Quick Answer
On November 10, 2026, the President signed the Bankruptcy Threshold Adjustment Act (H.R. 7730) (White House). For cases filed on or after that date, the enacted text raises the Subchapter V debt limit from $3,424,000 to $7,500,000 and replaces Chapter 13’s separate caps ($526,700 unsecured and $1,580,125 secured) with one combined limit of less than $2,750,000. For business owners who personally guaranteed a bank loan, SBA loan, equipment lease or commercial lease, these changes can open reorganization options that were closed before.
Why Personal Guarantors Were Often Shut Out
When a business fails, the lender usually turns to the owner who signed the personal guarantee, which is typically an unsecured debt. Under the old Chapter 13 rules, unsecured debt had to stay under $526,700, so one guaranty on a mid-sized loan could put an owner over the line. That often left Chapter 7, where non-exempt property may be sold, or a traditional Chapter 11, which can be costly for an individual.
Chapter 13 for Guarantors: One Combined $2.75 Million Limit
Under the new 11 U.S.C. § 109(e), an individual with regular income, or an individual and spouse, may file Chapter 13 if their noncontingent, liquidated debts total less than $2,750,000. Secured and unsecured debts now count together, so a large guaranty no longer disqualifies you on its own.
Chapter 13 is for individuals only, not companies. You repay creditors through a three- to five-year plan supervised by a standing trustee and keep your property, such as your home. It is often the simplest reorganization for a guarantor whose business has closed but who now earns a steady paycheck.
Hypothetical example 1: Guarantor of an SBA loan
Hypothetical, for illustration only. A Cherry Hill contractor guaranteed a $900,000 SBA loan for his company, which has stopped operating, and has a $350,000 home mortgage. The guaranty exceeded the old $526,700 unsecured cap. His total, about $1,250,000, is under $2,750,000, so Chapter 13 may now be available if he has regular income.
Subchapter V (Chapter 11) for Guarantors and Their Businesses: $7.5 Million Limit
Under the new 11 U.S.C. § 1182(1), Subchapter V, a streamlined form of Chapter 11, is available to a person engaged in commercial or business activities, which can include an individual, whose total noncontingent, liquidated debts are not more than $7,500,000, at least 50% from business activities. Debts owed to affiliates or insiders are not counted. Businesses whose main activity is owning single asset real estate, and SEC-reporting companies and their affiliates, are excluded.
For guarantors, Subchapter V matters in two ways. The business itself may reorganize and keep operating, which may reduce what the lender later seeks from you. And an owner whose debts are mostly business debts may be able to file an individual Subchapter V case, even with debts above the Chapter 13 limit. Only the debtor may file a plan, generally within 90 days, and a plan can be confirmed without creditor votes if the legal tests are met.
Hypothetical example 2: Owner with several business debts
Hypothetical, for illustration only. A Philadelphia distributor and its owner face about $5,000,000 in bank, equipment and vendor debt, nearly all business-related. That was above the old $3,424,000 limit. It is now under $7,500,000, so the company, and in some cases the owner individually, may be able to use Subchapter V.
Effective Date and Duration
Both changes apply to cases filed on or after November 10, 2026. The enacted text has no sunset. Similar higher limits were in place temporarily but expired in 2024, according to the Congressional Research Service summary on Congress.gov. The prior limits took effect April 1, 2025 (Federal Register).
What About Chapter 7?
Chapter 7 has no debt limit. A trustee may liquidate non-exempt property, and individuals can receive a discharge of most qualifying debts, including many guaranty debts. The means test applies only to individuals whose debts are primarily consumer debts, so a guarantor with mostly business debt may not face it.
Hypothetical example 3: Florida owner with a guaranteed lease
Hypothetical, for illustration only. A Tampa retailer closed her store but guaranteed the lease and a line of credit. With mostly business debt, Chapter 7 may be worth comparing. If she wants to keep property and repay over time, Chapter 13 or Subchapter V may now fit.
