Ken Lund / Wikimedia Commons / CC BY-SA 2.0
President Donald Trump signed a law Tuesday that permanently raises debt limits for two bankruptcy paths used by small businesses and people with regular income, widening who can seek court-supervised repayment or reorganization.
The White House confirmed the November 10 signing of H.R. 7730, the Bankruptcy Threshold Adjustment Act. The changes apply to cases started on or after the date of enactment.
For qualifying businesses, the law sets a $7.5 million debt ceiling for Subchapter V, a small-business route within Chapter 11. In plain terms, it lets an eligible business ask a bankruptcy court to reorganize what it owes rather than simply shut its doors. Eligibility does not mean a repayment plan is automatically approved.
Under the enrolled text, qualifying secured and unsecured debts must total no more than $7.5 million, excluding amounts owed to insiders or affiliated businesses. At least half of the debt must come from commercial or business activity.
The business limit covers noncontingent, liquidated debts: broadly, debts that are not dependent on a future event and whose amounts can be determined. The law also excludes affiliated debtor groups above the combined ceiling, businesses primarily engaged in owning single-asset real estate, corporations subject to federal securities reporting requirements, and their affiliates.
For consumers, the law allows an individual with regular income, or that individual and a spouse, to seek Chapter 13 with combined qualifying debts of strictly less than $2.75 million. This is one combined ceiling, not a separate allowance for each spouse. Stockbrokers and commodity brokers are excluded.
Chapter 13 generally allows a person with steady income to propose a court-supervised plan to repay all or part of what they owe over three to five years, according to the federal courts’ explanation. The new law changes the debt limit; it does not make someone eligible regardless of the other bankruptcy rules.
The practical effect is a wider doorway to these two court processes for businesses and households whose debts were too high under the lower limits. It is not automatic debt forgiveness, a government payment, or a recommendation to file for bankruptcy.
Congress.gov’s action tracker still displayed the bill as presented to the president on November 5 when checked Tuesday afternoon. The White House’s November 10 signing announcement confirms that it is now law.
JBizNews Desk | Business & Washington
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