HR 7730: Bankruptcy Threshold Adjustment Act

HR 7730 in plain English: This bill restores and makes permanent higher debt limits for two types of bankruptcy that expired in 2024. It raises the debt ceiling for Subchapter V small business reorganization bankruptcies to $7.5 million and raises the Chapter 13 wage earner bankruptcy limit to $2.75 million.

Stated purpose

This bill restores higher debt limits for two types of bankruptcy that expired in 2024: it raises the debt ceiling for small business reorganization (Subchapter V) to $7.5 million and raises the debt ceiling for individual wage-earner repayment plans (Chapter 13) to $2.75 million, also combining the separate secured and unsecured debt limits into one combined limit under Chapter 13.

Key points

• Raises the Subchapter V small business bankruptcy debt limit to $7.5 million
• Raises the Chapter 13 bankruptcy cumulative debt limit to $2.75 million
• Combines secured and unsecured debt into a single $2.75 million limit under Chapter 13
• Restores higher limits that had been in place but expired in 2024

Arguments supporters make

• Higher debt limits give struggling small businesses a realistic chance to reorganize and survive rather than being forced to liquidate, protecting jobs and local economies.
• Restoring these limits simply continues a policy that already existed and proved useful — letting them lapse created an unnecessary gap that hurt people who needed relief.
• Combining secured and unsecured debt into one Chapter 13 limit simplifies the rules, making it easier for ordinary people to understand whether they qualify without needing an expensive lawyer to figure it out.

Arguments opponents make

• Raising the limits allows higher-debt filers — who may owe far more than typical struggling families or small businesses — to access bankruptcy protections originally designed for people with modest means.
• Creditors, including small lenders and suppliers, may face greater losses if more large-debt cases flow into reorganization processes that limit what creditors can recover.
• The limits were allowed to expire through the normal legislative process; reinstating them without revisiting whether the thresholds are set at the right level may simply repeat a policy without evaluating whether it worked as intended.

Tradeoffs

Expanding access to reorganization bankruptcy helps more debtors avoid complete financial collapse, but it also extends legal protections to higher-debt filers, which may reduce what creditors — including everyday lenders and suppliers — are able to recover.

Current status in Congress: In committee.

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