# Plain Language Summary: Bankruptcy Threshold Adjustment and Technical Corrections Act

This bill temporarily raises the debt limits that determine who can file for different types of bankruptcy protection. Right now, if you're an individual trying to reorganize your debts through Chapter 13 bankruptcy (where you pay back creditors through a repayment plan), you can only qualify if you owe less than $1.395 million. This bill increases that limit to $2.75 million, making it possible for people with higher debt levels to use this type of bankruptcy. Similarly, for small business owners filing under Chapter 11 bankruptcy, the bill raises the debt threshold from $2.7 million to $7.5 million, allowing larger small businesses to use streamlined bankruptcy procedures designed for smaller operations.

The bill also makes some practical changes to how bankruptcy cases work. It clarifies that bankruptcy trustees (the officials who oversee your case) can operate your business if you're a small business owner going through bankruptcy. It also gives debtors more flexibility in proving they can pay back their debts—instead of having to show they can definitely make all payments, they can now show there's a reasonable likelihood they'll make payments, as long as the plan includes protections for creditors if payments don't happen.

Here's the catch: these higher debt limits are temporary. They're set to expire two years after the bill becomes law, at which point the old, lower limits would return. The bill also includes some technical fixes to correct errors in previous bankruptcy legislation. Overall, this bill is designed to help people and small businesses with moderate to higher debt loads access bankruptcy protection that was previously only available to those with lower debts, though this expanded access is meant to be a temporary measure.

Bankruptcy Threshold Adjustment and Technical Corrections Act

Rep. Neguse, Joe [D-CO-2]

Bankruptcy Threshold Adjustment and Technical Corrections Act This bill modifies provisions related to small business reorganization bankruptcies and wage earner's bankruptcies. Specifically, the bill extends for two years the increase of the amount of debt allowed to be carried by debtors to qualify for small business reorganization bankruptcy and provides that this debt limit is subject to adjustment for inflation. Additionally, it provides that a small business debtor includes a debtor that is an affiliate of certain publicly traded companies. Further, it authorizes the bankruptcy trustee to operate the business of the debtor if the debtor ceases to be a debtor in possession. The bill also increases for two years the debt limit for individuals filing for bankruptcy under Chapter 13 (i.e., the wage earner's plan) and allows both secured and unsecured debt to count towards this single limit. (Currently, separate limits apply to secured and unsecured debt.)