S. 3977: Bankruptcy Threshold Adjustment Act of 2026
Sponsor
Chuck Grassley
Republican · IA
Bill Progress
Latest Action · Mar 4, 2026
Read the second time. Placed on Senate floor schedule under General Orders. Calendar No. 347.
More businesses and families could reach the cheaper bankruptcy track
Why it matters
S. 3977 raises the debt ceiling for small-business bankruptcy to $7.5 million and lifts the Chapter 13 household limit to just under $2.75 million. Those two numbers decide who gets the streamlined, lower-cost reorganization tracks instead of a longer, pricier case. Raise the caps, and more struggling businesses and households clear the bar. The bill carries rare bipartisan weight, led by Senators Grassley and Durbin, and sits on the Senate calendar.
S. 3977 is short, and it does one thing: it raises the debt limits that control who can use two cheaper corners of the bankruptcy system.
For businesses, it lifts the Subchapter V small-business ceiling to $7,500,000. A larger company can still use the small-business track, as long as at least 50% of its debt came from actual business activity. Money owed to affiliates or insiders does not count toward the $7.5 million cap.
For households, it lets an individual with regular income file under Chapter 13 with less than $2,750,000 in liquidated debt. A married couple filing together would share that same combined cap.
Some lines stay exactly where they are. A business whose main activity is owning a single real-estate asset is still shut out of the small-business track. So are public reporting companies and their affiliates. Stockbrokers and commodity brokers still cannot use Chapter 13.
If S. 3977 becomes law, the higher limits would apply to any bankruptcy case filed on or after that date.
S. 3977 Bill Summary
What S. 3977 actually does.
Small businesses get a higher Subchapter V ceiling
S. 3977 would let a qualifying business use the Subchapter V small-business track with up to $7,500,000 in total qualifying debt, measured when the case is filed.
Business debt has to actually be business debt
To use the small-business track, at least 50% of the debtor's debt must come from commercial or business activity rather than personal obligations.
Insider debt does not count toward the cap
Debt owed to affiliates or insiders would be excluded when measuring whether a business sits under the $7.5 million threshold.
More households could use Chapter 13
An individual with regular income could file under Chapter 13 with less than $2,750,000 in liquidated debt, and a married couple could qualify together under that same combined cap.
Some filers still stay out
The bill keeps the exclusions for single-asset real estate businesses, public reporting companies and their affiliates, and stockbrokers and commodity brokers.
The new limits start with future filings
The higher thresholds would apply to bankruptcy cases filed on or after the day the bill becomes law.
Who benefits from S. 3977?
Small-business owners carrying up to $7.5 million in debt
If you run an operating business and your total qualifying debt is at or below $7,500,000, S. 3977 could let you use the small-business track instead of a more complex and expensive Chapter 11 case.
Households with regular income but larger debt loads
If your debts are too high for today's Chapter 13 limit but still under $2,750,000, this bill could put Chapter 13 back on the table.
Married couples filing together
Spouses with combined debts under $2,750,000 could still use Chapter 13 together, which matters for households juggling a mortgage, business guarantees, medical bills, and credit lines at once.
Business owners with insider or affiliate loans
If part of what you owe is money lent by related parties, those balances would not count toward the $7.5 million Subchapter V ceiling.
Who is affected by S. 3977?
Single-asset real estate operators
If your main business is owning a single real-estate asset, S. 3977 would still keep you out of the small-business track.
Larger affiliated business groups
If your group of affiliated debtors tops $7,500,000 in combined qualifying debt, the small-business pathway stays closed.
Public companies and their affiliates
Businesses that file public reports with the SEC, and their affiliates, would remain excluded from Subchapter V under this bill.
Stockbrokers and commodity brokers
Even with the higher Chapter 13 ceiling, these two categories would still be ineligible to file under Chapter 13.
What Congress Is Saying
S. 3977 has come up 5 times in the Congressional Record so far.
S. 3977 also appeared in 2 more Senate floor references and 1 routine cosponsor filing.
S3977 Legislative Journey
Action Taken
Mar 4, 2026
Read the second time. Placed on Senate Legislative Calendar under General Orders. Calendar No. 347.
Introduced
Mar 3, 2026
Introduced in the Senate. Read the first time. Placed on Senate Legislative Calendar under Read the First Time.
+1 more action this day
About the Sponsor
Chuck Grassley
Republican, IA · 51 years in Congress
Committees: the Judiciary, Finance, the Budget
View full profile →
Cosponsors (5)
This bill has 5 cosponsors: 3 Democrats, 2 Republicans, reflecting bipartisan support. Cosponsors represent 5 states: Delaware, Illinois, Rhode Island, and 2 more.
S. 3977 Quick Facts
- Chamber
- Senate
- Policy
- Finance and Financial Sector
- Introduced
- Mar 3, 2026
Read the second time. Placed on Senate floor schedule under General Orders. Calendar No. 347.
Mar 4, 2026
Official Sources
Official Congress.gov page for the Bankruptcy Threshold Adjustment Act of 2026, including status, text, and actions.
Official U.S. Code section defining the Subchapter V small-business debtor criteria that S. 3977 would amend.
Official U.S. Code section covering who may be a debtor, including the Chapter 13 eligibility rule changed by the bill.
Judiciary overview of bankruptcy chapters and filing basics, useful background for understanding Subchapter V and Chapter 13.
Official court explanation of Chapter 13 reorganization for individuals with regular income, directly relevant to the bill's household debt limit change.
Securities Exchange Act reporting requirements (15 U.S.C. 78m) that the bill cites to exclude public reporting companies and their affiliates from the small-business track.
S. 3977 Common Questions
What does S. 3977 do?
It raises two bankruptcy eligibility limits: up to $7.5 million for qualifying small-business Subchapter V cases, and less than $2.75 million for Chapter 13 household cases. Higher caps mean more filers can use those cheaper tracks.
How much debt can a small business have under S. 3977?
Up to $7.5 million in qualifying debt. At least 50% of it has to come from business activity, and money owed to affiliates or insiders doesn't count toward the cap.
What's the new Chapter 13 debt limit under S. 3977?
Less than $2.75 million in liquidated debt, as long as you have regular income. A married couple filing together shares that same combined cap.
Does debt owed to insiders count toward the $7.5 million cap?
No. S. 3977 excludes debt owed to affiliates or insiders when measuring whether a business is under the small-business limit.
Can a real estate holding company use the higher small-business limit?
Not if its main activity is owning single-asset real estate. S. 3977 keeps that exclusion in place.
Would public companies qualify for the new Subchapter V limit?
No. S. 3977 keeps public reporting companies, and their affiliates, out of the small-business track even with the higher cap.
Do stockbrokers or commodity brokers get the higher Chapter 13 cap?
No. Even with the new $2.75 million ceiling, stockbrokers and commodity brokers stay ineligible for Chapter 13.
When would the new bankruptcy limits take effect?
Right away for new cases. S. 3977 says the higher limits would apply to any bankruptcy filed on or after the day it becomes law.
Based on S. 3977 bill text
S. 3977 Bill Text
“To amend title 11, United States Code, to modify certain bankruptcy eligibility requirements, and for other purposes.”
Source: U.S. Government Publishing Office
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