Congress Passed Legislation to Increase Bankruptcy Debt Limits
The new law adjusts debt ceilings for Chapter 13 and Subchapter V bankruptcy filings to assist more applicants.
Updated on Sept. 30, 2026 in Debt Relief
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Congress has approved H.R. 7730, a bill that raises the Subchapter V debt limit to $7.5 million and establishes a $2.75 million ceiling for Chapter 13 bankruptcy cases. The legislation now moves to President Donald Trump for his signature.
Why it matters
The update aims to allow more businesses and individuals to qualify for reorganization instead of liquidation, responding to rising home prices and debt obligations that outpaced previous caps. This shift intends to provide broader access to federal bankruptcy relief options.
The legislation increases the Subchapter V debt limit from $3.4 million to $7.5 million and sets a consolidated $2.75 million Chapter 13 limit. Subchapter V elections grew by 67% in the first quarter of 2026 compared to prior tracking periods.
The players
Congress
This is the legislative branch of the federal government of the United States responsible for enacting national laws.
President Donald Trump
He is the current President of the United States who must sign legislation for it to become law.
The details
By removing the distinction between secured and unsecured debt for Chapter 13 eligibility, the law provides a more flexible path for those burdened by current market prices. Subchapter V continues to streamline the reorganization process by simplifying how creditors vote on proposed plans.
Timeline
2020: Tracking of Subchapter V elections began.
2024: The previous higher bankruptcy debt limits expired.
Q1 2026: Subchapter V elections rose by 67%.
September 2026: The House of Representatives approved H.R. 7730.
September 28, 2026: The Senate passed H.R. 7730.
Market Dynamics
This legislation builds upon the Small Business Reorganization Act of 2019 to address contemporary economic pressures. By raising debt caps, it adapts the bankruptcy system to reflect structural changes in real estate values and small business debt since the original Act was passed.
Individuals and small business owners may find it easier to qualify for reorganization plans rather than facing total liquidation. This change helps those whose debt levels were previously ineligible for standard protection due to rising housing costs.
The takeaway
The new debt limits offer a necessary safety net for small businesses and households struggling with modern cost-of-living increases. Qualified applicants should consult with legal counsel to determine how these expanded limits affect their specific reorganization strategy.
Further reading
For more information on current bankruptcy procedures, visit the Debt Relief section.
Source note: This article includes information reported by Bloomberglaw.
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