WHAT THE LAW DOINCongress, in plain words

S. 3977 · 119th Congress

Bankruptcy Threshold Adjustment Act of 2026

Passed SenateDrafted by AI, awaiting reviewFinance and Financial Sector
IntroducedMar 3, 2026
Passed SenateAug 3, 2026
Passed HouseNot yet
To PresidentNot yet
Became lawNot yet

Where it stands

Passed Senate. Latest step, Aug 10, 2026: Held at the desk. From Iowa: Chuck Grassley sponsors it. It would change 2 sections of existing law.

How this bill changes the law

Sourced

S. 3977 would change 2 sections of existing law. Read from the bill text as passed by the Senate (Aug 3, 2026).

11 U.S.C. 1182 Definitions

  • (1) Debtor.—The term "debtor" means a small business debtor. rewritten · Sec. 2(a) · see the words

11 U.S.C. 109 Who may be a debtor

What the words would change: every change, in place (2)

Today's wording of each part of the law, with what would be struck out and added. Each change also gives the bill's own instruction, word for word.

  1. 11 U.S.C. 1182(1)rewrittenby S. 3977 Sec. 2(a)

    (1) Debtor.— The term debtor—(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and(B) does not include—(i) any member of a group of affiliated debtors under this title that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $7,500,000 (excluding debt owed to 1 or more affiliates or insiders);(ii) any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or(iii) any debtor that is an affiliate of a corporation described in clause (ii).

    The bill says: Section 1182(1) of title 11, United States Code, is amended to read as follows:

    Bill text · Current law (11 U.S.C. 1182)

  2. 11 U.S.C. 109changedby S. 3977 Sec. 2(b)

    The bill says: Section 109 of title 11, United States Code is amended by striking subsection (e) and inserting the following:

    Bill text · Current law (11 U.S.C. 109)

From the bill's official text on GovInfo and the U.S. Code, 2024 edition, which may not yet show changes made since.

Bill text used: Engrossed in Senate (passed the Senate Aug. 3, 2026; not yet law) · updated Oct 28, 2026

This breakdown was drafted by AI from the official documents and passed our automatic checks: every quoted word was found in its source, and every number comes from an official record. A person must review it before we mark it reviewed. Tap any small number to see the exact words a sentence rests on.

At a glance

Sourced

What it would mean for you

Sourced

If you own a small business that is deep in debt

A quicker way to reorganize, for more businesses

  • You could use Subchapter V if your business owes up to $7,500,000, and at least 50 percent of it came from the business.
    2in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(A)
  • Public companies that file reports with the SEC could not use it.
    2any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(B)(ii)
  • Its sponsors say it is cheaper and faster, so owners can keep the lights on.
    7This bill makes permanent a quicker and cheaper pathway for entrepreneurs to settle debts, keep the lights on, and keep serving their neighbors.[7] Senate Judiciary Committee press release: Senate Unanimously Passes Grassley-Durbin Bankruptcy Legislation (Aug. 4, 2026) · Aug. 4, 2026, Sen. Durbin

If your family is struggling with debt

More families could qualify for a Chapter 13 repayment plan

If you already filed for bankruptcy

It would not change your case

  • The new limits would apply only to cases filed after the bill becomes law.
    2The amendments made by this Act shall apply to any case that is commenced under title 11, United States Code, on or after the date of enactment of this Act.[2] Engrossed in Senate (August 3, 2026) · Sec. 3

If you live in Iowa

Your senator wrote it

What this bill does not do

Sourced

Current law vs. the bill

Sourced

Every place the bill changes existing law. On the left, the law as it stands today, quoted from the U.S. Code. On the right, the bill's words.

11 U.S.C. 1182(1)Rewrites a definition

Current law

Debtor.—The term debtor means a small business debtor.
5Debtor.—The term debtor means a small business debtor.[5] 11 U.S.C. 1182, Definitions (small business debtor) (U.S. Code, 2024 edition, before this bill) · (1)

Subchapter V used the general small business limit, which fell back to a lower amount when the higher limit lapsed in 2024.

The bill

in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor
2in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(A)
In plain words: Subchapter V would get its own limit of $7,500,000.
2in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(A)
11 U.S.C. 109(e)Rewrites a subsection

Current law

noncontingent, liquidated, unsecured debts of less than $250,000 2 and noncontingent, liquidated, secured debts of less than $750,000,2
6noncontingent, liquidated, unsecured debts of less than $250,000 2 and noncontingent, liquidated, secured debts of less than $750,000,2[6] 11 U.S.C. 109, Who may be a debtor (U.S. Code, 2024 edition, before this bill) · (e)

Two caps, one for unsecured and one for secured debts; the amounts in the law are adjusted for inflation.

The bill

Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000
2Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000[2] Engrossed in Senate (August 3, 2026) · Sec. 2(b) → inserted (e)
In plain words: Chapter 13 would have one combined cap of less than $2,750,000.
2Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000[2] Engrossed in Senate (August 3, 2026) · Sec. 2(b) → inserted (e)may be a debtor under chapter 13 of this title[2] Engrossed in Senate (August 3, 2026) · Sec. 2(b) → inserted (e)

What the bill decides, and what it leaves to others

Sourced

Written into the bill

These take effect exactly as written.

