The American Bankruptcy Institute and its Subchapter V Task Force are supporting bipartisan legislation that would restore and permanently increase the debt eligibility cap for Subchapter V small business reorganizations to $7.5 million.
The “Bankruptcy Threshold Adjustment Act of 2026” was introduced by Senate president pro tempore and Senate Judiciary Committee chair Charles Grassley, R-Iowa, and Rep. Ben Cline, R-Va. In a letter to lawmakers, ABI said expanding access to Subchapter V is critical to preserving an effective restructuring pathway for financially distressed small businesses.
Subchapter V was established under the Small Business Reorganization Act of 2019 and took effect in February 2020 with a debt limit of $2,725,625. The CARES Act of 2020 temporarily raised the threshold to $7.5 million, but that increase expired in June 2024, reverting first to $3.02 million. The current adjusted limit is $3,424,000, which ABI said leaves many small businesses without a viable restructuring option.
“Although it is difficult, if not impossible, to quantify the number of troubled small businesses that did not file and simply failed because of their ineligibility to file Subchapter V during the lapse of the higher threshold, ABI estimates that between June 22, 2024, and March 15, 2026, 1,475 would-be Subchapter V debtors were not eligible to file due to the lower debt ceiling,” Amy Quackenboss, ABI Executive Director, wrote.
ABI said it supports restoring the eligibility limit to $7.5 million and is prepared to provide data and analysis as Congress considers the legislation.
