Debtors have the option of filing a chapter 13 bankruptcy as long as some qualifications are met. One of those qualifications is the debtor’s secured and unsecured debt amounts cannot exceed the limits set for a chapter 13. A chapter 13 is a repayment plan that allows debtors to make monthly payments to the assigned trustee. Many debtors file a chapter 13 as a way to keep their house, if they are behind on payments; pay off tax debt; or bring a car loan current. In some circumstances, a chapter 13 may have its advantages over a chapter 7 as long as a debtor does not exceed the debt limits.
The current debt limits for a chapter 13 became effective April 1, 2013. The debt limits are adjusted every three years by the Judicial Conference of the United States. The next adjustment will become effective April 1, 2016. The current debt limits for noncontingent, liquidated, unsecured debts is $383,175.00 and for noncontingent, liquidated, secured debts is $1,149,525.00.
The unsecured debt limit usually includes debts owing for credit cards, medical bills, pay day loans, repossessions, deficiencies from foreclosures, student loans, and any other debt not secured by property. The secured debt limit usually includes debts owing for mortgages, vehicle loans, tax debt secured by a lien, title loans, or any other debt that is secured by property. Some debt may not be categorized as easily as others due to how noncontingent and liquidated are defined by the courts.
Noncontingent debt is owed at present without any contingent acts needing to occur first. A contingent debt is contingent on a future event. An example of a contingent debt is when a debtor is being sued for injuries caused in a car accident and the court has not awarded an amount for personal injuries. The triggering event is whether the debtor is found liable in the court case. A liquidated debt is a debt where the amount is known or easily calculated. An example of an unliquidated debt is the possible debt you may owe your personal injury attorney for taking your case on a contingency fee. You will not know the exact amount you owe your attorney until the amount of your award is determined. Some debts can be difficult to categorize and should be discussed with an attorney.
If a debtor exceeds either the debt limits for secured or unsecured, the debtor will be ineligible to file a chapter 13. Depending on the debtor’s situation there my still be options available to the debtor under the bankruptcy code. If a Kansas or Missouri debtor believes they are over the debt limits and would like to see what bankruptcy options are available they should contact a Kansas City bankruptcy attorney to discuss their options. Please feel free to contact our office to schedule a free, initial bankruptcy consultation by telephone or email.