Chapter 13 Debt Limit Change Will Impact Eligibility
The debt limit for Chapter 13 bankruptcy cases is soon set to change, and it could limit the number of individual debtors who are eligible to file for Chapter 13 bankruptcy. In short, the debt threshold is currently at $2,750,000 (or $2.75 million) of combined secured and unsecured debt. However, unless Congress takes action, that debt ceiling will revert to a lower debt limit, and one in which there are separate debt limits on secured and unsecured debt. As such, if you have been planning to file for Chapter 13 bankruptcy and have been assuming your eligibility to do so based on the $2.75 million threshold, it is essential to speak with a West Palm Beach bankruptcy attorney as soon as possible. In the meantime, we can provide you with more information about the impending change set to impact the Chapter 13 bankruptcy debt threshold.
Chapter 13 Bankruptcy Has a Debt Threshold
For individuals, Chapter 13 bankruptcy is one of the most common types of bankruptcy to file. It allows debtors to stop a foreclosure and to remain in their home while catching up on their mortgage, and to reorganize other debts over a period of three to five years without having to have any assets liquidated. However, in order to be eligible for Chapter 13 bankruptcy, which is also known as a wage earner’s bankruptcy, you must have debt below a certain threshold.
The passage of certain pandemic-related assistance laws, and the 2022 Bankruptcy Threshold and Technical Corrections Act, extended the Chapter 13 bankruptcy threshold to $2.75 million in combined debt. To be clear, under the extended debt ceiling provision, as long as your combined secured and unsecured debts are below $2.75 million, you can be eligible for Chapter 13 bankruptcy. However, that provision is only good through June 21, 2024. After that date, the debt threshold will change.
Changes to the Chapter 13 Bankruptcy Debt Threshold
After June 21, 2024, you will only be eligible for Chapter 13 bankruptcy if you have debts below the following amounts:
- $465,275 in unsecured debt; and
- $1,395,875 in secured debt.
Up through June 21, 2024 — assuming Congress does not act to extend the Chapter 13 debt threshold — you will still be able to file for Chapter 13 bankruptcy with combined secured and unsecured debts under $2.75 million. Otherwise, you may be ineligible for Chapter 13 bankruptcy and will need to consider a Chapter 11 filing instead.
Contact a West Palm Beach Bankruptcy Lawyer Today
If you have concerns about Chapter 13 eligibility once the debt threshold reverts due to a higher amount of secured or unsecured debt, or amounts of both types of debt above what will be the new limits, we can discuss your options for filing your Chapter 13 bankruptcy petition before the provision sunsets. We also want to ensure that you know, even if you are not eligible for Chapter 13 bankruptcy due to the amount of debt you are carrying, you can still file for reorganization bankruptcy under Chapter 11. Although Chapter 11 cases are more complex than Chapter 13 cases, our firm is here to assist you.
For an individual debtor who is considering a Chapter 13 bankruptcy filing, it is essential to seek advice from one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller, PLLC. Contact us today for more information.
Sources:
nysb.uscourts.gov/news/bankruptcy-threshold-adjustment-technical-corrections-act-raises-debt-limit-subchapter-v-and
congress.gov/bill/117th-congress/senate-bill/3823
