Subcommittee Ranking Member Nadler’s Opening Statement at Hearing on Providing Affordable Relief for Small Businesses and Working Families
Washington, D.C. (July 15, 2025)—Today, Rep. Jerrold Nadler, Ranking Member of the Subcommittee on the Administrative State, Regulatory Reform, and Antitrust, delivered opening remarks at a hearing on why extending the debt limits for subchapter V and Chapter 13 bankruptcy is essential to providing access to timely, affordable relief for small businesses and working families.
Below are Ranking Member Nadler’s remarks, as prepared for delivery, at today’s hearing.
WATCH Subcommittee Ranking Member Nadler’s opening statement.
Ranking Member Jerrold Nadler
Subcommittee on the Administrative State, Regulatory Reform, and Antitrust
Hearing on “Bankruptcy Law: Overview and Legislative Reforms”
July 15, 2025
Thank you, Mr. Chairman, for holding this bipartisan hearing. Thank you as well to our distinguished panel of witnesses for contributing their time and expertise to assist the Committee in its efforts to streamline and improve our bankruptcy system.
I am pleased that we have come together in a bipartisan fashion today to consider a variety of proposals to make our bankruptcy system more accessible to individuals and businesses in financial distress. These reforms can ensure that the Bankruptcy Code is more efficient and beneficial for debtors and creditors alike and will help businesses—especially small businesses—restructure in the face of potential financial disaster.
One important issue that our hearing will touch on is increasing the debt limit under Subchapter V of Chapter 11 of the Bankruptcy Code. In 2020, eligibility for Subchapter V bankruptcy treatment was temporarily increased to $7.5 million from approximately $3 million, allowing a significantly greater number of businesses to access relief under this part of the code, which generally provides debtors an efficient and successful restructuring plan. Unfortunately, this provision was allowed to lapse in June of 2024.
Data shows that the debt limit increase was a clear success: while it was in effect, Subchapter V cases had double the plan confirmation rate and a 20% lower dismissal rate in relation to non-Subchapter V Chapter 11 cases. This means that small businesses were able to keep their doors open and their employees on staff while ensuring that their creditors were fairly compensated. I hope that we can work together to reinstate this important provision.
Congress similarly passed a temporary debt limit increase for Chapter 13 filings, allowing for combined unsecured and secured debt of $2.75 million. Chapter 13 bankruptcy is the best path for many filers because it is less expensive and more efficient than pursuing relief under Chapter 11. Unfortunately, although this provision proved to be successful, it also expired last year and has not been renewed. Now, debtors must meet significantly lower levels of both unsecured and secured debt, leaving many people without access to the courts and needed relief.
Resurrecting the higher Chapter 13 debt limit would serve individuals and families with regular income who are facing higher housing prices, medical costs, and other debts that present significant financial hardship yet put them over the current debt limit.
In addition to facing higher prices, Americans are also facing mountains of student loan debt. Under the Bankruptcy Code, however—unlike nearly every other unsecured debt, such as credit cards or auto loans—it is nearly impossible to discharge student loans, leaving millions of Americans deeply in debt, with little hope of ever regaining financial security.
Nearly 43 million Americans have federal student loan debt, with the total federal student loan portfolio exceeding 1.6 trillion dollars. Under current law, educational debt can only be discharged in bankruptcy if the borrower demonstrates that continued repayment of the debt would impose an “undue hardship” on the debtor and the debtor’s dependents. In practice, this standard has proven a nearly impossible hurdle to overcome in the courts. There is no reason that this one category of debt should be singled out for special treatment that makes relief under the Bankruptcy Code virtually impossible. It is long past time to repeal the current limitation on educational debt and to place it on the same footing as other similar debt.
While the picture of student loan debtors is traditionally of young, recent college graduates, the reality is that a significant population of student loan debtors are older Americans whose wages and Social Security checks are being garnished towards loans that they will never be able to repay. Student loan bankruptcy reform, therefore, would benefit a wide swath of Americans, including the most vulnerable borrowers in our society who have no prospect of being able to repay their debts incurred decades ago.
Finally, we will consider reforms to compensation of attorneys and trustees in Chapter 7 cases, which would expand access to justice for low-income debtors. Chapter 7 is a critical lifeline for low-income individuals in the most severe financial distress, offering the most direct and immediate path to a fresh start. It eliminates unsecured debts without the burden of a multi-year repayment plan, and its streamlined structure makes it the only viable option for many households facing wage garnishment, utility shutoffs, or eviction.
Yet the current framework makes it exceedingly difficult for those same individuals to access legal counsel.
Chapter 7 debtors with attorneys are nine times more likely to obtain a discharge than those without representation. As a result of a clerical error in the law, however, attorneys representing Chapter 7 debtors are generally ineligible for compensation from the bankruptcy estate unless formally retained by the trustee.
Therefore, most debtors seeking a Chapter 7 pathway have to pay for their representation up front and in full despite them being insolvent, which either pushes them to the less efficient Chapter 13 or forces them to continue without representation. I hope that our witnesses will help us examine solutions to this problem.
A similar access to justice issue arises with respect to trustee compensation.
Under current law, trustees appointed by the courts to administer a Chapter 7 bankruptcy are paid just $60 per case. Additional compensation comes only when the case involves liquidation of assets, which happens only rarely in Chapter 7 cases.
A fee of only $60 is clearly inadequate to compensate trustees for a role that requires them to review filings, conduct meetings with creditors, and identify potential circumstances of abuse or fraud. This results in experienced trustees not being able to afford to take on no-asset cases or being unwilling to invest their time in complex cases that would require their knowledge and expertise. We must work to increase this fee to ensure that debtors have the assistance they need to navigate the complicated world of bankruptcy proceedings.
Today’s hearing is an opportunity to discuss bipartisan paths forward to increasing access and opportunity provided to Americans under the bankruptcy system.
I thank the Chairman for holding this important hearing, I look forward to the testimony from our distinguished panel of witnesses, and I yield back the balance of my time.