BANKRUPTCY THRESHOLD ADJUSTMENT ACT

On 2026-09-16, Representative Ben Cline (R-VA-6) delivered a floor speech titled "BANKRUPTCY THRESHOLD ADJUSTMENT ACT" in the House.

BANKRUPTCY THRESHOLD ADJUSTMENT ACT

Congressional Record, Volume 172 Issue 146 (Wednesday, September 16, 2026) [Congressional Record Volume 172, Number 146 (Wednesday, September 16, 2026)] [House] [Pages H5939-H5941] From the Congressional Record Online through the Government Publishing Office [ www.gpo.gov ] BANKRUPTCY THRESHOLD ADJUSTMENT ACT Mr. CLINE. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 7730) to amend title 11, United States Code, to modify certain bankruptcy eligibility requirements, and for other purposes, as amended. The Clerk read the title of the bill. The text of the bill is as follows: H.R. 7730 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Bankruptcy Threshold Adjustment Act''. SEC. 2. DEBT LIMIT MODIFICATIONS. (a) Modification to the Small Business Bankruptcy Debt Limit.--Section 1182(1) of title 11, United States Code, is amended to read as follows: ``(1) Debtor.--The term `debtor'-- ``(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the [[Page H5940]] petition or the date of the order for relief in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and ``(B) does not include-- ``(i) any member of a group of affiliated debtors under this title that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $7,500,000 (excluding debt owed to 1 or more affiliates or insiders); ``(ii) any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or ``(iii) any debtor that is an affiliate of a corporation described in clause (ii).''. (b) Modification to the Consumer Bankruptcy Debt Limit.-- Section 109 of title 11, United States Code, is amended by striking subsection (e) and inserting the following: ``(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000 or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000 may be a debtor under chapter 13 of this title.''. SEC. 3. EFFECTIVE DATE. The amendments made by this Act shall apply to any case that is commenced under title 11, United States Code, on or after the date of enactment of this Act. The SPEAKER pro tempore. Pursuant to the rule, the gentleman from Virginia (Mr. Cline) and the gentleman from Maryland (Mr. Raskin) each will control 20 minutes. The Chair recognizes the gentleman from Virginia. General Leave Mr. CLINE. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and to include extraneous material on H.R. 7730. The SPEAKER pro tempore. Is there objection to the request of the gentleman from Virginia? There was no objection. Mr. CLINE. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 7730, the Bankruptcy Threshold Adjustment Act of 2026. H.R. 7730 is an important bipartisan bill that will help small businesses and individual consumers reorganize their financial affairs in bankruptcy. First, H.R. 7730 increases the debt limit for cases under subchapter V. In 2019, I sponsored the bill that created the subchapter V process, which allows small businesses the opportunity to efficiently reorganize their debts and exit bankruptcy as a viable small business. Between 2020 and 2024, Congress temporarily increased the subchapter V debt limit allowing debtors with up to $7.5 million in debt to be eligible for Subchapter V. In 2024, the higher limit expired and reverted to around $3 million. All available evidence suggests that subchapter V is working as Congress intended. Subchapter V provides a quick, cheap, and effective path forward for indebted small businesses allowing businessowners to keep employees on the payroll while repaying creditors. Subchapter V has also proven to be better for creditors. Evidence shows that creditor recoveries are higher in subchapter V than they would have been under chapter 11. H.R. 7730 permanently reinstates the higher $7.5 million limit. By reinstating the higher debt limit, H.R. 7730 will allow more small businesses to effectively reorganize their debts and exit bankruptcy as a financially viable business. H.R. 7730 also modifies the eligibility criteria for individual debtors filing for relief under chapter 13. Between 2020 and 2024, Congress temporarily allowed individual debtors to aggregate their secured and unsecured debts for purposes of qualifying for chapter 13. After 2024, the temporary change expired, meaning individual debtors can only qualify for chapter 13 if their unsecured or secure debts are under their respective thresholds. H.R. 7730 reinstates the ability for debtors to qualify for chapter 13 if their aggregate debts are less than $2.75 million, regardless of how those debts are constructed. Mr. Speaker, I urge my colleagues to support this commonsense, bipartisan bill, and I reserve the balance of my time. Mr. RASKIN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I am very happy to support this bipartisan bill which would restore and make permanent higher debt limits for working families, individuals, and small businesses under both chapters 11 and 13 of the Bankruptcy Code. Too often, bankruptcy is spoken of in hushed tones or considered something not really relevant to the lives of people in our economy, but it is not just a footnote in the American economy. It turns out to be a major force in it. At its core when it is used properly and not abused, it is a guardrail for the life and the dignity and the livelihoods of American people. Even the President of the United States has filed for bankruptcy six times under chapter 11 alone. Although we don't recommend that frequent usage, it is there for all of us when we need it, and we do hope that those who are able to exercise their bankruptcy rights, like the President, will learn from the experience. Alas, he has already added $11.6 trillion to our national debt in his one-and-a-half terms in office so far. In any event, it should be there in less extreme cases for people who need it in order to get through tough times. All across America, small businesses and working families are shouldering debts that would have once been considered extraordinary, but now really just reflect the cost of staying afloat in today's economy. Although it remains a remedy of last resort legally, our bankruptcy system must be equipped to provide relief when economic pressures collapse the margins of household and commercial stability and solvency. A well-calibrated system does not punish misfortune or entrench failure. It provides a lawful path forward where all else fails. H.R. 7730 reestablishes a higher debt threshold for small businesses under subchapter V and working families under title 13. For 5 years, subchapter V of the bankruptcy code, the streamlined bankruptcy process for small businesses to reorganize and restructure, offered small businesses a path back to viability by providing a simpler pathway to restructure debt, save jobs, and continue serving in the communities. Regrettably, that path was narrowed, not because the policy failed but because in June 2024, the debt limit set by Congress, the maximum debt small businesses can have and still be eligible for subchapter V's streamlined process, lapsed and dropped by 60 percent from $7.5 million to $3 million. Despite clear data and near unanimous agreement among the bankruptcy bar that the $7.5 million debt limit was a success for small businesses and their creditors, we went back to the old, lower debt limit, which excludes way too many of the very small businesses that subchapter V was designed to support. Without a workable path to reorganize under subchapter V, all that remains of these businesses is used equipment and unpaid bills. This tremendous loss in value is lost not only for small business owners, but also for their employees, their creditors, and entire communities are affected. I am heartened by the bipartisan agreement we have to permanently restore the $7.5 million debt limit in the Bankruptcy Threshold Adjustment Act of 2026. It is both sensible and long overdue. Additionally, this bill also reinstates the higher debt limit for working families under chapter 13. Families who exceed the chapter 13 debt limit, which is $1.58 million, are legally barred from filing under that chapter, no matter how regular their income or sincere their repayment intentions. Nor can they turn to chapter 12, which is limited to farmers or fishermen, or chapter 15, which is limited to international cases, or subchapter V, which requires you to be a small business. Because of chapter 13's expired debt limit, we risk pushing working people into chapter 11 bankruptcy proceedings, which is not designed for people with stable income and assets they seek to keep. Chapter 11 was never meant for someone trying to save their home while paying down medical bills and putting kids through school. I am glad we are acting to reinstate the higher debt limit of $2.75 million. The Senate has already unanimously passed identical legislation. This is a [[Page H5941]] good example of how Congress should functio

Referenced legislation: HR7730, HR7730