The Chapter 13 debt limits that govern bankruptcy eligibility in 2026 represent a critical threshold for individuals seeking debt reorganization relief. As we enter the new year, understanding both the current limits and potential legislative changes is essential for anyone considering bankruptcy protection.
Current Debt Limits for 2026
Under Section 109(e) of the Bankruptcy Code, individuals seeking Chapter 13 bankruptcy relief must meet specific debt requirements. As of April 1, 2025, and continuing through March 31, 2028, the Chapter 13 debt limits are:
Secured debt limit: $1,580,125
Unsecured debt limit: $526,700
These limits reflect a 13.2% increase from the previous period, which had established secured debt at $1,395,875 and unsecured debt at $465,275. The adjustment, mandated by Section 104 of the Bankruptcy Code, accounts for inflation measured by the Consumer Price Index for All Urban Consumers.
Critically, these are separate limits rather than combined thresholds. A debtor’s secured debts cannot exceed $1,580,125, and their unsecured debts cannot exceed $526,700. If either category exceeds its respective limit, the individual is ineligible for Chapter 13 bankruptcy, regardless of how much room exists under the other category.
What Qualifies as Secured and Unsecured Debt
Secured debt includes any debt backed by collateral, such as mortgages on real estate, car loans, and liens against personal property including equipment, electronics, or jewelry. These debts give creditors the right to repossess or foreclose on the collateral if payments are not made.
Unsecured debt encompasses obligations not secured by collateral, including credit card balances, medical bills, personal loans, lines of credit, and certain tax obligations. Only noncontingent and liquidated debts count toward the eligibility limits, meaning contingent and unliquidated debts must be excluded from the Section 109(e) analysis.
The Importance of Separate Limits
The current dual-limit structure poses particular challenges for debtors in high-cost areas like New Jersey, where property values and housing costs significantly exceed national averages. A homeowner with a substantial mortgage, even with minimal unsecured debt, may find themselves over the secured debt limit. Similarly, individuals with large student loan balances, medical bills, or personally guaranteed business loans can easily exceed the unsecured debt threshold.
This represents a dramatic change from the temporary pandemic-era relief measures. From June 21, 2022 through June 21, 2024, Chapter 13 operated under a combined debt ceiling of $2,750,000 with no distinction between secured and unsecured debt. That unified approach, enacted through the Bankruptcy Threshold Adjustment and Technical Corrections Act, expired when Congress allowed the temporary increase to sunset.
Pending Legislative Changes
There is significant bipartisan momentum in Congress to restore the higher, unified debt limit. Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Illinois) introduced Senate Amendment 3382 to the National Defense Authorization Act for Fiscal Year 2026. The proposed amendment would:
- Reinstate a single combined debt limit of $2,750,000 for Chapter 13 bankruptcy
- Eliminate the distinction between secured and unsecured debt
- Apply retroactively to cases filed after June 21, 2024, when the previous increase expired
- Extend for an additional two years through June 21, 2027
As of early January 2026, the amendment received strong support from bankruptcy professionals and industry organizations, including the American College of Bankruptcy and the Commercial Law League of America. However, the provision was not included in the final version of the FY 2026 NDAA that was signed into law in December 2025.
Why the Change Matters
Bankruptcy practitioners and advocacy groups argue that the current limits are “obsolete, arbitrary gatekeepers” that prevent deserving individuals from accessing Chapter 13 relief. The proposed increase would provide several key benefits:
Expanded Access: More individuals with significant secured or unsecured debt would qualify for Chapter 13 rather than being forced into the more expensive and complex Chapter 11 bankruptcy or the liquidation-focused Chapter 7.
Regional Fairness: The higher limit addresses geographic disparities where housing costs in states like New Jersey, New York, and California routinely push mortgage debt beyond current thresholds.
Economic Reality: The limits would better reflect modern debt levels, particularly for homeowners, those with student loan obligations, and small business owners who personally guaranteed SBA loans during the pandemic.
Simplified Structure: A single combined limit is easier to understand and apply than tracking two separate categories of debt.
What This Means for Potential Filers
For individuals considering Chapter 13 bankruptcy in 2026, the current landscape presents both challenges and opportunities:
Current Eligibility: You must carefully calculate your secured and unsecured debts separately, excluding contingent and unliquidated amounts. Working with an experienced bankruptcy attorney is essential to properly categorize debts and determine eligibility.
Watch for Changes: While the proposed debt limit increase was not included in the 2026 NDAA, legislative efforts continue. If passed with retroactive application, individuals who currently exceed the limits might become eligible.
Alternative Options: If you exceed the Chapter 13 debt limits, Chapter 11 bankruptcy remains available for reorganization, though it involves more complex procedures and higher costs. Chapter 7 liquidation bankruptcy has no debt limits but does not offer the same asset protection or reorganization benefits.
Planning Considerations
The debt limit applies on the date of filing the bankruptcy petition. This timing can be strategic—if legislative changes are imminent, it may benefit some debtors to wait. Conversely, if your debt is approaching but has not yet exceeded the limits, filing sooner may preserve eligibility.
For married couples filing jointly, the debt limits apply to their combined debts but are calculated per debtor for eligibility purposes. Additionally, regular income is required for Chapter 13 eligibility beyond just meeting the debt thresholds, as the repayment plan depends on the debtor’s ability to make monthly payments over three to five years.
Looking Ahead
The next Chapter 13 debt limit adjustment under the automatic inflation provisions of Section 104 is not scheduled until April 1, 2028. However, Congress could act at any time to implement the proposed $2,750,000 combined limit through separate legislation or by including it in another legislative vehicle.
The broad support for increasing the debt limits—spanning bankruptcy judges, practitioners, academics, and lawmakers from both parties—suggests that change may come in 2026. Until then, the current dual limits of $1,580,125 for secured debt and $526,700 for unsecured debt remain in effect.
Conclusion
Understanding Chapter 13 debt limits is critical for anyone considering bankruptcy in 2026. The current separate thresholds for secured and unsecured debt create eligibility challenges, particularly in high-cost regions like New Jersey. While proposed legislation could restore a higher, unified debt limit with retroactive application, no changes have been enacted as of January 2026.
If you are uncertain about your eligibility for Chapter 13 bankruptcy or need guidance on your debt reorganization options, contact the experienced bankruptcy attorneys at Middlebrooks Shapiro, P.C. for a consultation. We can help you navigate the current debt limits, evaluate your bankruptcy alternatives, and develop a strategy tailored to your specific financial circumstances.
About Middlebrooks Shapiro, P.C.
Middlebrooks Shapiro, P.C. is a boutique bankruptcy law firm serving clients throughout New Jersey. Our attorneys specialize in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases for individuals and small businesses, providing experienced counsel through every stage of the bankruptcy process.
