Individuals have several options when filing bankruptcy. Chapter 13 is often preferred for individuals with regular income who wish to keep their homes that have equity and other secured assets. In a Chapter 13 filing, the court will approve the debtor’s three to five-year payment plan, which generally provides for curing any pre-petition delinquency, maintaining payments on secured debt, and a payment to unsecured creditors based on the debtor’s disposable income. The debtor will receive a discharge at the completion of the plan.
As of April 1, you can owe more debt and still qualify for Chapter 13
You may not have heard that if you owe too much to your creditors, you cannot file a Chapter 13 bankruptcy. Part of the reason you may not have heard is that debt limits are high enough that they don’t affect most people. An experienced attorney can guide you.
The Bankruptcy Code sets specific limits on the amount of unsecured and secured debt that you can have and still qualify for a Chapter 13 bankruptcy.
The new debt limits for Chapter 13 are effective for cases filed April 1, 2019 and will control for the next 3 years. The debts limits are as follows:
Unsecured debt = $ 419,275
Secured debt = $1,257,850
Is Debt Secured or Unsecured
An unsecured debt is one that does not have some property or asset serving as collateral for payment of the debt. Common examples include credit card debt, medical and utility bills.
A secured debt is one that has property as collateral. If the debtor defaults or doesn’t pay on a secured loan the lender can take the property. The most common types of secured debt are mortgages on real estate and automobile loans. When a secured lender is not paid, they can foreclose on your home or repossess your vehicle.
The debt limits apply to debts that are liquidated and non-contingent
In determining whether the debt limits are exceeded only noncontingent, liquidated debts are counted. It is therefore important to speak to an attorney competent in Chapter 13 bankruptcy when performing the analysis.
Filing Alternatives to Chapter 13
If you exceed the Chapter 13 debt limits, there are still other bankruptcy options. You may consider filing a Chapter 11 bankruptcy to obtain many of the benefits of Chapter 13 bankruptcy; although there are onerous administrative requirements and high quarterly fees. Some debtors file a “Chapter 20”. Under this strategy, the debtor first files a Chapter 7 to discharge much of his unsecured debts (assuming the debtor meets the Chapter 7 means test). Once the debtor gets the discharge and lowers the total amount of unsecured debt, they can file a Chapter 13 case to restructure the remainder of the debts.
You Need an Attorney to Defend Your Legal Rights
At Levitt & Slafkes, P.C. we appreciate the gravity of these proceedings to your financial future and your life. With over thirty years of experience, we know the law and take pride in getting things right the first time. Let us help you attain some much-needed debt relief. Call our office at (973) 323-2953, or contact us online to schedule an appointment.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years.