The House Passed a $7.5 Million Subchapter V Debt Limit. Here Is What It Means for Businesses Carrying MCA Debt.

CredibleLaw Legal News  |  Published September 25, 2026

The short answer On September 16, 2026, the House passed H.R. 7730, the Bankruptcy Threshold Adjustment Act, which would permanently set the Subchapter V debt limit at $7.5 million, up from today’s $3,424,000. The Senate passed identical language in S. 3977 on August 3, but under a different short title, so one chamber still has to pass the other’s bill before it can be signed. It is not law yet, and the new limit would apply only to cases filed on or after the date it is enacted.

For two years, a small business carrying more than about $3.4 million in debt has been locked out of the fastest, least expensive way to reorganize under the Bankruptcy Code. That includes a surprising number of businesses whose balance sheets were inflated by stacked merchant cash advances. On September 16, 2026, the House of Representatives voted to change that.

The bill would permanently restore a $7.5 million Subchapter V debt limit. It passed by voice vote, and the Senate has already approved the same substantive language. What remains is procedural, but procedure matters: until one identical bill clears both chambers and is signed, today’s lower limit is the law, and any business that files before enactment is judged under it.

CredibleLaw is a legal referral network and resource, not a law firm. This article explains what passed, where it stands, and what it could mean for a business weighing its options against MCA collections. It is not legal advice for any particular situation.

What the House Passed on September 16

The House-passed text of H.R. 7730 is short. Its first section rewrites the definition of an eligible Subchapter V debtor in 11 U.S.C. § 1182(1). Its second rewrites the Chapter 13 eligibility limit in § 109(e). Its third sets the effective date.

• Subchapter V limit: $7,500,000. A business debtor would qualify if its aggregate noncontingent, liquidated secured and unsecured debts are not more than $7.5 million, excluding debts owed to affiliates or insiders, and at least half of that debt arose from the debtor’s commercial or business activities.
• No sunset. Unlike the 2020 and 2022 increases, the bill text contains no expiration date.
• Exclusions carried forward. Businesses whose primary activity is owning single asset real estate, publicly reporting companies and their affiliates, and members of an affiliated group whose combined debts exceed $7.5 million would remain ineligible.
• Chapter 13: one combined $2,750,000 limit. For individuals, the separate secured and unsecured ceilings would be replaced with a single limit of less than $2.75 million in noncontingent, liquidated debt.
• Not retroactive. The amendments apply only to cases commenced on or after the date of enactment.

Where the Bill Stands Now

The Senate passed its version, S. 3977, by unanimous consent on August 3, 2026. The House Judiciary Committee reported H.R. 7730 with an amendment on August 27, and the full House passed it on September 16. According to the American Bankruptcy Institute, the substantive language of the two bills is identical, but their short titles differ. Congress requires both chambers to pass the same text before a bill is enrolled and sent to the President, so one more floor action is needed, followed by a signature.

Broad bipartisan support is a good sign, but it is not a guarantee of timing. Congress has let this exact limit lapse twice before. Until enactment, the Subchapter V debt limit remains $3,424,000.

Item	Current law	Under H.R. 7730 / S. 3977
Subchapter V debt limit	$3,424,000	$7,500,000, with no sunset
Chapter 13 debt limit	Separate secured and unsecured limits	One combined limit under $2,750,000
Which cases it covers	All cases filed today	Only cases filed on or after enactment
Status	In effect	Passed both chambers under different short titles; not yet law

Why This Matters to Businesses Carrying MCA Debt

The gap between $3.4 million and $7.5 million is where many distressed operating businesses sit: a restaurant group with equipment loans and a lease, a trucking company with financed tractors, a contractor with a line of credit, each layered with two, three, or four merchant cash advances taken to cover the payments on the others. When stacked advances push total debt past today’s limit, the only reorganization path left is traditional Chapter 11, which is slower and far more expensive.

Demand for Subchapter V is already climbing. Epiq AACER data released September 4 showed 302 Subchapter V elections in August 2026, up 63 percent from 185 a year earlier. A higher Subchapter V debt limit would open the same tool to businesses that are currently just over the line.

