On November 10, 2026, President Trump signed into law H.R. 7730, the Bankruptcy Threshold Adjustment Act (the “Act”). Among other things, the Act permanently raises the debt ceiling for small business reorganizations under Subchapter V of Chapter 11 of the Bankruptcy Code to $7.5 million. The new limit applies to all bankruptcy cases filed on or after November 10, 2026.
Background
Subchapter V, created by the Small Business Reorganization Act of 2019, offers small businesses a faster, less expensive path through Chapter 11. In 2020, as part of the initial government response to the COVID-19 pandemic, Congress temporarily raised the Subchapter V debt limit to $7.5 million. The temporary increase expired in June 2024, and the limit reverted to approximately $3.4 million (and was subject to inflation adjustments every three years).
Representative Ben Cline (R-VA), who sponsored the 2019 legislation creating Subchapter V, introduced H.R. 7730 on February 26, 2026. The House passed the bill by voice vote on September 16, 2026, and the Senate passed it without amendment by unanimous consent on September 28, 2026. The bipartisan, uncontested passage reflects a consensus that the higher threshold had worked well, and that reestablishing this threshold would assist a broader range of small businesses.
Key Provisions
1. Subchapter V debt limit increased to $7.5 million
The Act amends Section 1182(1) of the Bankruptcy Code to define an eligible “debtor” as a person engaged in commercial or business activities (including an affiliate that is also a debtor) with aggregate noncontingent, liquidated secured and unsecured debts of not more than $7,500,000 as of the petition date or the date of the order for relief, excluding debts owed to affiliates or insiders, at least 50 percent of which arose from the debtor’s commercial or business activities. Certain existing exclusions remain, including for debtors subject to the reporting requirements of the Securities Exchange Act of 1934.
2. Permanent, with no sunset
Unlike the prior temporary increases, the Act contains no sunset provision. The amendments apply to any case commenced under the Bankruptcy Code on or after the date of enactment. Subchapter V cases filed before November 10, 2026 remain subject to the prior lower debt limit.
Why it Matters
A streamlined path for more businesses. By roughly doubling the eligibility ceiling, the Act reopens Subchapter V to a significant segment of lower middle-market companies that had been shut out since mid-2024. Those companies gain access to a process with several debtor-friendly features: a creditors’ committee is not appointed unless the court orders otherwise; debtors do not pay U.S. Trustee quarterly fees; a Subchapter V trustee facilitates the case rather than displacing management; only the debtor may file a plan, which is due within 90 days after the petition date; and a plan may be confirmed over creditor objections without satisfying the absolute priority rule, so existing owners may keep their equity and control, provided the plan devotes the debtor’s projected disposable income to plan payments for three to five years and is fair and equitable.
Implications for lenders and secured creditors. Lenders to small and mid-sized companies should anticipate that more of their borrowers will be eligible for Subchapter V. Owners can keep their equity without creditors being paid in full, and a plan can be confirmed even if no impaired class votes to accept it, so lenders hold less negotiating leverage than they would in a traditional Chapter 11 case. Lenders should reassess their workout playbooks, track borrower debt levels relative to the new limit, and weigh whether forbearance arrangements and out-of-court restructurings now present a different risk profile.
Implications for trade creditors, landlords, and counterparties. Suppliers and landlords dealing with financially stressed customers or tenants should expect more Subchapter V cases and compressed plan schedules. Counterparties should be ready to move quickly to file claims, challenge the assumption or rejection of contracts and leases, and respond to proposed plan treatment.
Opportunities for distressed businesses and their owners. Companies carrying up to $7.5 million in qualifying debt now have access to a more affordable restructuring tool, one that may let their owners keep their ownership stakes.
A stable threshold. Because the higher limit is permanent, businesses, lenders, and their advisors can plan around a fixed eligibility threshold rather than the cycle of temporary extensions and lapses seen between 2020 and 2026.
Thompson Coburn Experience Across the Subchapter V Landscape
Thompson Coburn has significant experience representing stakeholders in Subchapter V cases, including debtors, secured lenders, trustees, and asset purchasers.
- Represented Subchapter V debtors in confirmed reorganization plans
- Advised secured lenders providing DIP financing in successful restructurings
- Represented purchasers acquiring assets through Subchapter V sales
- Served as Subchapter V trustees, liquidating trustees, and mediators
- Experience in healthcare, senior living, and other middle-market restructurings
- Katharine Battaia Clark has served as Subchapter V trustee in more than 130 cases since 2020
Subchapter V Team Members
| Katharine Battaia Clark Co-Chair, Financial Restructuring & Bankruptcy Practice Group | Mark Indelicato Co-Chair, Financial Restructuring & Bankruptcy Practice Group | Mark Bossi Partner |
| Liz Boydston Partner | Brian Hockett Partner | Joseph Orbach Partner |
| David Warfield Partner |
If you have questions about the Act or how it may affect your business or loan portfolio, please contact Joseph Orbach or any member of Thompson Coburn’s Bankruptcy & Restructuring practice.
This alert is provided for informational purposes only and does not constitute legal advice. Thompson Coburn LLP.
