Debt Limits Revert in Chapter 13 and Subchapter V Bankruptcies

Have you been considering the possibility of a Chapter 13 bankruptcy filing, or a Subchapter V filing for your business? While these types of bankruptcy are quite different from one another aside from both being types of reorganization bankruptcy, they have one important and recent thing in common: the debt limits, or debt ceilings, for both types of bankruptcy recently became much lower after the sunsetting of a law that had raised those debt ceilings for the last couple of years. Accordingly, debtors who want to file for Chapter 13 bankruptcy or Subchapter V bankruptcy will need to be sure that they meet the debt requirements. A West Palm Beach bankruptcy attorney at our firm can tell you more.

Federal Law Sunsets without Action from Congress 

In June 2022, Congress passed the Bankruptcy Threshold Adjustment and Technical Corrections Act, which raised the debt ceiling for Chapter individual bankruptcy filings and Subchapter V small business bankruptcy filings. The increased debt ceiling was extended by Congress, but the provisions that maintained those higher debt ceilings ended in June 2024.

Under the increased debt ceilings, individual debtors could file for Chapter 13 bankruptcy with combined secured and unsecured debt of less than $2,750,000. Businesses could file for Subchapter V with total debts of less than $7,500,000. However, those debt ceilings no longer apply, and debtors will need to meet lower debt requirements to qualify for these types of bankruptcy.

Chapter 13 Bankruptcy New Debt Limit 

To file for Chapter 13 bankruptcy, you must have unsecured debts of less than $465,275 and secured debts of less than $1,395,875.

Subchapter V Bankruptcy New Debt Limit 

To file for Subchapter V bankruptcy, your business must have debts totaling less than $3,024,725.

Traditional Chapter 11 Filings When Your Debt is Too High 

What are your options in either of the above types of bankruptcy cases if you now have too much debt to qualify? In short, you will likely file for a traditional Chapter 11 bankruptcy case instead. Traditional Chapter 11 cases are also reorganization cases, but they are more complex and costly than either Chapter 13 cases for individuals or Subchapter V cases for small businesses, thus debtors tend to prefer the latter when they qualify.

Could Congress Act? 

There is some possibility that Congress could act to permanently change one or both of the debt limits in Chapter 13 and Subchapter V cases. However, any individual or business planning to file for bankruptcy presently will need to meet the requirements associated with the lower debt ceiling.

Contact Our West Palm Beach Bankruptcy Lawyers Today 

If you have any questions about filing for a type of reorganization bankruptcy as an individual or a business owner, you should get in touch with one of our experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller to discuss the details of your case. We can determine your eligibility for a more streamlined type of reorganization bankruptcy like Chapter 13 or Subchapter V, and no matter what type of bankruptcy you ultimately file, we can represent you throughout your case. Contact us today for more information.

Sources:

congress.gov/bill/117th-congress/senate-bill/3823

law.cornell.edu/uscode/text/11