Chapter 13 Debt Limits Increase
Are you thinking about filing for Chapter 13 bankruptcy? You may know that Chapter 13 bankruptcy is one of two common types of bankruptcy for individuals or consumers, and it is a form of reorganization bankruptcy. What that means is that none of your assets will be liquidated in the bankruptcy process. Rather, Chapter 13 bankruptcy will allow you to reorganize your debts. If you want to file for Chapter 13 bankruptcy, one of the eligibility requirements involves showing that you do not have more debt than is permitted for this type of bankruptcy. In terms of Chapter 13 debt limits, there is good news for potential filers with a significant amount of debt: a recent change to the law means that the Chapter 13 debt limits have increased for at least two years, and that increase could be extended into the future.
What should you know about Chapter 13 bankruptcy and the increase in debt limits? Consider the following information from our Oak Park bankruptcy lawyers.
What is Chapter 13 Bankruptcy?
The process of reorganization occurs through a bankruptcy repayment plan through which debtors outline a monthly amount that they will pay each month for a period of anywhere from three to five years. The amount of money that is repaid in total at the end of the repayment period will depend on the debtor’s priority debts, as well as the total amount of debt and exemptions.
One of the reasons that Chapter 13 bankruptcy is particularly popular is that it allows debtors to get caught up on delinquent debts. For debtors who are behind on mortgage payments, Chapter 13 bankruptcy can allow them to reorganize debts and catch up on mortgage payments, ultimately becoming current on their mortgage. In this way, Chapter 13 allows debtors to avoid foreclosure and to remain in their homes. This aspect of Chapter 13 bankruptcy can also allow debtors to catch up on car payments, for example, and to avoid repossession of their vehicle.
It is also important to know that Chapter 13 bankruptcy is only for consumers, but there is a catch with sole proprietors who own small businesses. Because of the way sole proprietorships are structured, there is no difference between the individual business owner and the business. Accordingly, a sole proprietor who is struggling with business debt may be eligible to file for Chapter 13 bankruptcy. The increase in debt limits could be particularly helpful to small business owners of sole proprietorships who owe a significant amount of debt.
Increase in Chapter 13 Bankruptcy Limits
Until recently, Chapter 13 bankruptcy was limited to debtors who owed less than a specific amount of secured debt and less than a specific amount of unsecured debt. Those limits were: $465,275 in unsecured debt and $1,395,875 in secured debt, and those amounts were set to stay good through March 31, 2025. However, Congress recently passed the Bankruptcy Threshold Adjustment and Technical Corrections Act. That law makes changes to both Chapter 11 and Chapter 13 bankruptcy filings.
For Chapter 13, the law “increases for two years the debt limit for individuals filing for bankruptcy under Chapter 13 (i.e., the wage earner’s plan) and allows both secured and unsecured debt to count towards this single limit.” The total limit now, since President Biden signed the law and it took effect, is $2,750,000. The law could be extended beyond the two-year time window, as well. If it is not, the previous debt limits would again apply.
Contact a Chapter 13 Bankruptcy Lawyer in Oak Park
If you are considering Chapter 13 bankruptcy, one of our Oak Park bankruptcy attorneys can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Is Now the Right Time to File for Consumer Bankruptcy?
Can I Stop Debt Collectors From Texting Me?
What should you know about Chapter 13 bankruptcy and the increase in debt limits? Consider the following information from our Oak Park bankruptcy lawyers.
What is Chapter 13 Bankruptcy?
The process of reorganization occurs through a bankruptcy repayment plan through which debtors outline a monthly amount that they will pay each month for a period of anywhere from three to five years. The amount of money that is repaid in total at the end of the repayment period will depend on the debtor’s priority debts, as well as the total amount of debt and exemptions.
One of the reasons that Chapter 13 bankruptcy is particularly popular is that it allows debtors to get caught up on delinquent debts. For debtors who are behind on mortgage payments, Chapter 13 bankruptcy can allow them to reorganize debts and catch up on mortgage payments, ultimately becoming current on their mortgage. In this way, Chapter 13 allows debtors to avoid foreclosure and to remain in their homes. This aspect of Chapter 13 bankruptcy can also allow debtors to catch up on car payments, for example, and to avoid repossession of their vehicle.
It is also important to know that Chapter 13 bankruptcy is only for consumers, but there is a catch with sole proprietors who own small businesses. Because of the way sole proprietorships are structured, there is no difference between the individual business owner and the business. Accordingly, a sole proprietor who is struggling with business debt may be eligible to file for Chapter 13 bankruptcy. The increase in debt limits could be particularly helpful to small business owners of sole proprietorships who owe a significant amount of debt.
Increase in Chapter 13 Bankruptcy Limits
Until recently, Chapter 13 bankruptcy was limited to debtors who owed less than a specific amount of secured debt and less than a specific amount of unsecured debt. Those limits were: $465,275 in unsecured debt and $1,395,875 in secured debt, and those amounts were set to stay good through March 31, 2025. However, Congress recently passed the Bankruptcy Threshold Adjustment and Technical Corrections Act. That law makes changes to both Chapter 11 and Chapter 13 bankruptcy filings.
For Chapter 13, the law “increases for two years the debt limit for individuals filing for bankruptcy under Chapter 13 (i.e., the wage earner’s plan) and allows both secured and unsecured debt to count towards this single limit.” The total limit now, since President Biden signed the law and it took effect, is $2,750,000. The law could be extended beyond the two-year time window, as well. If it is not, the previous debt limits would again apply.
Contact a Chapter 13 Bankruptcy Lawyer in Oak Park
If you are considering Chapter 13 bankruptcy, one of our Oak Park bankruptcy attorneys can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Is Now the Right Time to File for Consumer Bankruptcy?
Can I Stop Debt Collectors From Texting Me?
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