Bankruptcy Threshold Adjustment Act of 2026

H.R. 7730 — the Bankruptcy Threshold Adjustment Act of 2026 — was introduced on February 26, 2026, by Rep. Cline (R-VA) and referred to the House Judiciary Committee. On March 26, 2026, the committee ordered the bill reported (amended) by voice vote — a strong bipartisan signal. The bill currently awaits floor action in the House. Critically, an identical companion bill (S. 3977) has passed the Senate committee stage and is on the Senate Legislative Calendar, greatly increasing the probability of enactment in the 119th Congress.

The bill makes two structural changes to the U.S. Bankruptcy Code. First, it raises the consumer Chapter 13 debt limit from approximately $1.26 million to $2.75 million — more than doubling the threshold for individuals to enter a repayment plan rather than liquidate under Chapter 7. Second, it raises the small business Chapter 11 debt limit from approximately $3.79 million to $7.5 million for eligibility under the streamlined Subchapter V framework. Both changes apply to cases commenced on or after enactment. This is an authorization bill with no direct federal spending — the economic impact is a transfer from creditors to debtors via the bankruptcy system.

The structural winners are bankruptcy attorneys, distressed debt traders, and consumer debt relief platforms (no direct public equity plays in pure bankruptcy services beyond litigation finance). The structural losers are consumer and small business lenders where expanded restructuring access increases loss severities on defaulted loans. The causal chain is direct: higher debt ceiling → more borrowers qualify for Chapter 13 cram-downs (reducing secured lender collateral recovery) and Subchapter V small business reorganizations (extending repayment terms and reducing creditor payouts).

Market data confirms the stock price erosion is already underway. $COF has lost 7.4% in the last seven trading days (closing at $206.47 on April 17 to $191.14 on April 30). $SYF has declined 2.9% in the same period. $ALLY has dropped 2.4%. The broader 30-day trends remain positive (+4.8%, +11.7%, +12.9% respectively), but the divergence between the 30-day uptrend and the recent 7-day decline signals market participants are beginning to price in credit risk from this legislation. $C has held relatively steady (-1.6% over the 7-day period versus +13.5% over 30 days) consistent with Citi's more diversified business model that dilutes the bankruptcy impact.

The legislative timeline: the House must schedule floor debate and passage, followed by conference with the Senate companion bill (S. 3977) or — given identical text — direct passage. The strong committee vote (voice vote with no recorded opposition) and Senate companion already on the calendar suggest passage within 60–90 days. Probability of enactment: 70%+.