Bankruptcy Code Chapter 13 Debt Limits
Section 109(e) of the Bankruptcy Code establishes debt limits for a debtor, or married couple, to qualify for relief under Chapter 13 of the Code. As with many monetary amounts in the Bankruptcy Code, the Chapter 13 Debt Limits are adjusted on a regular basis.
Current Chapter 13 Debt Limits
Effective April 1, 2016, and effective for three (3) years, the applicable debt limits for Chapter 13 cases are:
Unsecured debt limit: $394,725
Secured debt limit: $1,184,200
Therefore, to qualify, on the date of the filing of the petition, a debtor (or married couple), must owe no more than the above amounts in non contingent and liquidated debt to qualify for Chapter 13. The amounts will adjust again effective April 1, 2019.
The secured debt limit ($1,184,200) includes the dollar total amount of any debt which is secured by property – personal property or real property. This includes mortgages on any real estate, including the debtor’s residence or rental or commercial properties. It may also include liens on personal property such as automobile loans, furniture loans, boat loans, etc. Federal, state and property tax liens may also be included in the total of secured debt.
Unsecured debt typically involves credit cards, medical debt, personal loans but may also include other obligations. For example, some income tax liabilities or debts owed as a personal guarantor (depending on the status of the payments) may be included in the calculation for the debt limitation total. The calculation may also include “disputed” debts. If a married couple files a Chapter 13 bankruptcy case, the debt is calculated per person but can be counted against both spouses if the debt is owed jointly.
Debtors Exceeding Chapter 13 Debt Limits
If a Debtor (or married couple) exceeds the Chapter 13 debt limits, they do not qualify for relief under a Chapter 13 case and would only be able to seek bankruptcy reorganization relief through an individual (or joint) Chapter 11 Bankruptcy filing. Keep in mind that there are other requirements to qualify for relief under Chapter 13 such as the requirement that the filing debt have “regular income”.
For these and many reasons, those who believe that they may benefit for relief through a Chapter 13 Bankruptcy proceeding should immediately consult with experienced counsel to better understand their rights and responsibilities and give themselves the best opportunity for success.