Economy / Restructuring
A New Bankruptcy Law Raises the Entry Limits. It Does Not Erase the Repayment Test.
A law signed November 10 widens access to two bankruptcy paths, but higher debt ceilings do not guarantee a workable repayment plan.
For a small business with a viable operation and an unmanageable balance sheet, the price of entering the right bankruptcy process can matter almost as much as the size of its debts. For a household with regular income, a different question arises: can a court-supervised repayment plan accommodate its obligations without forcing it into a more complex proceeding? A new federal law changes the entry rules for both groups. It does not answer the harder question of whether either can sustain the payments that follow.
President Donald Trump signed H.R. 7730, the Bankruptcy Threshold Adjustment Act, on November 10. The enrolled text published by the Government Publishing Office sets a $7.5 million debt ceiling for qualifying debtors seeking Chapter 11’s Subchapter V process. It also replaces Chapter 13’s separate secured- and unsecured-debt limits with one aggregate ceiling of less than $2.75 million for qualifying individuals with regular income. The amendments apply to bankruptcy cases commenced on or after the date of enactment.
Those are two different doors into two different procedures. Subchapter V is a streamlined business-reorganization route within Chapter 11. Chapter 13 is a repayment process for individuals with regular income, including some people who are self-employed. Neither number is a grant, a government payment, an amount automatically forgiven, or an instruction to file. The news is that Congress has widened the statutory eligibility boundary while leaving the work of restructuring obligations to debtors, creditors, trustees and judges.
The numbers change the doorway, not the outcome
The wording of the two thresholds is deliberately different. The Subchapter V definition permits qualifying debt of “not more than” $7.5 million. The revised Chapter 13 provision requires qualifying debts to aggregate “less than” $2.75 million. At the boundary, those phrases are not interchangeable. Nor is either ceiling simply the total of every number on a credit report or a business’s latest balance sheet: the legislation refers to noncontingent, liquidated debts and adds specific qualifications for business cases.
In ordinary language, those legal terms distinguish obligations whose liability is not dependent on a future event and whose amount can be determined. Applying them to guarantees, disputed claims and particular contracts can require legal analysis. A newspaper-style threshold comparison cannot settle those questions for an individual borrower. A headline debt figure begins an eligibility inquiry; it does not conclude it.
The federal judiciary’s general Chapter 11 guide, checked for this article, still displayed the earlier $3,424,000 figure for small-business and Subchapter V cases. Its Chapter 13 guide still displayed separate limits of less than $526,700 in unsecured debt and less than $1,580,125 in secured debt. Those guide pages remain useful for explaining how the processes work, but their debt-limit passages had not yet caught up with the new statute. For cases covered by the November 10 amendments, the enacted change and its effective-date clause are the relevant starting point, rather than an older general-information page.
There is an additional distinction inside Chapter 11. The new act rewrites the debtor definition in section 1182, which governs Subchapter V. It should not be described as raising every limit associated with every form of small-business bankruptcy. A traditional small-business case and a Subchapter V election are not interchangeable labels. Treating the $7.5 million figure as a universal threshold for all business filings would overstate what this legislation does.
Why the business route matters beyond the owner
A business in financial distress is not always a business without customers. It may still have useful equipment, a functioning shop, employees with specialized skills and orders to fill, while its debt structure has become impossible to carry. Reorganization is a legal mechanism for trying to preserve an operating enterprise while addressing creditor claims. That possibility matters to workers and suppliers as well as to the people who own the business. It is also only a possibility: the legislation does not establish that any particular firm is economically viable.
The judiciary describes Subchapter V as a process intended to streamline small-business restructuring and reduce costs. A trustee is appointed to oversee the case and facilitate development of a reorganization plan. Only the debtor may file that plan. The process differs from ordinary Chapter 11 in important ways, including treatment of creditors’ committees, disclosure requirements and plan confirmation. These differences explain why access to the route can have practical value even though it does not create additional revenue for the company.
The higher ceiling expands the range of debt balances that can pass the first statutory test. It does not remove the requirement for a credible plan. A firm still needs reliable information about incoming cash, operating costs, liabilities and the treatment proposed for its creditors. The court process imposes duties to provide financial information and continuing reports. Reorganizing a balance sheet cannot, by itself, make an unprofitable product profitable or replace a lost customer.
For suppliers, this is not simply a story of relief being handed to somebody else. They may be creditors with unpaid invoices and businesses with their own payrolls to meet. A restructuring can create a process for resolving competing claims, but the outcome and timing of payment depend on the case. The new law supplies neither a promise of full repayment nor an estimate of creditor recoveries. Its economic significance lies in changing which firms can seek the streamlined procedure, not in deciding the distribution of losses in advance.
The business eligibility conditions remain substantial
The $7.5 million test covers aggregate noncontingent, liquidated secured and unsecured debts at the petition date or the date of the order for relief, as specified in the revised definition. Debts owed to affiliates or insiders are excluded from that calculation. At least 50 percent of the relevant debt must have arisen from the debtor’s commercial or business activities. The definition is therefore not a general invitation for any entity with a debt total below the headline number to choose Subchapter V.
The act also retains exclusions. A person whose primary activity is the business of owning single-asset real estate is outside the definition. A corporation subject to specified Securities Exchange Act reporting requirements is excluded, as is an affiliate of such a corporation. A member of an affiliated group of debtors is also excluded when the group’s qualifying aggregate debt exceeds $7.5 million, with the stated exclusion for affiliate and insider debt. These provisions matter because looking at one company in isolation can obscure the statutory treatment of a wider corporate group.
It is not a test based solely on employee numbers, annual sales or whether an enterprise describes itself as a small business. It is a debt-based statutory definition with business-activity conditions and exclusions.
