Individuals and small business owners facing financial difficulties may now have more options for reorganizing their debt following the passage of a new federal bankruptcy law.
On November 10, 2026, President Donald Trump signed the Bankruptcy Threshold Adjustment Act (H.R. 7730) into law. The legislation permanently increases the debt limits for Chapter 13 bankruptcy and Subchapter V of Chapter 11, potentially expanding access to bankruptcy relief for qualifying individuals, families, and small businesses.
The changes apply to bankruptcy cases filed on or after November 10, 2026.
Chapter 13 Bankruptcy Debt Limit Increases to $2.75 Million
One of the most significant changes under the new law involves Chapter 13 bankruptcy eligibility.
Previously, individuals seeking Chapter 13 bankruptcy protection had to meet two separate debt limits:
- Unsecured debt: Less than $526,700.
- Secured debt: Less than $1,580,125.
Exceeding either limit could prevent someone from qualifying for Chapter 13 bankruptcy.
Under the new legislation, these separate thresholds are replaced with a single combined debt limit of less than $2.75 million in noncontingent, liquidated secured and unsecured debt.
This change could make Chapter 13 available to more individuals, particularly homeowners with substantial mortgage balances who previously exceeded the secured debt threshold.
Chapter 13 allows eligible individuals with regular income to reorganize their debts through a court-approved repayment plan, typically lasting three to five years. The process can also provide an opportunity to catch up on missed mortgage payments and address other qualifying debts.
Learn more about Chapter 13 bankruptcy and how it can help protect your home and reorganize debt.
Small Business Bankruptcy Debt Limit Increases to $7.5 Million
The new law also expands eligibility for small businesses seeking bankruptcy protection through Subchapter V of Chapter 11.
Previously, the debt limit for Subchapter V was $3.424 million. The Bankruptcy Threshold Adjustment Act increases that limit to $7.5 million in combined qualifying secured and unsecured debt.
To qualify, small business debtors must meet additional requirements, including having at least 50% of their qualifying debt arise from commercial or business activities. Certain debts owed to affiliates or insiders are excluded from the calculation.
Subchapter V provides an alternative reorganization process for qualifying small businesses, offering a more streamlined approach than traditional Chapter 11 bankruptcy.
The increased debt limit may allow more business owners to explore restructuring options while continuing their operations.
For more information, visit our page on Chapter 11 and Subchapter V small business bankruptcy.
When Do the New Bankruptcy Limits Take Effect?
The Bankruptcy Threshold Adjustment Act took effect upon signing on November 10, 2026. The updated debt limits apply to bankruptcy cases commenced on or after that date.
Another important aspect of the legislation is that these increases are permanent. Previous temporary increases expired in June 2024, returning bankruptcy eligibility thresholds to their lower limits.
The new law eliminates the sunset provisions, providing greater certainty for individuals and businesses evaluating their bankruptcy options.
What This Means for Individuals and Businesses Facing Debt
The expanded debt limits represent an important development in federal bankruptcy law. Individuals who previously exceeded Chapter 13 debt thresholds may now have another opportunity to pursue a repayment plan, while qualifying small businesses may have greater access to Subchapter V reorganization.
For individuals and business owners in Anaheim and throughout Southern California, understanding these changes may be an important first step when evaluating available debt relief options.
Eligibility depends on more than the total amount of debt, and each bankruptcy case involves individual financial circumstances and legal requirements.
Speak With an Experienced Bankruptcy Attorney About Your Options
If you have been considering bankruptcy but were previously concerned that your debt exceeded the eligibility limits, the new legislation may change the options available to you.
Attorney Andrew S. Cho has more than 30 years of experience helping individuals, families, and business owners navigate bankruptcy and debt-related challenges. He can review your financial circumstances, explain how the new debt limits may affect your eligibility, and help you understand the options available.
Whether you are considering Chapter 13 bankruptcy to protect your home or Subchapter V to reorganize your small business, Mr. Cho is here to help you take the next step toward financial stability.
Contact the Law Office of Andrew S. Cho at (714) 384-7633 or request a free consultation to discuss your situation.
*Source: National Association of Consumer Bankruptcy Attorneys (NACBA), November 10, 2026. Read the full press release.