The U.S. Senate this week passed a bill to restore, permanently, a Subchapter V debt eligibility threshold raised during the pandemic, which bankruptcy practitioners say would open up the streamlined Chapter 11 process to more small and medium-sized businesses at an economically critical time.

The Bankruptcy Threshold Adjustment Act of 2026 would reimplement a $7.5 million cap on debts held by small businesses seeking to file for bankruptcy under Subchapter V of the Bankruptcy Code. Subchapter V is currently restricted to businesses with $3.4 million or less in debt after Congress let a higher debt threshold lapse more than two years ago.

The legislation comes amid an across-the-board rise in bankruptcy filings as the expiration of pandemic-era relief programs collides with persistent inflation and high interest rates hitting both consumers and businesses. Subchapter V filings have outpaced the overall uptick, as small businesses have also contended with tariff costs and higher fuel prices driven by geopolitical turmoil.

Bankruptcy practitioners told Law360 that legislation is needed to fulfill Subchapter V’s original purpose: making reorganization feasible for small businesses that cannot afford or are not able to confirm a traditional Chapter 11 plan.

“If the idea was to allow small to medium-sized businesses access to an efficient bankruptcy process, the debt limit should have never been allowed to sunset,” said Daniel Gielchinsky, a partner at Florida-based business law firm DGIM Law PLLC.