankruptcy options. It raises the debt cap for small-business cases under Subchapter V to $7.5 million and sets a single $2.75 million debt cap for individuals (or couples) to qualify for Chapter 13 repayment plans. It excludes public-reporting corporations and most single‑asset real estate businesses, and applies to cases filed on or after enactment.

• Small businesses: Eligible if total secured + unsecured, noncontingent, liquidated debts are at or below $7.5 million, with at least half from business activities; affiliated public-reporting companies and large affiliated groups are excluded.
• Consumers: Individuals with regular income (alone or with a spouse) can use Chapter 13 if total noncontingent, liquidated debts are under $2.75 million.
• Effective date: Applies to new cases filed after the bill becomes law.

Why It Matters

• More options to reorganize: Expanding eligibility could help viable small firms keep operating and workers employed rather than shutting down.
• Lower costs and faster timelines: Subchapter V and Chapter 13 are generally simpler than traditional Chapter 11, which can reduce legal costs and uncertainty for debtors and creditors.
• Creditor recoveries: Structured repayment and court oversight can improve predictability of recoveries compared with piecemeal collections or liquidation.

Who’s For It

• Sponsors from both parties: Introduced by Rep. Ben Cline with co-sponsors Lou Correa, Laurel Lee (FL), and Joe Neguse, signaling bipartisan support.
• Small-business advocates: Tend to favor keeping more firms eligible for Subchapter V to preserve jobs and local services.
• Consumer-focused groups: Often support broader access to Chapter 13 so households can repay over time and avoid liquidation of essential assets.

Who’s Against It

• Some creditor and lender groups: May argue higher thresholds let larger or more leveraged debtors use debtor‑friendly procedures, increasing losses or delaying repayment.
• Fiscal conservatives: Could worry that easier access reduces deterrence against over-borrowing and shifts costs to suppliers, landlords, or community banks.
• Process skeptics: May prefer case-by-case judicial discretion over fixed nationwide thresholds.

What’s Next

As of March 26, 2026, the House Judiciary Committee approved the bill by voice vote after a markup. Next step is consideration by the full House; if it passes, the bill moves to the Senate and then to the President.

Key Numbers