For more than two years, a small business in Georgia carrying between roughly $3.4 million and $7.5 million in debt has been caught in a gap: too large to qualify for Subchapter V, the streamlined small business reorganization under Chapter 11, and often too small to absorb the cost of a traditional Chapter 11 case. Congress has now voted to close that gap permanently. On September 28, 2026, the Senate unanimously passed H.R. 7730, the Bankruptcy Threshold Adjustment Act, which the House had approved by voice vote on September 16. As of the date of this article, the bill is awaiting the President’s signature.
The legislation arrives at a moment when bankruptcy filings are climbing across the board. This article explains what the Act changes, why the timing of a filing now matters more than usual, and what the numbers say about the financial pressure facing Georgia businesses and families heading into 2027.
What the Bankruptcy Threshold Adjustment Act Changes
The Act makes three principal changes to the Bankruptcy Code.
1. A permanent $7.5 million Subchapter V debt limit
Subchapter V was created by the Small Business Reorganization Act of 2019 and took effect in February 2020 with a debt ceiling of roughly $2.7 million. Weeks later, the CARES Act temporarily raised that ceiling to $7.5 million in response to the pandemic. Congress extended the higher limit twice, most recently through the Bankruptcy Threshold Adjustment and Technical Corrections Act of 2022, but that extension sunset on June 21, 2024. The limit then reverted to its inflation-adjusted statutory level, which currently stands at $3,424,000 for cases filed on or after April 1, 2025.
The Act amends 11 U.S.C. § 1182(1) to set the Subchapter V eligibility threshold at $7,500,000 in aggregate noncontingent, liquidated secured and unsecured debt, with no expiration date. The other eligibility requirements remain in place: at least 50 percent of the debt must have arisen from the debtor’s commercial or business activities, debts owed to affiliates and insiders are excluded from the calculation, affiliated debtors are measured in the aggregate, and SEC-reporting companies and their affiliates remain ineligible.
2. A single $2.75 million Chapter 13 debt limit
Under current 11 U.S.C. § 109(e), an individual may file Chapter 13 only if he or she owes less than $526,700 in noncontingent, liquidated unsecured debt and less than $1,580,125 in noncontingent, liquidated secured debt. Those two separate caps have excluded a growing number of debtors, particularly homeowners in metro Atlanta whose mortgage balances alone can approach the secured limit, and individuals who guaranteed business loans or carry significant tax or student loan obligations.
The Act replaces the two caps with a single combined limit: 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 distinction between secured and unsecured debt disappears for eligibility purposes. Debtors who previously would have been forced into Chapter 7 liquidation or an expensive individual Chapter 11 case will have the option of a Chapter 13 repayment plan.
3. Prospective application only
The amendments apply to any case commenced on or after the date of enactment. The Act is not retroactive. A debtor who files the day before the President signs the bill is governed by the old limits; the same debtor filing the day after is governed by the new ones. Early summaries of the bill circulated with language suggesting retroactive application to June 2024, but the enrolled text contains no such provision.
Why Subchapter V Matters for Georgia Small Businesses
Subchapter V is not simply a smaller Chapter 11. It removes the features of a traditional reorganization that make the process slow and expensive for a closely held company. Unless the court orders otherwise, there is no official creditors’ committee and no disclosure statement. The debtor remains in possession and continues to operate the business. A Subchapter V trustee is appointed, but that trustee’s role is to facilitate a consensual plan rather than to displace management. The debtor must file its plan within 90 days of the petition, and only the debtor may propose a plan, so creditors cannot advance a competing one.
Most significantly for owners, Subchapter V modifies the absolute priority rule. If creditors will not consent, the debtor can still confirm a plan by committing its projected disposable income to creditors for a period of three to five years, and the existing owners keep their equity. In a traditional Chapter 11, that outcome generally requires either paying dissenting classes in full or contributing substantial new value.
For a Georgia restaurant group, a construction subcontractor, a medical practice, a trucking company, or a family-owned manufacturer with debt in the $3.4 million to $7.5 million range, the practical difference is the difference between a reorganization the business can afford and one it cannot. Will Geer and the firm’s business bankruptcy group regularly represent Subchapter V debtors in the United States Bankruptcy Court for the Northern District of Georgia, and Will spoke on streamlining small business cases at the American Bankruptcy Institute’s 2026 Southeast Bankruptcy Workshop earlier this year.
