As lawmakers return from their August recess, the Senate is set to consider a bipartisan amendment that would temporarily raise debt limits for Chapter 13 bankruptcy filers, according to a published report. The measure, introduced by Senate Judiciary Chair Sen. Chuck Grassley [R-Iowa] and Ranking Member Sen. Dick Durbin [D-Ill.], is attached to the must-pass national defense authorization bill.
Why it matters: The adjustment could expand access to bankruptcy relief for consumers in high-cost states, those carrying large student loans, and small business owners saddled with pandemic-era debt. For the credit and collection industry, it has direct implications for which debts are recoverable and how consumers choose to reorganize or discharge obligations.
Details:
- The proposal replaces existing Chapter 13 debt caps — $1.58 million for secured debt and $526,000 for unsecured debt — with a single $2.75 million ceiling.
- The amendment would be retroactive for cases filed since June 2024, when temporary pandemic-related increases expired.
- Subchapter V small business debt limits would also rise, from about $3 million to $7.5 million.
Between the lines: Attorneys say current thresholds are outdated and block access to relief for wage earners and business owners alike. With inflation and higher housing costs, it’s common for secured debt, particularly mortgages, to exceed $1 million in cities like New York, Los Angeles, and San Francisco. Without Chapter 13 access, debtors often face costlier Chapter 11 filings or Chapter 7 liquidations that force asset forfeiture.
What they’re saying:
- “This bipartisan amendment will restore the ability for families to get much needed relief from unaffordable mortgages, medical debt, and student loans,” Durbin said.
- “Pre-Covid debt limits are obsolete, arbitrary gatekeepers,” said Michelle Bass of Wolfson Bolton Kochis PLLC.
- Opponents, such as Sen. Rand Paul [R-Kent.], argue bankruptcy allows consumers to walk away from obligations they should repay.
The backdrop: Chapter 13 filings are on the rise. Bankruptcy analytics show an average of more than 16,000 filings per month through July 2025, alongside increasing Chapter 7 liquidations amid record credit card balances, resumed student loan payments, and persistently high interest rates.
Zoom out: For the ARM industry, raising the limits could mean more consumers opting for Chapter 13 restructuring rather than outright liquidation. That may extend repayment windows and introduce additional litigation over debt classification, but it also reduces uncertainty over outright charge-offs.
What’s next:
