A bipartisan group of lawmakers, including Rep. Ben Cline (VA-06), Rep. Lou Correa (CA-46), Rep. Laurel Lee (FL-15), and Rep. Joe Neguse (CO-02), has introduced the Bankruptcy Threshold Adjustment Act of 2026 in the U.S. House of Representatives. The bill proposes to permanently increase the debt threshold for small business reorganization under Chapter 11 bankruptcy to $7.5 million.
Supporters say this measure will allow more small businesses to use a quicker and less expensive bankruptcy process, helping them negotiate with creditors, remain open, retain employees, and continue paying suppliers. The legislation also aims to keep the bankruptcy system self-sustaining by ensuring its costs are shared fairly among users.
“The Bankruptcy Threshold Adjustment Act will give small businesses the certainty they need to reorganize, restructure, and keep operating when challenges arise,” said Rep. Cline. “By permanently raising the eligibility threshold, we’re ensuring more job creators can access a streamlined and affordable bankruptcy process that helps them stay open, protect paychecks, and meet their obligations. Just as importantly, this bipartisan bill maintains the integrity of our bankruptcy system by keeping it self-supporting and fair for all who rely on it.”
Rep. Correa emphasized the impact on local communities: “Bankruptcy is a painful last result for struggling businesses, impacting the people and communities that rely on their services. This legislation would make a streamlined and more cost-effective process accessible to more businesses, enabling them to settle their debts and continue serving their customers,” he said. “With the heavy burdens that Main Street already faces in this economy, we need to give them opportunities to not only survive but thrive.”
Rep. Lee added: “When small businesses face financial distress, they should have a practical path to reorganize and continue operating. This legislation permanently restores the $7.5 million debt threshold so more small and family-owned businesses can access a streamlined restructuring process, preserve jobs, and continue serving their communities. I’m pleased to support this bipartisan effort to provide greater certainty for small businesses.”
Reflecting on previous efforts during the pandemic era, Rep. Neguse stated: “When we enacted the Bankruptcy Threshold Adjustment Act in 2022, we responded to the economic and financial strain Americans faced in the wake of the Coronavirus pandemic. Since then, this legislation has protected our local entrepreneurs, small business owners, and family-owned shops,” he said.“By making this change permanent, we can protect those in our communities confronting the ongoing cost-of-living crisis and continue to ensure sufficient support for our main street economies.”
This latest bill follows earlier work by Rep. Cline on related issues; he previously had legislation signed into law as part of his first term in Congress with measures such as establishing Subchapter V reorganization through the Small Business Reorganization Act.
Ben Cline currently represents Virginia’s 6th district in Congress after replacing Bob Goodlatte in 2019 (https://cline.house.gov/about). He served in Virginia’s House of Delegates from 2002 until 2018 before entering Congress (https://www.congress.gov/member/ben-cline/C001120). Born in Stillwater, Oklahoma in 1972 at age 51 he lives in Fincastle with his wife Elizabeth and two children; Cline holds degrees from Bates College (BA) and University of Richmond (JD).
