House Judiciary Committee backs permanently higher bankruptcy thresholds for small businesses

The House Committee on the Judiciary on March 25 adopted an amendment in the nature of a substitute and voted to report HR 7730, the Bankruptcy Threshold Adjustment Act, which would permanently restore higher debt thresholds for expedited small-business and individual bankruptcy paths.

Supporters said the measure restores a pandemic-era adjustment that helped small firms and families reorganize without liquidation. "HR 7730 increases the debt limit for cases under subchapter 5," a sponsor said, adding that the higher $7.5 million threshold will let more Main Street businesses reorganize and keep employees on payroll.

The bill also reinstates an aggregate-debt test for chapter 13 filers so that individuals may qualify based on combined secured and unsecured obligations up to $2.75 million. Backers pointed to evidence that subchapter V led to higher creditor recoveries and faster, less costly reorganizations during COVID-era relief.

Opponents raised narrower concerns about potential misuse by sophisticated investors or commercial real estate interests who might try to fit larger entities into subchapter V. A member noted that in such cases "the judicial conference and our bankruptcy trustees will look into these cases and take action as necessary to combat potential fraud."

The committee adopted an amendment in the nature of a substitute (procedural edit to the bill title) and the chair announced the bill ordered to be reported favorably to the House; members will have two days to submit views.

The committee record includes opening statements from sponsors and co-sponsors and reflects bipartisan support for restoring the higher eligibility caps, balanced by calls for judicial oversight to prevent abuse.