As Congress reconvenes after the August recess, one major change on the horizon could bring significant relief to consumers and small business owners struggling with overwhelming debt. The U.S. Senate is expected to weigh an amendment that raises the debt limits for Chapter 13 bankruptcy—an adjustment that would open the door for more people to seek meaningful financial reorganization.
What Is Changing?
Currently, Chapter 13 bankruptcy eligibility is capped at $1.58 million for secured debt (like mortgages) and $526,000 for unsecured debt (like credit cards or student loans). The new proposal, introduced by Senator Chuck Grassley (R-Iowa) and Senator Dick Durbin (D-Ill.), would replace these separate limits with a single $2.75 million ceiling.
This change would be retroactive to cases filed after the temporary pandemic-era caps expired in June 2022. That means individuals or families who filed during that gap may now fall back under eligibility.
Why This Matters
Chapter 13 bankruptcy is often the best path for individuals who want to reorganize debts while keeping their homes, cars, or other important assets. But under the current limits, many people—especially those living in high-cost areas like California, New York, or even Miami—are excluded because their mortgage debt alone exceeds the cap.
By raising the debt ceiling, more families burdened by rising housing costs, medical bills, or student loans will be able to access Chapter 13’s protections. Instead of being forced into liquidation under Chapter 7, or an expensive and complex Chapter 11 case, they can create a repayment plan that works with their budget.
As Florida bankruptcy attorney Patrick L. Cordero explains:
“The SBA loans were very popular back in 2021 and 2022, and people owe well over $300,000 to $500,000. Most businesses don’t succeed, especially restaurants and mom-and-pop stores, and they are stuck with a debt they can’t pay.”
This amendment would allow many of those business owners who personally guaranteed loans during the pandemic to finally seek relief.
Avoiding Unnecessary Litigation
Another benefit of the proposal is simplification. Currently, disputes often arise over whether a debt is classified as secured or unsecured, which can derail Chapter 13 cases. By creating a single cap, the law would reduce costly litigation and make the process more accessible to everyday consumers.
Critics and Safeguards
Some opponents argue that raising the limits could invite abuse. But bankruptcy courts already have procedures in place to prevent misuse. If a debtor files improperly, creditors or trustees can object and move to dismiss the case. As experts note, the higher limits won’t create a “free pass” for abuse—just more fairness for honest families trying to get back on track.
What Comes Next?
The amendment is one of hundreds tied to the national defense bill, but its bipartisan sponsorship gives it momentum. If passed, it could provide immediate relief for thousands of families, especially in states like Florida where mortgage balances and SBA loan guarantees are common.
Final Thoughts
If you or your business are struggling with overwhelming debt—whether from a mortgage, student loans, or pandemic-era SBA loans—this proposed change could expand your options.
At The Law Offices of Patrick Cordero, we closely follow these developments to better serve our clients. Our mission is to help families and business owners in Florida protect their homes, assets, and future.
If you have questions about whether Chapter 13 or another form of bankruptcy might be right for you, contact our office today.