Bankruptcy Threshold Adjustment Act of 2026

Legislative bill overview

HR 7730 adjusts the income thresholds used in bankruptcy law to determine eligibility for Chapter 7 liquidation versus Chapter 13 reorganization bankruptcy. The bill updates these "means test" thresholds, which determine whether filers can discharge debts or must repay them through a court-supervised plan, based on current economic conditions and inflation.

Why is this important

Bankruptcy thresholds directly affect millions of Americans facing financial hardship by determining access to debt relief. When thresholds aren't adjusted for inflation, they become less relevant to actual household finances, potentially forcing lower-income filers into repayment plans they cannot afford or preventing legitimate Chapter 7 filers from accessing fresh starts. This adjustment ensures the bankruptcy code reflects modern living costs.

Potential points of contention

• Impact on creditors: Expanding Chapter 7 access reduces creditor recovery rates, which financial institutions typically oppose as it increases their losses from consumer debt
• Eligibility scope: Disagreement over how much adjustment is appropriate—higher thresholds help more debtors but reduce creditor protections and court-supervised oversight
• Inflation measurement methodology: Debate over which inflation index to use (CPI, regional variations, etc.) and how frequently thresholds should automatically adjust