Individuals who are considering seeking bankruptcy protection may benefit from the recent increase in the amount of debt you can have and qualify to file for a Chapter 13 Bankruptcy reorganization.
Debtors can only qualify for a Chapter 13 reorganization if their total unsecured and secured debts are less than the limits set in the federal Bankruptcy Code. The bankruptcy code provides for an automatic adjustment to the debt limits every three years to reflect changes in the Consumer Price Index.
The Chapter 13 debt limits increased by approximately 6.2 percent as of April 1, as published by the Judicial Conference of the United States.
As a result of the debt limit increase, more individuals who are self-employed or own a small business and have regular income may qualify for Chapter 13 reorganization of their debts. The advantages of a Chapter 13 petition include being able to protect your home from foreclosure proceedings and adjusting the payment schedules of certain secured debts to lower the payments.
The new limits apply to debts in Chapter 13 petitions submitted after April 1.
If you are considering filing for bankruptcy, our attorneys can meet with you to discuss whether Chapter 13 may be an option for you. We will review your situation for personal and discuss your options.
Changes to the Chapter 13 Debt Limit for 2019
A Chapter 13 bankruptcy allows people to develop a plan to pay all or a portion of their debts over three to five years. However, Chapter 13 bankruptcy has special eligibility requirements:
- Individuals, not businesses, apply for Chapter 13 protection, though it is primarily used by the self-employed.
- The filer must have a steady income.
- The individual’s debt must be within caps set for secured and unsecured debt.
Every three years the debt limits on bankruptcy filings are adjusted according to changes in the Consumer Price Index for All Urban Consumers (CPI-U), as required by Section 104(a) of title 11, United States Code.
For Chapter 13 bankruptcies, the debt limits are divided between unsecured debts and secured debts. If your debts exceed either cap, you cannot file under Chapter 13. There are no debt limits for Chapter 7 or Chapter 11 bankruptcies.
How Much Debt Do You Need to File Chapter 13?
As of April 2019, the adjusted debt limits to qualify for Chapter 13 are:
- $419,275 for a debtor’s noncontingent, liquidated unsecured debts (up from $394,725).
- $1,257,850 for a debtor’s noncontingent, liquidated secured debts (up from $1,184,200).
The new limits reflect a 6.2 percent increase from the caps set in 2016 rounded to the nearest $25.
When Did the Bankruptcy Code Increase Take Place?
The new debt limits apply to bankruptcy filings on or after April 1, 2019.
If you are unsure of the amount of debt you face, the Law Office of Steven J. Hart can help you determine what you owe and discuss options with you.
Options for Debtors Who Exceed Chapter 13 Debt Limits
Each bankruptcy case is unique, but there are certain options that are commonly considered when a prospective filer’s debt exceeds the Chapter 13 limits:
- Chapter 11. Chapter 11 bankruptcy reorganizes a business to pay debts. However, under Chapter 11, the business must sell its assets and the repayment plan must be approved by creditors, which many see as onerous.
- Chapter 20. Under this infrequently used strategy, the debtor lowers his total amount of unsecured debt by first going through a Chapter 7 liquidation. Once he has obtained a “discharge” of unsecured debt, the debtor should be able to meet requirements of Chapter 13 and be able to restructure his remaining debt.
In a Chapter 13 bankruptcy, you work to develop a payment plan that provides for paying unpaid mortgage payments, auto loans, and other debts. It consolidates your debt into a monthly or bi-monthly payment, which is sent to a bankruptcy trustee who distributes payments to creditors.
Chapter 13 also allows you to restructure some loans, such as a car or truck loan, which may help protect co-signers if there are any.
In exchange for a Chapter 13 repayment plan that the bankruptcy court finds acceptable, the debtor is protected from debt collectors during the three (3) to five (5) year length of the court-approved plan.
In the end, the bankruptcy judge who presides over your case will decide what is allowed within the federal bankruptcy code.
Contact The Law Office Of Steven J. Hart
Whatever financial problems you or your business face, take the first step to deal with them by contacting us today for a personal review and a bankruptcy attorney's recommendations. There’s nothing to gain by putting off dealing with your debt issues. The Law Office of Steven J. Hart can work with you to develop a recovery plan and take immediate action to protect you from creditors.
Before filing bankruptcy or beginning the process, you should consult with an experienced Kent County bankruptcy attorney to find out if declaring is right for you. At the Law Office of Steven J. Hart, we strive to help people get their financial independence back while keeping their possessions that matter the most. Attorney Hart and his team are dedicated to providing the highest standards of professional legal counsel in order to put the law on your side and help you through your most difficult financial times.
For a personal consultation, call the Law Office of Steven J. Hart today at 888.701.0919.