The enrolled act contains no expiration provision for these amendments. This is not a temporary extension with a scheduled sunset, although Congress can revise the law again. The defensible description is that the act raises the thresholds without putting a sunset date into its own text.
Chapter 13 gets a combined ceiling
For individuals, the most important structural change is the move from two separate debt buckets to one aggregate threshold. The earlier guide distinguished secured debt, generally backed by collateral, from unsecured debt. The new section 109(e) instead sets the combined ceiling at less than $2.75 million. A person’s mix of obligations can therefore matter differently under the amended eligibility test than it did under the old separate limits.
Combining the ceiling does not combine all claims into one category for repayment. A mortgage lender’s rights in collateral do not disappear because secured and unsecured debts are counted together at the entry stage. Priority claims, secured claims and unsecured claims continue to receive different treatment under bankruptcy law and the proposed plan. Eligibility arithmetic and payment priority are separate questions. Confusing them would turn an access reform into a much broader change than Congress enacted.
The law retains the requirement that a Chapter 13 debtor be an individual with regular income. It addresses an individual and an individual together with a spouse, and excludes a stockbroker or commodity broker. Chapter 13 is not a filing route opened to corporations by this amendment. Nor does the larger cap remove other applicable eligibility restrictions or the normal procedural obligations that accompany a case.
The judiciary describes Chapter 13 as a process through which eligible individuals propose payments over three to five years. It can allow a debtor to retain property while carrying out a court-approved plan. That feature helps explain the interest for households facing disrupted finances. But retaining property is not the same as receiving it debt-free. The plan, ongoing payment obligations and the court’s confirmation requirements remain central to what happens next.
A larger cap cannot repair an unaffordable plan
The new law does not set the size of a household’s monthly payment. That calculation belongs to the wider Chapter 13 framework and the circumstances of the case. Income, reasonable expenses, the nature of creditor claims and statutory protections all matter. If the plan cannot be funded, a higher eligibility ceiling is not a substitute for the cash needed to make it work.
The court’s explanation of Chapter 13 illustrates the distinction with housing. Filing may stop a foreclosure proceeding through the automatic stay, subject to the law’s exceptions and limitations, and a plan may provide a route to curing past-due mortgage payments. Yet the debtor must still make the mortgage payments that become due during the plan. The new debt ceiling does not remove that ongoing obligation or guarantee that a home will be kept.
Likewise, the act does not erase the distinction between filing a case, obtaining confirmation of a plan and completing it. A petition begins the process. A confirmation decision assesses whether the plan meets the applicable standards. Completing required payments and satisfying discharge conditions comes later. Describing the November 10 signature as immediate debt forgiveness would collapse three separate stages into a result that the legislation does not promise.
People considering their own options need qualified legal advice about their particular circumstances, rather than an instruction based on a national headline. This article explains the policy change, not which chapter an individual should choose or when anyone should file. The statutory change can expand the set of questions worth examining without deciding the answer for a household or a business.
The start date deserves as much attention as the ceiling
Section 3 says the amendments apply to any bankruptcy case commenced on or after enactment. With the White House confirming the November 10 signature, that date is the dividing line stated in the act. It is not a January 2027 rollout, and the text does not provide a waiting period for agencies to write a new program before the threshold amendments apply to covered cases.
The same sentence also limits what can be said about an older case. The act does not say that every existing proceeding is automatically reopened, converted or brought within the new thresholds. Questions involving a case already underway require attention to the law and procedural posture, not an assumption that a new headline number rewrites its history. Readers should distinguish the date legislation became law from the date their own case commenced.
This is why source dates matter during the transition. An official explanatory page can be authoritative about general procedure while still showing a superseded dollar figure. A bill introduced earlier in the year can also differ from the version enrolled by Congress. For this report, the numerical limits and applicability clause were checked against the enrolled H.R. 7730 text, and enactment was checked against the White House’s signed-bills statement. That combination is more reliable than treating an undated summary as the latest legal text.
Rising filings explain the attention, not the law’s eventual effect
The reform arrives against an increase in bankruptcy activity. In an October 22 release, the Administrative Office of the U.S. Courts reported 621,111 total filings in the 12 months ending September 30, 2026, up 11.4 percent from 557,376 a year earlier. Business filings rose to 27,054 from 24,039; non-business filings rose to 594,057 from 533,337. Those figures describe the year before this legislation was signed.
The judiciary also emphasized that filings remained well below historical highs. Neither observation establishes how many debtors were previously excluded by these particular thresholds, how many will now enter Subchapter V or Chapter 13, or how many additional plans will succeed. The published totals are context, not a measured forecast of the new law’s impact.
Chapter choice also matters when interpreting the data. The same annual release counted 219,116 Chapter 13 filings and 9,986 Chapter 11 filings. The Chapter 11 figure is not a count of Subchapter V cases alone. Presenting it as the number of businesses affected by the higher ceiling would be incorrect. Establishing the law’s reach will require evidence about eligible debtors and actual filings under the relevant provisions, rather than simply attaching the largest available bankruptcy statistic to the new thresholds.
What to watch after the signature
The first practical development to watch is updated court and trustee guidance that clearly distinguishes the new limits from the older figures. The second is how the higher ceilings change the mix of cases entering the two processes. The third, and ultimately the more consequential measure, is what happens after entry: whether plans are confirmed, whether businesses continue operating and whether individuals complete their repayment obligations. Those outcomes cannot be read from the signature announcement.
For now, the change is concrete but bounded. Qualifying Subchapter V debtors can fall within a ceiling of $7.5 million, while qualifying Chapter 13 individuals face a combined debt limit below $2.75 million for cases covered by the new act. The business test remains conditional, the individual route still requires regular income, and both still demand a workable legal and financial process. Congress has widened access to restructuring. It has not replaced the discipline of making a restructuring work.
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