BANKRUPTCY : CHAPTER 13 DEBT ELIGIBILITY LIMITS
2022 Increases In Filing And Exemption Limits For Bankruptcy Cases – The debt limitations are adjusted every 3 years.
The Judicial Conference of the United States gave notice of the changes going into effect for cases filed after March 31, 2022:
Chapter 13:
Debtors have the option of filing a chapter 13 bankruptcy as long as some qualifications are met.
- 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.
As of April 1, 2022:
Chapter 13 cases are now permitted for individuals with unsecured debts of no more than $465,275 and secured debts of no more than $1,395,875.
This is an increase of more than $25,000, about the same amount of increase announced in 2019 for unsecured debt. Secured debt increased by $138,025 over the Chapter 13 limit previously imposed.
Defining Debt:
The unsecured debt limit usually includes debts owing for:
- credit cards
- medical bills
- pay day loans
- repossessions
- deficiencies from foreclosures
- student loans
- 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
- 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. That may not mean that bankruptcy is completely out of reach, just the chapter 13.