A major expansion of the federal bankruptcy safety net for small businesses quietly took effect this month, more than doubling the debt ceiling that determines who qualifies for streamlined restructuring protection.
The Bankruptcy Threshold Adjustment Act, signed into law on November 10, 2026, lifts the Subchapter V eligibility threshold to $7,500,000 in noncontingent, liquidated debt, up from $3,424,000.
That jump of roughly $4 million represents the largest single increase to the Subchapter V limit since the streamlined small-business chapter was introduced as part of broader bankruptcy reforms.
Subchapter V of the Bankruptcy Code offers a faster, less expensive restructuring path than a standard Chapter 11 proceeding, making the debt ceiling a critical gateway for struggling businesses.
By raising that gateway, the new law extends the option of a more manageable reorganisation process to a significantly wider pool of companies carrying debt that would previously have forced them into costlier proceedings.
The effective date creates a sharp dividing line for practitioners and debtors: any case filed on or before November 9, 2026 remains subject to the old $3,424,000 ceiling, regardless of the new legislation.
Beyond Subchapter V, the law also reshapes Chapter 13 personal bankruptcy rules, consolidating what had been separate secured and unsecured debt limits into a single combined threshold of $2,750,000.
That unified Chapter 13 figure applies as of November 10, 2026, simplifying the calculation that individual debtors and their advisers must make when assessing eligibility for a personal repayment plan.
Both the Subchapter V and Chapter 13 limits are now tied to inflation, with automatic adjustments scheduled every three years in line with most other statutory bankruptcy figures.
The triennial inflation-linking mechanism is designed to prevent the thresholds from eroding in real terms over time, a problem that had left earlier fixed limits increasingly out of step with actual business debt levels.
Congress passed the Bankruptcy Threshold Adjustment Act before the president’s signature brought it into force, completing a legislative process that had been closely watched by insolvency lawyers and small business advocates across the country.
The combination of a higher Subchapter V ceiling, a simplified Chapter 13 structure, and built-in inflation protection marks one of the more substantive overhauls of consumer and small-business bankruptcy eligibility thresholds in recent years.