Wondering whether Subchapter V fits your situation? A bankruptcy attorney can calculate where your debt actually stands against the limit and compare Subchapter V with settlement and litigation options. Call 888-201-0441 or request a free case review to be connected with an independent attorney in our network.

What Subchapter V Offers That Traditional Chapter 11 Does Not

Subchapter V was created by the Small Business Reorganization Act and took effect in February 2020. It keeps the core of Chapter 11, a business that keeps operating while it restructures, and removes much of the cost and delay.

• Only the business can propose a plan, and it generally must do so within 90 days of the filing, which keeps the case moving.
• Owners can generally keep their equity without creditor approval if the plan commits the business’s projected disposable income for three to five years and meets the other confirmation requirements.
• No creditors’ committee or separate disclosure statement is required unless the court orders otherwise.
• A Subchapter V trustee is appointed to facilitate a consensual plan, while the business generally stays in control of its operations.
• Lower administrative cost, including generally no quarterly U.S. Trustee fees of the kind charged in traditional Chapter 11 cases.

For a fuller comparison of bankruptcy chapters against settlement and litigation, see our overview of MCA bankruptcy options.

How a Bankruptcy Filing Interacts With MCA Collections

Filing any bankruptcy case triggers the automatic stay, which generally halts lawsuits, collection efforts, and enforcement of judgments against the business. That is why businesses facing restraining notices, levies, or daily withdrawals often ask about it; our guide on how Chapter 11 can stop MCA lawsuits covers the mechanics.

Two limits are worth understanding in advance. First, funders frequently argue that the receivables they “purchased” are not the business’s property at all, which can lead to early fights in the case. Bankruptcy courts have increasingly examined those agreements on their substance; in July 2026, the Southern District of New York bankruptcy court in In re Kossoff PLLC recharacterized 19 MCA agreements as loans. That ruling is persuasive, not binding on other courts, and outcomes depend on the contract. Second, the stay protects the debtor. An owner who personally guaranteed the advances is a separate person, and funders may continue to pursue a guarantor unless the owner files or the court extends protection.

If you have already been sued, including in a New York county with no connection to your business, see our coverage of MCA lawsuits filed in the wrong county and our MCA lawsuit defense guide.

Does Your MCA Debt Count Toward the Subchapter V Debt Limit?

The limit is measured by noncontingent, liquidated debts as of the filing date, not by a rough total of everything a business might owe. That distinction can move a business above or below the line, which is why the calculation belongs with an attorney.

• Outstanding MCA balances generally count if the amount is fixed and the obligation is not dependent on a future event. A balance you dispute, including one you believe is a disguised loan, may still count.
• Debts owed to affiliates or insiders are excluded under the bill’s language, as they are under current law.
• Business debts must be at least half the total. At least 50 percent of the qualifying debt must have arisen from business activities.
• Entity versus owner. A personal guarantee is the owner’s obligation, not the company’s. If the owner files individually, whether a guarantee counts can depend on whether the funder has called on it.

File Now or Wait for the New Subchapter V Debt Limit?

Because the new limit applies only to cases filed after enactment, businesses near the line face a genuine timing decision. There is no single right answer, but the factors are consistent:

• Under $3,424,000 today: the bill does not change your eligibility. Subchapter V is available now.
• Between $3.4 million and $7.5 million with no active enforcement: waiting for enactment may be a reasonable option to discuss with counsel, alongside settlement or restructuring talks that could proceed in the meantime.
• Between $3.4 million and $7.5 million with active enforcement, such as a frozen account, a levy, or a default judgment: waiting has a cost that grows each day collections continue. Traditional Chapter 11 is available today, and counsel can weigh its cost against the uncertainty of the congressional timeline. Our guides on unfreezing a business bank account and stopping daily MCA withdrawals cover interim steps.
• Over $7.5 million: the bill would not change your eligibility for Subchapter V.

