H.R. 7730: Making COVID-Era Bankruptcy Limits Permanent

Bankruptcy case debt limits were temporarily expanded during the COVID-19 pandemic. Those higher limits eventually expired, but H.R. 7730 (the Bankruptcy Threshold Adjustment Act) aims to bring them back—and make them permanent.

Here is what the bill proposes and why it matters for filers and creditors alike:

What the Bill Does

• • • Chapter 13 (Individuals & Families): Permanently raises the debt ceiling to an aggregate $2.75 million (applying to both individuals and married couples). It also removes the old, restrictive two-part test that required separate limits for secured and unsecured debts. (Under standard prepandemic law, unsecured debt had to be under $526,700 and secured debt under $1,580,125).

    • Subchapter V (Small Business Reorganization): Permanently raises the small business reorganization debt ceiling from about $3.42 million to $7.5 million in total secured and unsecured debts.

    • Permanent Status: Unlike the temporary COVID-19 relief provisions that phased out between 2020 and 2024, H.R. 7730 has no sunset date and will apply to all cases commenced on or after enactment.

Why It Matters

• • • The Case for the Bill: Supporters—including major organizations like the American Bankruptcy Institute and NACBA—argue that this change is long overdue. It expands access to reorganization, particularly in high-cost housing markets where soaring home values and a single primary mortgage could easily push a filer past the old secured debt cap.

    • The Criticisms: Critics point out potential downsides, including a rise in moral hazard and reduced overall recoveries for unsecured creditors.

The Bottom Line

If enacted, H.R. 7730 permanently restores the higher thresholds temporarily seen during the pandemic. It streamlines Chapter 13 into a single $2.75 million aggregate limit and keeps small business reorganization limits at $7.5 million, giving more filers a realistic path to financial recovery.