Washington, Nov 12 (SocialNews.XYZ) More American small businesses and individuals can seek bankruptcy reorganisation under a law that permanently raises debt eligibility limits, senators said on Thursday, two days after President Donald Trump signed the measure.
The Bankruptcy Threshold Adjustment Act restores a $7.5 million debt ceiling for eligible small businesses under Chapter 11. It establishes a single combined debt limit of less than $2.75 million for individuals seeking Chapter 13 protection.
Trump signed the legislation, H.R. 7730, on November 10, according to the White House. The changes apply to bankruptcy cases commenced on or after that date.
Senate Judiciary Committee Chairman Chuck Grassley, a Republican from Iowa, and ranking Democrat Dick Durbin of Illinois welcomed the enactment in a statement issued on Thursday.
“The Bankruptcy Threshold Adjustment Act is now the law of the land, ensuring our nation’s bankruptcy code works for Americans, not against them,” Grassley said.
“By restoring modern debt limits and eliminating barriers to reorganisation, this bipartisan bill provides American small businesses and families the tools they need to regain their financial footing.”
The measure expands eligibility for existing bankruptcy procedures. Its operative provisions change debt thresholds rather than authorise grants or direct financial assistance.
For small businesses, the $7.5 million ceiling covers qualifying secured and unsecured debts, excluding amounts owed to affiliates or insiders. At least half of the qualifying debt must have arisen from commercial or business activities.
Other restrictions remain. The legislation excludes businesses primarily engaged in owning single-asset real estate, certain corporations subject to securities-reporting requirements and their affiliates. It also applies an aggregate debt ceiling to groups of affiliated debtors.
For Chapter 13, the law combines secured and unsecured obligations into one eligibility limit. Individuals must have regular income and meet the other requirements set out in the bankruptcy code.
The National Association of Consumer Bankruptcy Attorneys said the previous Chapter 13 rules imposed separate ceilings of $526,700 for unsecured debt and $1,580,125 for secured debt. Exceeding either ceiling could prevent a person from qualifying under the debt-limit test.
“Bankruptcy is often a painful last resort for small business owners,” Durbin said. “This bill restores a quicker and cheaper pathway for entrepreneurs to settle debts, keep the lights on, and keep serving their neighbours.”
“It also expands eligibility for Chapter 13 bankruptcy to help more families manage rising costs, stay in their homes, and get back on their feet.”
Durbin said he welcomed the president’s signature following passage in both chambers. The House approved H.R. 7730 on September 16, and the Senate passed it on September 28, according to the congressional legislative history. It was presented to the president on November 5.
Source: IANS
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