Chapter 13 Debt Limit Increase
Chapter 13 bankruptcy, often referred to as a wage earner’s plan, allows individuals with regular income to develop a plan to repay all or part of their debts. It is designed to restructure debt in a way that is manageable for the debtor, under the guidance and protection of the bankruptcy court.
The nuances of Chapter 13 bankruptcy just became a bit more approachable, thanks to the recent increase in debt limits outlined in the Threshold Adjustment and Technical Correction Act. This significant change not only alters the landscape for potential filers but also underscores the importance of having an experienced Brooklyn bankruptcy attorney by your side.
Chapter 13 Debt Limit
A Chapter 13 debt limit refers to the maximum amount of debt an individual can have to be eligible to file for Chapter 13 bankruptcy. Chapter 13, often known as a wage earner’s plan, allows individuals with a regular income to develop a plan to repay all or part of their debts under the supervision and approval of the bankruptcy court. These debt limits are categorized as secured debts and unsecured debts.
The significance of these debt limits lies in their role as a qualifying criterion for Chapter 13 bankruptcy. If an individual’s total debt exceeds these limits, they are not eligible for Chapter 13 and might have to consider Chapter 11 bankruptcy or other debt-relief options. This makes understanding the current debt limits crucial for anyone considering Chapter 13 bankruptcy as a solution to their financial difficulties.
Chapter 13 Debt Limit Before
Before the recent legislative changes, the debt limits for Chapter 13 bankruptcy were $419,275 for non-contingent, liquidated, unsecured debts and $1,257,850 for non-contingent liquidated secured debts.
These thresholds, despite being adjusted for inflation over time, did not adequately reflect the increasing debt burdens that have become more common in today’s economic environment.
New Chapter 13 Debt Limit
The impact of the Chapter 13 debt limit increase is monumental, representing a significant shift in bankruptcy law. The debt limit threshold for Chapter 13 was a notable barrier in the past, effectively excluding a broad segment of debtors.
The Bankruptcy Threshold Adjustment and Technical Corrections Act has ushered in a new era for Chapter 13 filers. The act significantly increased the debt limit threshold, allowing more individuals to qualify for this type of bankruptcy relief. The new debt limits stand at $2,750,000, a consolidation of both secured and unsecured debts, offering a more inclusive bracket for debtors.
Individuals with debt levels exceeding the previous limits found themselves in a precarious position. They were often compelled to file under Chapter 11 bankruptcy, which is more expensive, or, in some cases, they were left without any feasible bankruptcy option at all. This situation was particularly challenging for those whose debts were marginally above the limit, as they faced the dilemma of being too indebted for Chapter 13 but not ideally suited for other bankruptcy options.
Increased Debt Limit for Chapter 13 Expires Soon
This increase in the debt limit threshold is a game-changer. It means that more individuals, particularly those with higher levels of debt, can now seek the protection and relief offered by Chapter 13 bankruptcy. However, this increase will soon expire on June 21, 2024 – either be extended or modified afterward.
As bankruptcy lawyers in Brooklyn, NY, Ursulova Law Offices is poised to assist clients in navigating these new waters. Our experience in handling the complexities of bankruptcy law becomes even more crucial with these changes.
Contact us today and let us help you ensure that the process is as seamless and beneficial as possible for your Chapter 13 filing.
