President Donald Trump signed the Bankruptcy Threshold Adjustment Act (H.R. 7730) into law on November 10, 2026, permanently increasing the Chapter 11 Subchapter V small-business bankruptcy debt limit from $3,424,000 to $7.5 million.
For business owners carrying millions of dollars in debt, this change could open the door to a Chapter 11 restructuring option that was previously unavailable. The new law expands eligibility for qualifying small businesses seeking to reorganize secured and unsecured business debts while continuing operations.
The increased debt limit applies to bankruptcy cases commenced on or after November 10, 2026. However, businesses must still satisfy the other statutory eligibility requirements to qualify for Subchapter V.
The Bankruptcy Threshold Adjustment Act (H.R. 7730) was signed into law by President Donald Trump on November 10, 2026. The law permanently increases the Chapter 11 Subchapter V small-business bankruptcy debt eligibility limit to $7.5 million.
Key provisions of the new law:
On November 10, 2026, President Donald Trump signed the Bankruptcy Threshold Adjustment Act (H.R. 7730) into law, permanently increasing the debt limits governing eligibility for Chapter 11 Subchapter V. The bipartisan legislation, sponsored by Representative Ben Cline (R-Va.), passed both chambers of Congress before being presented to the president on November 9, 2026.
For business owners, the most significant development is the permanent restoration of the Subchapter V debt eligibility limit to $7.5 million. This represents an increase from the previous $3,424,000 threshold and gives qualifying businesses with larger debt loads another opportunity to pursue a streamlined Chapter 11 reorganization.
The new debt limits apply to bankruptcy cases commenced on or after November 10, 2026.
The Bankruptcy Threshold Adjustment Act modifies the debt eligibility requirements for Chapter 11 Subchapter V business bankruptcy cases. It permanently increases the small-business bankruptcy debt eligibility limit to $7.5 million.
This change addresses longstanding concerns that existing bankruptcy debt limits prevented some businesses from accessing bankruptcy protections designed to help them reorganize their financial obligations. For businesses, the restoration of the $7.5 million Subchapter V threshold is particularly important because it expands access to a streamlined restructuring process that can help qualifying companies address significant debt while continuing operations.
One of the most important provisions of the Bankruptcy Threshold Adjustment Act is the permanent restoration of the $7.5 million Subchapter V debt eligibility limit.
Subchapter V is a streamlined form of Chapter 11 bankruptcy designed to help small businesses reorganize their debts while continuing to operate.
Congress previously increased the Subchapter V debt limit to $7.5 million through temporary legislation. However, that higher threshold expired in 2024, resulting in a substantially lower eligibility limit. As a result, the debt ceiling fell to $3,424,000, excluding certain debts owed to affiliates or insiders.
The Bankruptcy Threshold Adjustment Act restores the higher $7.5 million threshold permanently, eliminating the expiration date and uncertainty associated with the previous temporary increase. Under the new law, qualifying small-business debtors may have up to $7.5 million in aggregate noncontingent, liquidated secured and unsecured debt, excluding qualifying debts owed to affiliates or insiders.
At least 50% of the qualifying debt must have arisen from the debtor's commercial or business activities. Other statutory eligibility requirements and exclusions continue to apply.
For many businesses, the difference between the previous $3,424,000 threshold and the new $7.5 million limit can determine whether Subchapter V is an available restructuring option. Businesses with substantial commercial debt may need bankruptcy protection to:
Subchapter V offers several advantages over traditional Chapter 11, including a more streamlined restructuring process, a dedicated Subchapter V trustee, and generally no unsecured creditors' committee.
The process can also provide eligible debtors with certain advantages when proposing and confirming a repayment plan. By permanently restoring the higher debt threshold, Congress has expanded the number of businesses that may potentially qualify for this restructuring process. However, satisfying the debt limit alone does not guarantee eligibility or make Subchapter V the appropriate solution. Businesses must meet the remaining statutory requirements, and their financial circumstances must support a feasible restructuring strategy.
The Bankruptcy Threshold Adjustment Act reflects bipartisan support for modernizing federal bankruptcy eligibility requirements. Representative Ben Cline (R-Va.) sponsored H.R. 7730, which received support from members of both political parties. The Senate also considered companion legislation, S. 3977, sponsored by Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.).
The legislation incorporates the recommendation from the ABI Subchapter V Task Force to restore the Subchapter V debt eligibility threshold to $7.5 million. The House passed H.R. 7730 on September 16, 2026. The Senate subsequently passed the legislation without amendment on September 28, 2026. Following its presentation to President Trump on November 5, 2026, the bill was signed into law on November 10, 2026. The result is a permanent expansion of bankruptcy debt eligibility thresholds for qualifying small businesses and individual debtors.
The new bankruptcy debt limits are effective November 10, 2026.
The Bankruptcy Threshold Adjustment Act applies to bankruptcy cases commenced on or after the date of enactment. This means qualifying businesses filing Chapter 11 Subchapter V bankruptcy cases on or after November 10, 2026, may be eligible under the new $7.5 million debt threshold.
The legislation does not retroactively change the eligibility requirements for bankruptcy cases commenced before November 10, 2026. For businesses that previously exceeded the lower Subchapter V debt limit, the new law creates an opportunity to reevaluate whether Chapter 11 reorganization is now available.
For business owners struggling with substantial debt, the permanent restoration of the $7.5 million Subchapter V threshold is an important development. Businesses that previously exceeded the lower eligibility threshold may now have another restructuring option.
However, bankruptcy eligibility is only one part of determining whether Chapter 11 is the right strategy. Factors such as cash flow, secured creditor positions, personal guarantees, existing litigation, business operations, and the ability to fund a repayment plan can all influence whether a restructuring is practical. For example, a business with several million dollars in secured and unsecured obligations may benefit from evaluating Subchapter V if it has sufficient operating income to support a feasible repayment plan.
