This bill amends Title 11 to expand eligibility for two bankruptcy pathways. It revises the statutory definition of a ‘debtor’ for small‑business reorganizations and raises the maximum debt level for Chapter 13 consumer cases, while carving out public companies and certain affiliates.
Those changes broaden the pool of entities and individuals who can access streamlined reorganization procedures, alter which obligations are counted in the eligibility calculation, and add explicit exclusions designed to keep larger and publicly reporting entities out of these expedited tracks. Practitioners, creditors, and corporate counsel will need to adjust intake screening, eligibility analyses, and filing strategies accordingly.
At a Glance
What It Does
The bill raises the monetary cap for small‑business debtors under the small‑business reorganizational provision to $7,500,000 and sets the Chapter 13 consumer debt ceiling at $2,750,000. It also specifies that debts owed to affiliates or insiders do not count toward those caps and excludes corporations subject to SEC reporting and their affiliates.
Who It Affects
Small and mid‑sized commercial debtors seeking subchapter V relief, individuals (and individuals with spouses) exploring Chapter 13, creditors (secured and unsecured), insolvency counsel, trustees, and bankruptcy courts that administer these cases.
Why It Matters
The numeric increases expand access to faster, less costly reorganization tracks for larger debtors and higher‑debt individuals, potentially shifting recoveries and negotiating leverage in creditor constituencies and increasing caseloads in courts and trustee offices.
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What This Bill Actually Does
The bill rewrites two eligibility gates in the bankruptcy code. For small businesses it replaces the existing statutory text that defines who qualifies as a small‑business "debtor" and resets the upper limit on aggregate noncontingent, liquidated secured and unsecured debts that can be on a debtor’s balance sheet and still qualify for the expedited subchapter V procedures.
The new language also makes clear that debts owed to affiliates or insiders are excluded from that aggregation and that certain entities — specifically SEC‑reporting corporations and their affiliates — cannot be debtors under this definition.
For consumer cases, the bill substitutes new language into Section 109 that changes who may be a debtor under Chapter 13 by raising the aggregate debt ceiling for individuals (and individuals combined with spouses) who have regular income. The replaced statutory subsection continues to focus on noncontingent, liquidated obligations as the measurement baseline and keeps certain professions (e.g., stockbrokers and commodity brokers) outside the category by name.Practically, these changes affect eligibility screening and the mechanics of counting debt.
Intake teams must distinguish between contingent and noncontingent claims, identify and subtract obligations owed to affiliates or insiders, and determine whether a debtor’s business is primarily owning single‑asset real estate (which the bill continues to exclude). The carve‑outs for public companies and their affiliates mean that a corporate group cannot rely on these streamlined procedures if any member is a reporting issuer or if the group’s aggregated debts exceed the statutory ceiling.Because the bill applies only to cases commenced on or after enactment, practitioners need new checklists to determine whether a prospective filing falls on the new or old regime.
Bankruptcy judges and trustees will see the operational effects first: more mid‑sized business reorganizations under the subchapter V framework and larger Chapter 13 filings will change how plans are proposed and confirmed, how trustee oversight is conducted, and how creditor recoveries are negotiated.
The Five Things You Need to Know
The legislation sets the small‑business eligibility ceiling at $7,500,000 in aggregate noncontingent, liquidated secured and unsecured debt, excluding obligations to affiliates or insiders.
It excludes from the small‑business debtor category any member of an affiliated group whose aggregate debts exceed the statutory ceiling, preventing one affiliate’s filings from absorbing a large group into the streamlined track.
The bill bars corporations subject to SEC reporting requirements and their affiliates from qualifying for the small‑business debtor definition.
For Chapter 13 consumer eligibility the statute now permits an individual (or an individual together with a spouse) with regular income and aggregate noncontingent, liquidated debts below $2,750,000 to be a debtor under Chapter 13, while explicitly excluding stockbrokers and commodity brokers.
All changes apply prospectively only — they govern cases commenced on or after the law’s enactment date.
Section-by-Section Breakdown
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Short title
Provides the act’s short title: 'Bankruptcy Threshold Adjustment Act of 2026.' This is a formal placement that has no operational effect on bankruptcy practice but is how the changes will be cited in future statutory references.
