The Bankruptcy Code sets specific limits on the amount of debt that a person can reorganize in a Chapter 13 bankruptcy. There are separate limits for both secured debts and unsecured debts. These debt limits are calculated per each debtor where a married couple files a joint chapter 13 bankruptcy case.
These “debt limits” for Chapter 13 bankruptcy are found under Section 109(e) of the Bankruptcy Code, which in turn refers to Section 104. See, 11 U.S.C. §§ 109(e) and 104.
The 2020 Chapter 13 debt limits under Section 109(e) are effective as of April 1, 2019, and are valid for all of 2019, 2020, and 2021. Therefore, the current Chapter 13 debt limits effective for 2020 are as follows:
- Unsecured debt limit: $419,275
- Secured debt limit: $1,257,850
These Chapter 13 debt limits adjust every 3 years under Section 104(a). The next Chapter 13 debt limit adjustment will occur on April 1, 2022.
Section 109(e) of the Bankruptcy Code, entitled “Who may be a debtor,” provides in pertinent part:
Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $419,275 and noncontingent, liquidated, secured debts of less than $1,257,850, or an individual with regular income and such individual’s spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $419,275 and noncontingent, liquidated, secured debts of less than $1,257,850 may be a debtor under chapter 13 of this title.
11 U.S.C. § 109(e) (footnote 1 provides that the dollar amounts set forth above are adjusted by the Judicial Conference of the United States as provided by 11 U.S.C. § 104).
An individual is eligible for Chapter 13 bankruptcy relief provided, among other important requirements, that the individual’s unsecured debts are within these statutory limits.
Secured Chapter 13 Debt Limit
The Section 109(e) Chapter 13 secured debt limit of $1,257,850 includes the total of all of an individual’s debts, including taxes, that are secured by personal property and real property. These secured debts include, but are not limited to, liens and mortgages secured against real estate and other collateral such as vehicles, equipment, electronics, jewelry, etc.
Unsecured Chapter 13 Debt Limit
The Section 109(e) Chapter 13 unsecured debt limit of $419,275 includes the total of all amounts owed by an individual on credit cards, medical bills, lines of credit, unsecured taxes, and other debts not secured by collateral.
In both instances above, an individual must pay special attention to the language in Section 109(e) that qualifies the Chapter 13 debt limits based upon “noncontingent, liquidated, unsecured debts,” as contingent and unliquidated unsecured debt must be excluded from the Section 109(e) analysis. It is important to speak to an attorney competent in Chapter 13 bankruptcy when performing this analysis.
Chapter 13 Bankruptcy Alternatives
If an individual exceeds the chapter 13 debt limits, they still have other bankruptcy options. They may consider filing a Chapter 11 reorganization to obtain many of the benefits of Chapter 13 bankruptcy, although a Chapter 11 bankruptcy is generally less “stream-lined” than a Chapter 13 bankruptcy. Alternatively, they can consider a Chapter 7 bankruptcy, although it does not provide the individual with the ability to “reorganize,” only liquidation.
If you exceed the Chapter 13 bankruptcy debt limits, contact an experienced bankruptcy attorney at Middlebrooks Shapiro for a free consultation to consider all of your bankruptcy options.
About Middlebrooks Shapiro
New Jersey Attorney Melinda D. Middlebrooks and Attorney Joseph M. Shapiro have over 30 years of bankruptcy law experience. From our office in Springfield, NJ, we help clients with the most basic or complex personal and business bankruptcy cases by leading them through the legal process of numerous practice areas.
Call 973-218-6877 to speak with the experienced bankruptcy attorneys at Middlebrooks Shapiro. We’ll ensure you get the perspective you need to understand the full picture and the right guidance to have a successful bankruptcy, rebuild your credit, and move forward with your new debt-free life.
