Effective April 1, 2016 and valid for all of 2017 and 2018, the debt limits for filing chapter 13 bankruptcy as prescribed by section 109(e) of the Bankruptcy Code are as follows:
Unsecured debt limit: $394,725
Secured debt limit: $1,184,200
These limits adjust every three years and the next chapter 13 debt limit adjustment will occur on April 1, 2019.
The secured debt limit of $1,184,200 includes the total of all debt that is secured by personal and real property owned by the debtor including mortgages secured by real estate (i.e., residential homestead mortgages as well as mortgages on rental or commercial properties, if any) and other collateralized debts such as vehicle loans, equipment loans, etc. The secured limit may also include tax liens.
The unsecured debt limit of $394,725 includes the total of all amounts owed on unsecured lines of credit, credit cards, medial debts and other consumer debts, some taxes owed and even disputed debts in most cases. This unsecured debt limit is calculated per person in the event that a married couple files a joint chapter 13 bankruptcy case.
Any individual that is either employed or self-employed in business is eligible for chapter 13 bankruptcy relief provided the individual’s unsecured debts are within these limits of $394,725 unsecured / $1,184,200 secured.
Individuals who exceed the chapter 13 debt limits still have the option to file under chapter 7 so long as their income qualifies under the means test, or otherwise may file an individual Chapter 11 proceeding, particularly for individuals with income-producing assets such as rental properties, valuable business interests and other property holdings that would be liquidated in chapter 7.
If you exceed the 2016 chapter 13 debt limits, read more about alternatively filing under chapter 11 at What is Individual Chapter 11 Bankruptcy and Why Would I file an Individual Chapter 11?
Attorney Lynn Wartchow advises clients on which form of bankruptcy they qualify for and whether Chapter 7 or Chapter 13 fits their needs best. Contact for a free consultation and more information on all your options available in bankruptcy.