What the Bill Does Not Do

• It does not change the standards for confirming a plan or receiving a discharge.
• It does not reduce any MCA balance or resolve whether an agreement is a sale or a loan.
• It does not apply to cases already filed.
• It does not change Chapter 7, which has no debt ceiling.

Questions to Bring to a Bankruptcy Attorney

1. What is our total noncontingent, liquidated debt today, and which balances are excluded?
2. Are we eligible for Subchapter V now, and if not, how far over the limit are we?
3. What would traditional Chapter 11 cost compared with waiting for the new limit?
4. How would a filing affect the owner’s personal guarantees?
5. Are any of our MCA agreements strong candidates to challenge as disguised loans? See our overview of MCA legal defenses.

Talk through your options CredibleLaw can connect you with an independent bankruptcy or MCA defense attorney who can review your numbers and explain your options under current law and under the pending bill. Call 888-201-0441 or request a free case review.

Frequently Asked Questions

What is the Subchapter V debt limit right now?

The Subchapter V debt limit is currently $3,424,000 in noncontingent, liquidated debt. A pandemic-era $7.5 million limit expired in June 2024. The Bankruptcy Threshold Adjustment Act would permanently restore the $7.5 million limit, but it is not law yet.

Did the Bankruptcy Threshold Adjustment Act become law?

Not yet. The House passed H.R. 7730 on September 16, 2026, and the Senate passed S. 3977 on August 3, 2026. The substantive language is identical, but the short titles differ, so both chambers must pass the same bill before it can be signed by the President.

What would the new Subchapter V debt limit be?

The bill would set the Subchapter V debt limit at $7,500,000 in aggregate noncontingent, liquidated secured and unsecured debt, excluding debts owed to affiliates or insiders, with at least half arising from business activities. The bill text contains no sunset date.

Will the higher limit apply to a case I file now?

No. The bill applies only to cases commenced on or after the date of enactment. A business that files before the bill is signed is judged under the current $3,424,000 limit.

Do merchant cash advance balances count toward the Subchapter V debt limit?

Generally, outstanding MCA balances count if they are noncontingent and liquidated on the filing date, even if the business disputes them. Debts owed to affiliates or insiders are excluded. An attorney should calculate the total, because the treatment of specific balances can move a business above or below the limit.

Can Subchapter V stop MCA daily withdrawals and lawsuits?

Filing triggers the automatic stay, which generally halts collection actions and lawsuits against the business. Funders sometimes argue the receivables they purchased are not the business’s property, and the stay generally does not protect an owner who personally guaranteed the advances.

What does the bill change for Chapter 13?

For individuals, the bill would replace today’s separate secured and unsecured Chapter 13 limits with one combined limit of less than $2,750,000 in noncontingent, liquidated debt. Like the Subchapter V change, it would apply only to cases filed after enactment.

Should I wait for the bill to pass before filing?

It depends on your numbers and whether collections are active. Businesses under the current limit can file now, and those over $7.5 million are unaffected. Businesses in between should weigh the uncertain congressional timeline against ongoing levies, lawsuits, or withdrawals with a bankruptcy attorney.

Related Resources

• MCA bankruptcy options
• How Chapter 11 can stop MCA lawsuits
• Business bankruptcy
• Merchant cash advance settlement
• MCA lawsuits filed in the wrong county
• Merchant cash advance news

Sources and Editorial Standards

Primary sources consulted for this article:

• H.R. 7730, Bankruptcy Threshold Adjustment Act, Engrossed in House, September 16, 2026 (GovInfo)
• American Bankruptcy Institute statement on House passage of H.R. 7730 (via ABF Journal)
• Epiq AACER, August 2026 bankruptcy filing data (GlobeNewswire)
• Troutman Pepper Locke, In re Kossoff PLLC: Takeaways for SMB Lenders and Funders

Legal disclaimer CredibleLaw is a legal referral network and resource, not a law firm, and does not provide legal advice. This article reports on pending legislation as of its publication date; the bill may change or may not become law. The information is general and is not a substitute for advice from a licensed attorney about your specific situation. Contacting CredibleLaw does not create an attorney-client relationship. Any attorney you are referred to is independent and will explain their own fees and terms.