What is the Bankruptcy Threshold Adjustment and Technical Corrections Act?

Consumers in the Oak Park area who are considering filing for Chapter 13 bankruptcy but have a significant amount of debt should be relieved to know that President Biden recently signed into law the Bankruptcy Threshold Adjustment and Technical Corrections Act. The bill specifically provides additional protections to small businesses and individuals filing for Chapter 11 or Chapter 13 bankruptcy. While the changes to the law are not permanent, they will provide additional protections to debtors for the next two years. What do you need to know about the newly passed legislation? Our Oak Park consumer bankruptcy attorneys can provide you with more information.

Language of the Bankruptcy Threshold Adjustment and Technical Corrections Act

The Act was introduced by Senator Chuck Grassley in March 2022, and President Biden signed it into law on June 21, 2022. According to the language of the Act, it specifically “modifies provisions related to small business reorganization bankruptcies and wage earner’s bankruptcies.” Here are the ways the Act modifies current bankruptcy law:

Increases the debt amount for which a small business can qualify for Subchapter V bankruptcy under Chapter 11 to $7.5 million for two years, which is an extension provided under the CARES Act (otherwise, the debt limit for Subchapter V had gone down to $3,024,725, limiting a number of small business debtors from being eligible for the more streamlined type of Chapter 11 bankruptcy);
  • Adjusts the debt limit for inflation;
  • Expands the definition of a debtor eligible for Subchapter V to include “an affiliate of certain publicly traded companies”;
  • Authorizes a bankruptcy trustee to operate the debtor’s business if the debtors is no longer a debtor in possession;
  • Increases the debt limit for Chapter 13 bankruptcy, also known as a wage earner’s bankruptcy, to $2.75 million over the next two years; and
  • Allows Chapter 13 debtors to count both secured and unsecured debt together toward the debt limit of $2.75 million.
Why the Act is Important for Chapter 13 Bankruptcy Filers

Why is the new law important for Chapter 13 bankruptcy filers? Without it, individuals would only be eligible for Chapter 13 bankruptcy if their debts were less than $1,184,200 in secured debt and less than $394,725 in unsecured debt. With the amendments to the law, the debt limit for Chapter 13 eligibility is significantly increased, and a debtor does not have to worry about qualifying based on the specific amount of secured versus unsecured debt.

The law will allow more debtors to qualify for Chapter 13 bankruptcy over the next two years, which will also mean that more debtors who file for Chapter 13 bankruptcy will be able to rely on U.S. bankruptcy law to avoid foreclosure and get caught up on mortgage payments to prevent losing their homes.

Contact an Experienced Oak Park Bankruptcy Attorney

If you have questions about filing for Chapter 13 bankruptcy or proving your eligibility for a wage earner’s bankruptcy, one of our experienced Oak Park bankruptcy attorneys can assist you. We have years of experience representing consumers in Chapter 13 cases, and our lawyers are here to help you with your case. Contact the Emerson Law Firm for more information about filing for personal bankruptcy in Illinois.


See Related Blog Posts:

Exceptions to Discharge: Five Things to Know

Digital Assets and Bankruptcy: Things to Consider

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