By: Erich Paetsch, Financial Services Industry Group
On September 28, 2026, the Senate unanimously passed H.R. 7730, the Bankruptcy Threshold Adjustment Act (the “Act”) after the House approved it by voice vote on September 16th. The Act was signed into law by President Trump on November 10, 2026. The Act arrives at a time when bankruptcy filings are steady increasing around the United States, including in Oregon.
The Act is intended by its drafter to address perceived gaps in who is eligible for and can file for certain types of bankruptcy relief. A small business with between $3.4 million and $7.5 million in debt is caught in a potential eligibility gap: too large to qualify for a streamlined small business reorganization under Chapter 11 (referred to as Subchapter V), and often too small to pay the costs for a traditional Chapter 11 case. An individual may file Chapter 13 only if she owes less than $526,700 in noncontingent, liquidated unsecured debt and less than $1,580,125 in noncontingent, liquidated secured debt. Those caps create a second gap, by excluding a growing number of debtors including homeowners whose mortgage balances can approach the secured limit and individuals who guaranteed business loans or carry significant tax or student loan obligations.
The Act makes two significant changes to eliminate the perceived eligibility gaps. First, the Act sets the Subchapter V eligibility threshold at $7,500,000 in aggregate noncontingent, liquidated secured and unsecured debt, with no expiration date. This means the eligibility limits are fixed by law and won’t change again by expiration of a temporary change. It also restores Subchapter V to the increased level temporarily set under the CARES Act and subsequent legislation in response to the global pandemic that expired on June 21, 2024. Second, the Act replaces the two caps for individual debt with a single combined limit in Chapter 13: an individual, or an individual and spouse, with regular income may file Chapter 13 if their total noncontingent, liquidated debts are less than $2,750,000. The existing distinction between secured and unsecured debt disappears for eligibility purposes. This eligibility change opens the door to Chapter 13 to individuals who might not otherwise consider filing bankruptcy.
Subchapter V is not just an easier Chapter 11 bankruptcy case. It removes features of a traditional Chapter 11 reorganization that make the process slow, cumbersome, and expensive. Unless the court orders otherwise, there is no creditors’ committee and no disclosure statement in a Sub V bankruptcy case. The debtor remains in possession and continues to operate the business. A Subchapter V trustee is appointed but their role is to facilitate a consensual plan and not manage the debtor or its operations. The debtor must file its plan within 90 days and only the debtor may propose a plan, eliminating creditors’ competing plans. Like a Chapter 12 bankruptcy for farmers, a Sub V case does not involve the so-called absolute priority rule, providing a debtor with greater flexibility when designing a plan for repayment of creditors.
For a Chapter 13 debtor, the changes also mean bankruptcy is now a viable option when it might not have provided relief previously. For example, debtors who previously were forced into Chapter 7 liquidation or an expensive individual Chapter 11 case now have the option of a Chapter 13 repayment plan.
Because the new limits only apply to cases filed on or after enactment, bankruptcy filings are likely to increase following the Act’s enactment into law. Individual Chapter 13 bankruptcy filings are already up 8 percent in the first nine months of 2026, and Sub V cases are up 46 percent in 2026. Impacted business and individuals likely delayed filing until the new limits under the Act take effect. Many professionals are predicting a sizeable increase in filing volumes after the new limits in the Act become law and for those increases to continue throughout 2027.
While bankruptcy is not always a good thing for a lender, the changes can have positive impacts for Oregon lenders. A Subchapter V case tends to move faster and has lower administering costs, leaving more available for distribution to creditors. In addition, Sub V can delay discharge until plan payments are complete if the proposed plan is not consensual. In addition, the bankruptcy process can ensure timely communication and complete information disclosure that might otherwise be unobtainable.
In anticipation increased filings, for distressed credits Oregon lenders should confirm that their liens are properly perfected, review guaranty and credit support arrangements that survive a Subchapter V plan and be prepared to engage early in a Sub V case rather than waiting for a traditional bankruptcy plan approach in a Chapter 11 case. These actions may help improve success with the anticipated increase in filings after the Act becomes law.
The information in this article is not intended to provide legal advice. For professional consultation, please contact Saalfeld Griggs PC at (503) 399-1070 or visit www.sglaw.com. © 2026 Saalfeld Griggs PC