Rewrites the small‑business debtor definition and raises the debt cap
Replaces the current text of §1182(1) to redefine 'debtor' for purposes of small‑business reorganizations and sets a monetary ceiling for aggregate noncontingent, liquidated secured and unsecured debts. The provision also clarifies that debts owed to affiliates or insiders are excluded when computing the cap, excludes single‑asset real estate owners as before, and lists three specific categories of ineligible entities: members of an affiliated group exceeding the cap, corporations subject to SEC reporting requirements, and affiliates of those reporting corporations. That exclusion structure creates both a per‑entity floor and a per‑group ceiling, which directly affects whether multi‑entity groups can use subchapter V.
Raises the Chapter 13 debt threshold and restates named exclusions
Strikes and replaces subsection (e) of §109 to raise the aggregate debt limit for Chapter 13 eligibility for individuals and joint filers with regular income. The new text preserves the measurement method — counting noncontingent, liquidated debts — and explicitly exempts certain broker categories from Chapter 13 eligibility. This is a statutory ceiling change rather than an administrative guideline, so eligibility disputes will hinge on statutory interpretation of terms like 'regular income' and 'noncontingent, liquidated debts.'
Effective date
States that the amendments apply only to cases commenced on or after the date of enactment. That prospective application avoids reopening prior cases but requires practitioners to determine which statutory standard governs any filing around the enactment date.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Mid‑sized commercial debtors that previously exceeded older small‑business caps but fall below the new $7.5M ceiling — they gain access to the streamlined subchapter V procedures, which can lower reorganization costs and shorten case timelines.
- Individuals with regular income and aggregate debts under $2.75M (including some higher‑debt households) — they can pursue Chapter 13 plans where they may have been previously ineligible, giving them a greater range of workout options.
- Insolvency practitioners and bankruptcy counsel — more filings eligible for streamlined tracks expands market opportunity for restructuring advisors and may create demand for lawyers familiar with subchapter V and larger Chapter 13 cases.
Who Bears the Cost
- Unsecured and trade creditors — expanded access to debtor‑friendly tracks can reduce liquidation recoveries and shift bargaining leverage toward reorganizing debtors, particularly where creditors lack secured claims.
- Bankruptcy trustees and court systems — an increase in eligible subchapter V and larger Chapter 13 filings will create administrative and oversight burdens on trustees and judges, potentially requiring more resources to handle plan confirmations and disputed eligibility issues.
- Affiliates in corporate groups — companies that are affiliates of SEC‑reporting issuers are explicitly excluded, which may force such groups to pursue more complex chapter 11 filings rather than streamlined subchapter V proceedings, increasing legal and administrative costs.
Key Issues
The Core Tension
The central dilemma is between widening access to faster, lower‑cost reorganization options for larger debtors and protecting creditors and public‑interest transparency: enabling more reorganizations under streamlined tracks can improve debtor outcomes and reduce systemic costs, but it risks reducing recoveries for creditors, invites strategic behavior around affiliate debt accounting, and excludes public companies in a way that shifts complexity rather than resolving it.
The bill’s operational clarity depends on contested statutory phrases. 'Noncontingent, liquidated' is a familiar statutory measurement, but disputes typically arise when debt status (contingent or liquidated) is unclear — for example, debts subject to litigation, guarantees, or later‑arising indemnities. Excluding debts owed to affiliates or insiders reduces artificial inflation of the cap, but it creates an evidentiary trail and incentives for parties to relabel or restructure intercompany obligations.
The affiliate‑group exclusion prevents a single affiliate from enrolling a large group into the streamlined track, but it also raises practical questions about how to compute 'aggregate' debt for loosely coupled corporate groups and whether good‑faith borrowers can inadvertently trigger ineligibility.
The SEC‑reporting carve‑out is administratively tidy but blunt: it closes the expedited tracks to public companies and their affiliates regardless of size or debt composition. That prevents regulatory‑information asymmetry concerns but might push some mid‑sized subsidiaries into full chapter 11, increasing complexity.
Prospectivity of the effective date avoids retroactive dislocation, but it also creates a narrow window where debtors and creditors will race to file under the old or new rules, producing front‑loading or strategic filings. Finally, the law expands access to remedies for larger entities and households, but it does not add resources to courts or trustee offices — creating a likely capacity gap that will show up as delays, increased contested eligibility litigation, and pressure on trustee administrations.
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