Congress quietly raises bankruptcy thresholds, helping wealthier debtors
S. 3977 — Bankruptcy Threshold Adjustment Act of 2026 · Filed by Chuck Grassley (R-IA) · 5 cosponsors · Introduced Mar 3, 2026 · Passed chamber
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What it does
This bill raises the debt thresholds that determine who can file for bankruptcy protection. It increases the small-business bankruptcy limit from the current level to $7.5 million in debts, and raises the consumer bankruptcy limit to $2.75 million in debts. The effect is that individuals and small businesses with higher debt loads can now access bankruptcy courts that were previously closed to them.
Why we flagged it
The bill's core function is to raise the debt-eligibility ceilings for both consumer and small-business bankruptcy filings. It is a straightforward technical amendment to bankruptcy law, not a hidden rider or concealment mechanism.
What the text implies
- The $2.75 million consumer threshold is substantially higher than current law and may allow high-income households with significant unsecured debt (e.g., medical debt, credit cards) to access chapter 13 reorganization, potentially shifting collection risk to creditors.
- The $7.5 million small-business threshold may enable larger pass-through entities (LLCs, S-corps) to access chapter 11 protections previously reserved for smaller firms, potentially affecting commercial lending risk assessment.
The full analysis lists 4 implications of this text.
Who stands to gain
individuals with high unsecured debt seeking chapter 13 reorganization; small businesses and pass-through entities with debt between current and new thresholds; bankruptcy attorneys and court administrators (increased caseload)