U.S. Reps. Ben Cline (R-VA) Lou Correa (D-CA), Laurel Lee (R-FL), and Joe Neguse (D-CO) introduced legislation in the House that would permanently raise the small business reorganization threshold for filing Chapter 11 bankruptcy to $7.5 million
The Bankruptcy Threshold Adjustment Act of 2026 (H.R. 7730) seeks to provide small businesses with access to a faster, more cost-effective bankruptcy process. At the same time, it allows them to negotiate with creditors, keep their doors open, keep employees on the payroll, and get suppliers paid.
“The Bankruptcy Threshold Adjustment Act will give small businesses the certainty they need to reorganize, restructure, and keep operating when challenges arise,” Cline said. “By permanently raising the eligibility threshold, we’re ensuring more job creators can access a streamlined and affordable bankruptcy process that helps them stay open, protect paychecks, and meet their obligations.”
The bill also ensures the bankruptcy system remains self-supporting with its costs borne by those who use it.
“Bankruptcy is a painful last result for struggling businesses, impacting the people and communities that rely on their services. This legislation would make a streamlined and more cost-effective process accessible to more businesses, enabling them to settle their debts and continue serving their customers,” Correa said. “With the heavy burdens that Main Street already faces in this economy, we need to give them opportunities to not only survive but thrive.”
A companion bill has been introduced in the U.S. Senate by Sen. Chuck Grassley (R-IA).
“When small businesses face financial distress, they should have a practical path to reorganize and continue operating. This legislation permanently restores the $7.5 million debt threshold so more small and family-owned businesses can access a streamlined restructuring process, preserve jobs, and continue serving their communities. I’m pleased to support this bipartisan effort to provide greater certainty for small businesses,” Lee said.
Neguse noted that this builds on the success of the Bankruptcy Threshold Adjustment Act\ of 2022.
“When we enacted the Bankruptcy Threshold Adjustment Act in 2022, we responded to the economic and financial strain Americans faced in the wake of the Coronavirus pandemic. Since then, this legislation has protected our local entrepreneurs, small business owners, and family-owned shops,” Neguse said. “By making this change permanent, we can protect those in our communities confronting the ongoing cost-of-living crisis and continue to ensure sufficient support for our main street economies.”