Banking Brief: Financial Services Insights

Businesses and individuals with significantly higher debt levels may soon gain broader access to streamlined bankruptcy reorganization options. H.R. 7730, the Bankruptcy Threshold Adjustment Act of 2026, recently passed in the House and Senate and is expected to soon be signed into law. It is poised to permanently increase debt eligibility thresholds for Subchapter V small-business reorganizations and Chapter 13 consumer reorganizations.

For lenders, trade creditors, landlords, equipment lessors, and other businesses that regularly encounter financially troubled entities, the changes could be consequential. While intended to provide distressed debtors with more accessible restructuring options, creditors may face reduced leverage, accelerated case timelines, and increased pressure to evaluate workout and collection strategies sooner. As a result, it is important for creditors to understand the expanded eligibility rules and practice implications.