  • The limits, $7,500,000 and $2,750,000, are written into the bill.
    2in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(A)Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000[2] Engrossed in Senate (August 3, 2026) · Sec. 2(b) → inserted (e)
  • They would apply to cases filed on or after the day it becomes law.
    2The amendments made by this Act shall apply to any case that is commenced under title 11, United States Code, on or after the date of enactment of this Act.[2] Engrossed in Senate (August 3, 2026) · Sec. 3

Left to agencies or states

The real effect depends on rules someone else writes later.

Section by section

Sourced
Read all 4 sections in plain words
Sec. 1 Short title
Names the bill the Bankruptcy Threshold Adjustment Act of 2026.
2This Act may be cited as the Bankruptcy Threshold Adjustment Act of 2026.[2] Engrossed in Senate (August 3, 2026) · Sec. 1
Sec. 2(a) Small business limit
A business could use Subchapter V if it owes up to $7,500,000, not counting debts to insiders or related companies, with at least 50 percent from business activity.
2in an amount not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(A)
 A group of related companies owing more than $7,500,000 together could not, and neither could public companies.
2any member of a group of affiliated debtors under this title that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $7,500,000[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(B)(i)any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934[2] Engrossed in Senate (August 3, 2026) · Sec. 2(a) → inserted (1)(B)(ii)
Sec. 2(b) Chapter 13 limit
Replaces the separate secured and unsecured caps with one cap of less than $2,750,000 in total debts.
2,6noncontingent, liquidated, unsecured debts of less than $250,000 2 and noncontingent, liquidated, secured debts of less than $750,000,2[6] 11 U.S.C. 109, Who may be a debtor (U.S. Code, 2024 edition, before this bill) · (e)Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated debts that aggregate less than $2,750,000[2] Engrossed in Senate (August 3, 2026) · Sec. 2(b) → inserted (e)
Sec. 3 When it applies
Applies to bankruptcy cases started on or after the day it becomes law.
2The amendments made by this Act shall apply to any case that is commenced under title 11, United States Code, on or after the date of enactment of this Act.[2] Engrossed in Senate (August 3, 2026) · Sec. 3

What changed between versions

Sourced
1 step, from first draft to final text

From the text placed on the Senate calendar to the Senate-passed text

No changes to the wording.

Cost

Sourced

Analysis

Analysis

Every bill gets the same five questions. Arguments are attributed to the people who made them, and each side gets about the same space.

Path to law

Balance of power

Coalitions

Precedent

The strongest case on each side

For

Against

Did this make sense?

Sourced

Three quick questions. Your answers are anonymous and tell us which breakdowns need clearer writing.

1. What would the Subchapter V debt limit become?
2. Is this bill law yet?
3. Would the new limits apply to bankruptcy cases already filed?

How this was checked

Sourced
3 checks
  • Automatic: every quote matched its source; every number matched an official record.
  • Senate Judiciary Committee release (Aug. 4, 2026): Its description ($7.5 million and $2.75 million limits) matches the Senate-passed text. Quotes are hand-recorded excerpts an editor must confirm.
  • CBO estimate: None listed in the official bill record.

Spot an error? See our corrections log and how to report one

Sources

Sourced
All 8 sources
  1. Official bill status record (actions, votes, cosponsors) · Official bill record · retrieved Oct 28, 2026
  2. Engrossed in Senate (August 3, 2026) · Bill text · retrieved Oct 28, 2026
  3. Placed on Calendar Senate (March 4, 2026) · Bill text · retrieved Oct 28, 2026
  4. Congressional Record, Senate, August 3, 2026 (S4412) · Congressional Record · retrieved Oct 28, 2026
  5. 11 U.S.C. 1182, Definitions (small business debtor) (U.S. Code, 2024 edition, before this bill) · U.S. Code (current law) · retrieved Oct 28, 2026
  6. 11 U.S.C. 109, Who may be a debtor (U.S. Code, 2024 edition, before this bill) · U.S. Code (current law) · retrieved Oct 28, 2026
  7. Senate Judiciary Committee press release: Senate Unanimously Passes Grassley-Durbin Bankruptcy Legislation (Aug. 4, 2026) · News or advocacy · retrieved Oct 28, 2026 · excerpts recorded by hand, awaiting confirmation
  8. California Lawyers Association, Business Law Section: Senate passage of S. 3977 (Kathleen A. Cashman-Kramer, Aug. 6, 2026) · News or advocacy · retrieved Oct 28, 2026 · excerpts recorded by hand, awaiting confirmation

Official summary

Sourced

Bankruptcy Threshold Adjustment Act of 2026

This bill restores changes that expired in 2024 applicable to debt limits for Subchapter V (small business reorganization) and Chapter 13 (the wage earner's plan) bankruptcies.

Specifically, the bill increases the debt limit under Subchapter V from approximately $3.4 million to $7.5 million and increases the cumulative debt limit under Chapter 13 from approximately $2.1 million to $2.75 million.

The bill also applies both secured and unsecured debt towards the Chapter 13 limit. (Currently, separate limits apply to secured and unsecured debt under Chapter 13 bankruptcy.)

Official summary by the Congressional Research Service (Passed Senate, Aug 3, 2026).

What has happened

Sourced
  1. Aug 3, 2026Passed/agreed to in Senate: Passed Senate without amendment by Unanimous Consent.Library of Congress
  2. Mar 3, 2026Introduced in SenateLibrary of Congress

Show all 8 recorded actions

Cosponsors

  • Christopher A. Coons D-DE
  • John Cornyn R-TX
  • Richard J. Durbin D-IL
  • Sen. Lindsey Graham R-SC
  • Sheldon Whitehouse D-RI