HR-7730-119
Received in the Senate.
Sponsored by Ben Cline (R-VA)
What it does
This bill would raise the debt ceiling for small businesses filing under Subchapter V of Chapter 11 bankruptcy from about $3 million to $7.5 million, and raise the debt limit for individuals filing Chapter 13 consumer bankruptcy from about $2.75 million (the current temporary level) codified permanently at $2,750,000. It would apply to bankruptcy cases filed on or after the bill's enactment date.
Who benefits
Small and mid-sized business owners with debts up to $7.5 million who could now use the streamlined, less costly Subchapter V process instead of standard Chapter 11; individual debtors and married couples with high debt loads who can now use Chapter 13 instead of more disruptive Chapter 7 liquidation; bankruptcy attorneys and trustees who handle these cases; creditors who may recover more through structured repayment plans than liquidation.
Who is hurt
Unsecured creditors, including trade creditors, landlords, and lenders, who may see reduced recovery if more debtors qualify for repayment-plan bankruptcies rather than liquidation; competing businesses that do not restructure and may face debtors with a lower cost path to reorganize and continue operating; larger creditors who may need to adjust risk models as a broader pool of debtors gains access to these bankruptcy chapters.
Supporters argue
Supporters argue that the current debt thresholds have not kept pace with inflation and rising business costs, locking out many viable small businesses and heavily indebted individuals from cost-effective restructuring options. They contend that Subchapter V has proven successful since its 2020 creation in helping small businesses reorganize faster and cheaper than traditional Chapter 11, and that raising the consumer Chapter 13 limit prevents debtors from being forced into full liquidation under Chapter 7 when they could otherwise repay creditors over time.
Opponents argue
Opponents argue that significantly raising these thresholds allows much larger, more complex businesses and wealthier individuals to access simplified bankruptcy procedures designed for genuinely small debtors, potentially straining the streamlined process and trustee resources meant for smaller cases. They contend that expanding eligibility could reduce recoveries for unsecured creditors who bargained for terms based on debtors' apparent financial capacity, and that such a large jump in dollar thresholds deserves more scrutiny of its effects on credit markets before enactment.
Constitutional context
Congress has express constitutional authority to enact "uniform Laws on the subject of Bankruptcies throughout the United States" under Article I, Section 8, Clause 4, which squarely covers this bill's adjustment of bankruptcy eligibility thresholds.
Checks and balances
Congress exercises its enumerated bankruptcy power directly by amending the bankruptcy code; federal bankruptcy courts retain authority to interpret and apply the new thresholds, and no agency rulemaking is involved.
Historical precedent
Congress previously raised the Subchapter V debt limit to $7.5 million temporarily during the COVID-19 pandemic (2020-2024) before it reverted to roughly $3 million when the temporary provision expired; this bill would restore and make that higher limit permanent alongside a similar adjustment to the Chapter 13 consumer debt limit.