Two cautions. A guaranty generally must be “noncontingent” and “liquidated” to count toward these limits, which may depend on whether the borrower has defaulted. And courts have not all agreed on when an individual guarantor is “engaged in commercial or business activities” for Subchapter V, especially after the business has closed.
Where This Applies: New Jersey, Pennsylvania, Delaware and Florida
The limits are federal, so they apply equally in the District of New Jersey, the Eastern District of Pennsylvania, the District of Delaware and the Southern, Middle and Northern Districts of Florida. What changes from state to state are the property exemptions you may claim and local court procedures. Jenny R. Kasen is admitted in New Jersey, Pennsylvania, Delaware and Florida.
What to Do Next
- Gather the guaranty, the loan documents and any demand letters or lawsuits.
- Make a full list of personal and business debts, and note which are disputed.
- Write down any deadlines, such as a judgment, garnishment, levy or sheriff sale date.
- Do not move or transfer assets before talking with counsel. Transfers made before bankruptcy can be reviewed and sometimes undone.
- Get advice before filing. The new limits apply only to cases filed on or after November 10, 2026.
Frequently Asked Questions
Does a personal guarantee count toward the Chapter 13 debt limit?
Usually, if the guaranty is noncontingent and liquidated. Under the new law, it is added to your other debts and the total must be under $2,750,000.
Can an individual guarantor file Subchapter V?
Sometimes. Subchapter V is open to a person engaged in commercial or business activities, which can include individuals, if at least half of the debt arose from business activities and total debt is not more than $7,500,000. Courts differ on how this applies to guarantors whose businesses have closed.
Should a guarantor choose Chapter 13 or Subchapter V?
It depends. Chapter 13 is often simpler for an individual with regular income and total debts under $2,750,000. Subchapter V can fit a business, or an owner still engaged in business, with mostly business debt up to $7,500,000.
Do I need to pass the means test in Chapter 7 if my debt is from a business guaranty?
The means test applies to individuals whose debts are primarily consumer debts. If most of your debt is business debt, such as a guaranty, the means test may not apply.
When do the new bankruptcy debt limits take effect, and do they expire?
They apply to cases filed on or after November 10, 2026, the date the President signed H.R. 7730. The enacted text does not include an expiration date.
Will filing bankruptcy stop a lender’s lawsuit on my guaranty?
Filing generally triggers the automatic stay, which pauses most lawsuits and collection against you. Whether it protects others, such as co-guarantors, depends on the chapter and the facts.
Schedule a Consultation
If you signed a personal guarantee and your business is struggling, and you want to know whether Chapter 13 or Subchapter V now fits, call (856) 880-1010, email Hello@BankruptcyAttorney.co, or use our contact page to schedule a consultation. Our office is at 1236 Brace Rd, Suite B2, Cherry Hill, NJ 08034, and we represent clients in New Jersey, Pennsylvania, Delaware and Florida.
Sources
- The White House, Congressional Bills H.R. 997, H.R. 1703, H.R. 1945, and H.R. 7730 Signed into Law (Nov. 10, 2026)
- S. Government Publishing Office, H.R. 7730 Enrolled Bill text
- gov, H.R. 7730, Bankruptcy Threshold Adjustment Act
- Federal Register, Revision of Certain Dollar Amounts in the Bankruptcy Code (effective April 1, 2025)
- S. Trustee Program, Means Testing and Subchapter V
Disclaimer
ATTORNEY ADVERTISING. This article is for informational purposes and is not legal advice. Reading it or contacting us does not create an attorney-client relationship. Every situation is different, and the outcome of any matter depends on its own facts. Bankruptcy Attorney Co. is a trade name of Kasen Law Group, P.C. Jenny R. Kasen, Esquire, Cherry Hill, New Jersey, is responsible for this content and is admitted in New Jersey, Pennsylvania, Delaware and Florida. Jenny R. Kasen is Certified by the American Board of Certification, an organization accredited by the American Bar Association. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.