Grassley-Durbin Bankruptcy Legislation Becomes Law, Benefiting American Small Businesses and Families

WASHINGTON - Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Dick Durbin's (D-Ill.) Bankruptcy Threshold Adjustment Act has become law. The bipartisan legislation supports American small businesses and families by reinstating modern debt limits for Subchapter V and Chapter 13 bankruptcy, restoring access to critical reorganization tools.

"The Bankruptcy Threshold Adjustment Act is now the law of the land, ensuring our nation's bankruptcy code works for Americans, not against them," Grassley said. "By restoring modern debt limits and eliminating barriers to reorganization, this bipartisan bill provides American small businesses and families the tools they need to regain their financial footing. I thank Senator Durbin for his partnership in getting our bill across the finish line, as well as my colleagues in the Senate and House of Representatives for their support."

"Bankruptcy is often a painful last resort for small business owners. This bill restores a quicker and cheaper pathway for entrepreneurs to settle debts, keep the lights on, and keep serving their neighbors. It also expands eligibility for Chapter 13 bankruptcy to help more families manage rising costs, stay in their homes, and get back on their feet. Following unanimous passage in the Senate and House, I'm thrilled the President signed our bipartisan bill into law," Durbin said.

The bipartisan legislation is cosponsored by Sens. John Cornyn (R-Texas), Sheldon Whitehouse (D-R.I.) and Chris Coons (D-Del.).

Bill text can be found HERE.

Background:

The Grassley-Whitehouse Small Business Reorganization Act, signed into law in 2019, established Subchapter V within Chapter 11 of the Bankruptcy Code. The bipartisan legislation streamlined the bankruptcy process, reduced procedural burdens on small business owners and lowered filing costs. Legislation signed into law in 2020 allowed more small businesses to qualify for these procedures by increasing the upper debt limit for Subchapter V to $7.5 million.

In 2022, the Grassley-Whitehouse Bankruptcy Threshold Adjustment and Technical Corrections Act was signed into law, extending the $7.5 million debt limit for small businesses filing under Subchapter V and establishing a new debt limit of $2.75 million for individuals and families filing under Chapter 13. However, when the Bankruptcy Threshold Adjustment and Technical Corrections Act expired in 2024, the debt thresholds for both programs reverted to lower levels.

The Grassley-Durbin Bankruptcy Threshold Adjustment Act permanently restores the Subchapter V debt limit to $7.5 million and the Chapter 13 debt limit to $2.75 million.

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