Senate Passes Bankruptcy Bill to Help Businesses and Families
Quick answer: The Senate unanimously passed the Grassley-Durbin Bankruptcy Threshold Adjustment Act of 2026 on August 3, 2026. If enacted, the bill would permanently restore the Subchapter V debt limit to $7.5 million for qualifying small businesses and establish an aggregate Chapter 13 debt threshold of less than $2.75 million for eligible individuals and couples.
On August 3, 2026, the U.S. Senate unanimously passed the Bankruptcy Threshold Adjustment Act of 2026, a bipartisan bill sponsored by Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Dick Durbin (D-Ill.). For small business owners and families in Bucks County and surrounding communities who are struggling with debt, the legislation could expand access to bankruptcy relief if it becomes law.
What Is the Grassley-Durbin Bankruptcy Legislation?
The Grassley-Durbin Bankruptcy Threshold Adjustment Act of 2026 would permanently restore higher debt limits for two key bankruptcy programs if enacted: Subchapter V of Chapter 11, which provides a streamlined reorganization process for qualifying small businesses, and Chapter 13, which is available to eligible individuals with regular income.
These limits had been temporarily raised in previous legislation but reverted to lower levels when the Bankruptcy Threshold Adjustment and Technical Corrections Act expired in 2024. S. 3977 would make the higher thresholds permanent if enacted, rather than relying on another temporary extension.
How Does This Differ From Current Bankruptcy Law?
Under current law, the temporary higher thresholds expired in 2024, narrowing eligibility for both programs. If enacted, the Grassley-Durbin legislation would restore the Subchapter V debt limit to $7.5 million and establish an aggregate Chapter 13 debt threshold of less than $2.75 million, rather than separate secured and unsecured debt limits.
How Does the New Legislation Support Small Businesses?
Subchapter V was created by the Small Business Reorganization Act of 2019 to make Chapter 11 bankruptcy faster, cheaper, and less procedurally burdensome for small businesses. If enacted, restoring the $7.5 million debt limit would allow more qualifying small business owners to access this streamlined process.
As Senator Durbin stated, “This bill makes permanent a quicker and cheaper pathway for entrepreneurs to settle debts, keep the lights on, and keep serving their neighbors.” For business owners in financial distress, that distinction matters enormously. A more affordable and efficient reorganization process can mean the difference between saving a business and closing it permanently.
As of August 31, 2026, the bill has been received in the House of Representatives but has not been enacted. Its unanimous passage in the Senate signals bipartisan support, but the proposed debt-limit changes are not yet available to bankruptcy filers.
How Does the Legislation Affect American Families?
For eligible individuals and couples, the bill would establish an aggregate Chapter 13 debt threshold of less than $2.75 million if enacted. Chapter 13 bankruptcy allows qualifying filers with regular income to reorganize their debts and repay them through a three- to five-year plan, often helping people catch up on mortgage arrears and keep their homes.
Senator Grassley noted that the legislation gives “American families and small businesses the tools they need to regain their financial footing in a quicker, more streamlined process.” If the higher threshold becomes law, more individuals and couples dealing with substantial debt may qualify for Chapter 13 and have another option for reorganizing what they owe without using Chapter 7 liquidation.
Contact the Law Office of Michael Schwartz for Help in Bucks County, PA
If you are considering bankruptcy for your family or your business in Bucks County, PA, the Law Office of Michael Schwartz is here to help. If enacted, the Grassley-Durbin bankruptcy legislation could expand bankruptcy options for some individuals and small business owners, but the proposed thresholds are not currently in effect.
Contact the Law Office of Michael Schwartz today to schedule a consultation and learn how current bankruptcy law applies to your situation and how the proposed legislation could affect your options if enacted.
Frequently Asked Questions
What is the Grassley-Durbin Bankruptcy Threshold Adjustment Act of 2026?
The Grassley-Durbin Bankruptcy Threshold Adjustment Act of 2026 is a bipartisan bill that would permanently restore the Subchapter V debt limit to $7.5 million for qualifying small businesses and establish an aggregate Chapter 13 debt threshold of less than $2.75 million for eligible individuals and couples. It passed the Senate unanimously on August 3, 2026, but has not yet been enacted.
Who benefits most from the Grassley-Durbin bankruptcy legislation?
If enacted, the bill could benefit qualifying small business owners seeking Subchapter V reorganization and individuals or couples whose debt currently puts Chapter 13 eligibility out of reach. The higher thresholds would expand eligibility for these programs.
Has the Grassley-Durbin bankruptcy bill been signed into law?
As of August 31, 2026, the bill has passed the Senate unanimously and has been received in the House of Representatives. It has not yet been enacted, so the proposed higher debt thresholds are not currently in effect.
How does Chapter 13 bankruptcy help families avoid foreclosure?
Chapter 13 bankruptcy allows eligible individuals with regular income to reorganize and repay debts through a three- to five-year plan. This process can help filers catch up on missed mortgage payments and keep their homes, rather than losing them to foreclosure.
Should I contact a bankruptcy attorney before the bill becomes law?
Yes. Consulting a bankruptcy attorney now can help you understand your options under current law and how the proposed debt limits, if enacted, may affect your eligibility and strategy. The Law Office of Michael Schwartz can help residents in Bucks County, PA, evaluate their options.