The Numbers Behind the Legislation
The Act was passed against a backdrop of rising filings. According to data released on October 8, 2026 by Epiq AACER and the American Bankruptcy Institute, there were 469,719 total bankruptcy filings nationwide in the first nine months of 2026, an 11 percent increase over the same period in 2025. Individual filings rose 7 percent to 444,252, with Chapter 7 cases up 13 percent and Chapter 13 cases up 8 percent. Commercial filings rose 7 percent to 25,467, and commercial Chapter 11 filings rose 11 percent.
The sharpest increase was in Subchapter V. Small businesses made 2,442 Subchapter V elections through September 30, 2026, a 46 percent jump from the 1,672 elections in the same period a year earlier. Those figures reflect filings under the current $3,424,000 ceiling. Once the $7.5 million limit takes effect, the pool of eligible businesses will expand considerably, and ABI and Epiq both project that filing volumes will continue to climb into 2027.
The reasons are familiar to anyone running a business in metro Atlanta: higher borrowing costs, rising operating expenses, slowing consumer demand, and a softer job market. Businesses that refinanced or took on new debt in 2022 and 2023 are now servicing that debt at rates that no longer fit their revenue.
Timing Is Now a Strategic Question
Because the new limits apply only to cases filed on or after enactment, the timing of a bankruptcy filing has become a threshold decision for any business or individual whose debt falls between the old and new ceilings.
If your debt exceeds the current limit but falls under the new one, filing before enactment forecloses the option. A business with $5 million in qualifying debt that files a Chapter 11 petition today cannot elect Subchapter V. The same business filing the day after the President signs the bill can. For a business that is not facing an imminent foreclosure, lawsuit, or garnishment, waiting a short period for enactment may preserve a far better path.
If you are facing an emergency, the automatic stay may have to come first. A pending foreclosure sale, a bank sweep, or a lawsuit about to go to judgment may not wait for Washington. In those situations, the analysis is whether a traditional Chapter 11 or a Chapter 7 is viable today, or whether other measures can buy time until the new limits are in effect.
Model the debt calculation carefully. Eligibility turns on noncontingent, liquidated debt. Disputed claims, unliquidated tort claims, and contingent guaranty obligations are treated differently from fixed loan balances and trade debt. Debts owed to insiders and affiliates are excluded from the Subchapter V calculation, which means a business whose total liabilities exceed $7.5 million may still qualify once related-party debt is backed out. Affiliated entities, however, are aggregated. A careful schedule of debts is the first step in any eligibility analysis.
Individuals should run the same analysis for Chapter 13. A homeowner with a $1.2 million mortgage, a home equity line, a vehicle loan, and six figures in credit card and tax debt may currently be ineligible for Chapter 13 under the bifurcated limits but comfortably eligible under a single $2.75 million cap. The same is true for individuals who personally guaranteed business debt.
What Creditors Should Expect
The expanded threshold does not benefit only debtors. Lenders, landlords, equipment lessors, and trade creditors with exposure to borrowers in the $3.4 million to $7.5 million range should expect to encounter Subchapter V in cases they previously would have assumed were traditional Chapter 11 matters. That means no estate-funded creditors’ committee, a compressed timeline for evaluating a plan, no ability to propose a competing plan, and confirmation over the objection of every impaired class if the debtor commits its projected disposable income. On the other hand, Subchapter V cases tend to move faster and spend less on administrative expense, which generally leaves more value available for distribution, and a debtor who confirms a nonconsensual plan does not receive a discharge until plan payments are complete.
Creditors 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 rather than waiting for a solicitation package that may never arrive.
Next Steps
If the bill is signed, the new limits will apply immediately to new cases. If your business carries debt anywhere near the current threshold, the time to evaluate your options is now, before a creditor forces the issue. An eligibility analysis under both the current and the anticipated limits will clarify whether to file promptly, wait for enactment, or pursue an out-of-court resolution in the meantime.
Experienced Subchapter V and Business Bankruptcy Counsel in Atlanta
Rountree Leitman Klein & Geer represents small and mid-sized businesses and their owners in Subchapter V and Chapter 11 reorganizations in the United States Bankruptcy Courts for the Northern and Middle Districts of Georgia, and represents lenders, landlords, and trade creditors in those same cases. If your company’s debt falls anywhere near the current or anticipated Subchapter V threshold, or you hold exposure to a borrower who does, contact us to discuss how the Bankruptcy Threshold Adjustment Act affects your position.
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