S 3977: Bankruptcy Threshold Adjustment Act of 2026

S 3977 in plain English: This bill adjusts the debt thresholds that determine eligibility for certain types of bankruptcy filings. Specifically, it sets a $7,500,000 limit for small business debtor filings under Subchapter V and a $2,750,000 limit for Chapter 13 bankruptcy eligibility.

Stated purpose

This bill raises the debt limits that determine who can use certain types of bankruptcy protection, updating the dollar thresholds for both small business bankruptcies and individual consumer bankruptcies under federal law.

Key points

• Sets the debt ceiling for Subchapter V small business bankruptcy at $7,500,000, excluding debts owed to affiliates or insiders
• Sets the debt limit for Chapter 13 bankruptcy eligibility at $2,750,000 for qualifying individuals
• Passed the Senate unanimously by consent

Arguments supporters make

• The old debt limits had not kept up with inflation and rising costs, so raising them restores access to bankruptcy tools that Congress originally intended for small businesses and individuals.
• Subchapter V and Chapter 13 give debtors a structured way to repay creditors over time, so expanding eligibility helps more people and businesses avoid outright liquidation and stay economically active.
• The bill passed the Senate unanimously, showing broad bipartisan agreement that the thresholds needed updating.

Arguments opponents make

• Raising the debt ceiling lets larger and more complex debtors use simplified bankruptcy processes designed for small cases, potentially disadvantaging creditors who have fewer protections under those streamlined procedures.
• Higher thresholds could encourage more debt-taking by businesses and individuals who expect easier access to bankruptcy relief, shifting risk onto lenders and suppliers.
• Adjusting thresholds through a one-time legislative fix rather than building in automatic inflation adjustments means the limits will again fall out of date, requiring repeated legislative action.

Tradeoffs

Expanding eligibility gives more debtors access to potentially more favorable bankruptcy options, but it does so at the expense of creditors who receive stronger protections under the more rigorous standard bankruptcy processes those debtors would otherwise have to use.

Current status in Congress: Passed Senate.

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