In September, we wrote about Congress’s passage of the Bankruptcy Threshold Adjustment Act of 2026 and the prospect that more small businesses would soon have access to Subchapter V. That change is now official.
On November 10, 2026, President Trump signed H.R. 7730, the Bankruptcy Threshold Adjustment Act, into law, permanently increasing the debt limit for businesses and individuals seeking to reorganize under Subchapter V of Chapter 11 from $3,424,000 to $7.5 million. The new threshold is effective immediately for bankruptcy cases commenced on or after November 10, 2026.
For business owners, the change is significant. A business with, for example, $5 million in qualifying debt that could not access Subchapter V under the previous limit may now be eligible for a restructuring process designed to be faster, less expensive, and less administratively burdensome than a traditional Chapter 11 case.
Who Could Benefit from the New Limit?
Chapter 11 can give a financially distressed but otherwise viable business an opportunity to reorganize its debts while continuing to operate. But a traditional Chapter 11 proceeding can be expensive and time-consuming, making it impractical for some smaller businesses.
Congress created Subchapter V in 2020 to provide small businesses and business owners with a more workable option. The process generally moves more quickly than a traditional Chapter 11 case and usually does not involve an official committee of unsecured creditors, which can reduce the cost and administrative burden of a restructuring.
When the temporary $7.5 million debt limit expired in June 2024, many businesses found themselves in an awkward position: they had too much debt to qualify for Subchapter V but were too small for a traditional Chapter 11 case to be a practical or affordable restructuring option. The new law addresses that gap.
Businesses and business owners with qualifying debt of up to $7.5 million may now be eligible for Subchapter V. The debt limit is only one part of the eligibility analysis, however. Among other requirements, at least half of the qualifying debt generally must arise from commercial or business activities, and certain businesses remain excluded, including single-asset real estate entities.
For business owners, the important takeaway is simple: if your business previously explored bankruptcy or restructuring and was told it had too much debt to qualify for Subchapter V, it may be worth taking another look.
The same is true for businesses currently struggling with debt but otherwise capable of continuing to operate. A restructuring option that was not available before November 10 may be available now.
What About Businesses Already in Chapter 11?
Timing matters. The new $7.5 million eligibility limit applies to cases commenced on or after November 10, 2026.
Businesses already involved in a Chapter 11 case should therefore not assume that the increased limit automatically changes their case or makes them a Subchapter V debtor. Those businesses should talk with bankruptcy counsel about whether the new law affects their options and what, if any, steps may be available.
The Law Also Expands Chapter 13 Eligibility
The new legislation also makes an important change for individuals considering Chapter 13 bankruptcy.
Previously, Chapter 13 had separate limits for secured and unsecured debt. The new law replaces those limits with a single threshold: an individual must have less than $2.75 million in noncontingent, liquidated debt to qualify. That change also applies to cases commenced on or after November 10, 2026.
A Meaningful Change for Small Businesses
The $7.5 million Subchapter V limit was temporarily available during the COVID-19 pandemic and proved an important restructuring option for businesses that otherwise may not have been able to afford a traditional Chapter 11 proceeding. When the temporary increase expired in 2024, the limit eventually returned to $3.424 million.
This time, the $7.5 million threshold is permanent.
For small and family-owned businesses in Maine, New Hampshire, and throughout the country, that creates greater access to a restructuring tool designed specifically with smaller businesses in mind.
It does not mean bankruptcy is right for every financially distressed business. Nor does having less than $7.5 million in debt automatically make a business eligible for Subchapter V. But for businesses that have been struggling with debt, particularly those that previously fell above the eligibility limit, the new law creates a reason to reconsider the options available.
We Are Here to Help
Financial challenges do not necessarily mean that an otherwise viable business needs to close its doors. Depending on the circumstances, restructuring under Subchapter V may provide a path for addressing debt while keeping the business operating.
If you are a business owner considering your restructuring options, or if your business previously exceeded the Subchapter V debt limit, please contact Adam Prescott, Co-Chair of Bernstein Shur’s Business Restructuring & Insolvency Group, at [email protected] or (207) 228-7145.