HR 7730: Bankruptcy Threshold Adjustment Act

HR 7730 in plain English: This bill restores bankruptcy debt limits that had expired in 2024, raising the debt ceiling for small business reorganizations under Subchapter V from approximately $3.4 million to $7.5 million, and raising the combined debt limit for Chapter 13 wage earner bankruptcies from approximately $2.1 million to $2.75 million.

Stated purpose

This bill restores higher debt limits for two types of bankruptcy that had expired in 2024, allowing more small businesses and individuals to qualify for reorganization bankruptcy under Subchapter V and Chapter 13.

Key points

• Raises the Subchapter V small business reorganization debt limit from ~$3.4 million to $7.5 million
• Raises the Chapter 13 bankruptcy debt limit from ~$2.1 million to $2.75 million
• Combines secured and unsecured debt into a single $2.75 million cap under Chapter 13, replacing separate limits
• Restores changes that had expired in 2024

Arguments supporters make

• Raising these limits lets more struggling small businesses reorganize and survive rather than shut down entirely, preserving jobs and local economies.
• The higher limits simply restore thresholds that were already in place before 2024, bringing the law back to where Congress previously agreed it should be.
• Combining secured and unsecured debt into one Chapter 13 limit makes the rules simpler and more predictable for everyday people trying to get back on their feet.

Arguments opponents make

• Higher debt limits allow larger debtors to use bankruptcy processes originally designed for smaller, simpler cases, which could strain courts and disadvantage creditors who must wait longer for resolution.
• Restoring these limits without making them permanent means the same debate will return again when they expire, creating ongoing uncertainty for debtors and lenders alike.
• Expanding access to reorganization bankruptcy may encourage some businesses or individuals to take on more debt than they can handle, knowing higher limits give them a broader safety net.

Tradeoffs

Raising the debt ceilings gives more debtors access to reorganization tools that may help them recover, but it also means creditors face more cases where full repayment is delayed or reduced through a court-managed plan rather than immediate liquidation.

Current status in Congress: Passed both chambers.

NewsClear — neutral news & congressional tracking · Bill of the Week