Conversely, a business that is no longer generating revenue or cannot support a restructuring plan may need to consider other debt-relief strategies. Business owners should evaluate their options before creditor enforcement actions escalate and threaten their ability to continue operating.
The increased Subchapter V debt limit may benefit businesses that previously exceeded the $3,424,000 eligibility threshold but have qualifying debts of $7.5 million or less.
Examples may include:
However, the increased debt limit does not automatically make every business eligible or mean bankruptcy is the appropriate solution. Businesses must satisfy the applicable statutory requirements, and their financial circumstances must support a viable restructuring strategy.
The Bankruptcy Threshold Adjustment Act permanently restores the Chapter 11 Subchapter V bankruptcy debt eligibility limit to $7.5 million. President Donald Trump signed the legislation into law on November 10, 2026. The new threshold applies to bankruptcy cases commenced on or after that date.
Yes. The Bankruptcy Threshold Adjustment Act permanently restores the $7.5 million Subchapter V debt limit, eliminating the expiration date associated with the previous temporary increase.
The new $7.5 million debt limit took effect on November 10, 2026, when President Trump signed the Bankruptcy Threshold Adjustment Act into law. It applies to bankruptcy cases commenced on or after that date.
Potentially, yes. A business with $5 million in qualifying debt falls below the new $7.5 million Subchapter V debt limit. However, the business must also satisfy the other statutory eligibility requirements, including applicable commercial-debt requirements and restrictions.
Potentially, yes. A business with $7 million in qualifying debt may fall within the new $7.5 million debt limit. Eligibility depends on the composition of the debt, the nature of the business, and the other requirements established under federal bankruptcy law.
Yes. The Subchapter V debt eligibility calculation includes qualifying secured and unsecured debt. The Bankruptcy Threshold Adjustment Act does not establish separate secured and unsecured debt limits for Subchapter V eligibility.
No. The new debt thresholds apply to bankruptcy cases commenced on or after November 10, 2026. The legislation does not automatically change eligibility requirements for cases commenced before its effective date.
Traditional Chapter 11 and Subchapter V both allow eligible businesses to reorganize their debts under federal bankruptcy law. Subchapter V provides a streamlined restructuring process for qualifying small businesses, including a dedicated trustee and generally no unsecured creditors' committee. Traditional Chapter 11 involves a more extensive restructuring framework and may be appropriate for businesses that do not qualify for Subchapter V.
No. Meeting the debt limit is only one eligibility requirement. Businesses must also satisfy applicable statutory requirements concerning the nature of their debts, commercial activities, business structure, and other eligibility restrictions. Financial viability and the ability to fund a feasible repayment plan are also important considerations when evaluating whether Subchapter V is an appropriate restructuring strategy.
Potentially, yes. Merchant Cash Advance (MCA) obligations may count toward the Subchapter V debt limit, depending on the structure and legal characterization of the agreement. The eligibility calculation generally includes qualifying noncontingent, liquidated secured and unsecured debts, subject to statutory exclusions.
Businesses with multiple merchant cash advances, UCC liens, personal guarantees, and other business financing obligations may benefit from having their total debt structure evaluated under the new $7.5 million threshold. However, the treatment of an MCA agreement depends on its specific terms and circumstances.
Yes. One of the primary advantages of Chapter 11 Subchapter V bankruptcy is that an eligible business generally can continue operating while pursuing a financial restructuring.
The business typically remains in control of its day-to-day operations as a debtor in possession, subject to the oversight of the bankruptcy court and applicable bankruptcy requirements. This allows qualifying businesses to continue serving customers, generating revenue, and managing ordinary business activities while working toward a court-approved repayment plan.
However, certain financial transactions and business activities may require court approval, and the business must comply with its ongoing reporting and financial obligations throughout the bankruptcy process.
No. The Bankruptcy Threshold Adjustment Act increases the Subchapter V debt limit to $7.5 million, but it does not eliminate the other statutory eligibility requirements.
Among other requirements, a qualifying business generally must have no more than $7.5 million in aggregate noncontingent, liquidated secured and unsecured debt, excluding qualifying debts owed to affiliates or insiders. At least 50% of the qualifying debt must arise from the commercial or business activities of the debtor.
Certain affiliated debtor structures, publicly traded companies, and businesses primarily engaged in owning single-asset real estate are also subject to statutory exclusions.
Meeting the debt limit alone does not guarantee eligibility or mean Subchapter V is the right solution. A business's financial condition, creditor obligations, cash flow, and ability to fund a feasible repayment plan must also be evaluated.
The Lane Law Firm represents businesses facing complex financial restructuring challenges through Chapter 11 bankruptcy, including Subchapter V reorganizations. The firm's experience includes representing businesses with substantial secured and unsecured debt, multiple creditors, creditor litigation, and complex financial obligations.
The firm maintains a public portfolio of Chapter 11 Subchapter V bankruptcy case filings, providing additional information about the types of businesses and financial circumstances involved in its restructuring practice.
With the Bankruptcy Threshold Adjustment Act now in effect, businesses carrying up to $7.5 million in qualifying debt may have access to a streamlined Chapter 11 restructuring option that was previously unavailable to them. Whether your business is dealing with secured debt, multiple creditors, personal guarantees, creditor lawsuits, or mounting financial obligations, understanding your available options is an important first step toward developing a restructuring strategy.
Contact The Lane Law Firm to discuss whether Chapter 11 bankruptcy or another debt-relief strategy may be appropriate for your business.
This article is for informational purposes only and does not constitute legal advice. Bankruptcy eligibility and available options depend on applicable federal law and the specific circumstances of each case.