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Debt Limits for Chapter 13 Bankruptcy

If you're considering filing for Chapter 13 bankruptcy, you may be worried about how much debt you have. The U.S. Bankruptcy Code does set limits about how much debt a person can have and still qualify for Chapter 13 protection.

The bankruptcy code puts strict limits on the amount of debt that can be reorganized in a consumer Chapter 13 case. These debts are often adjusted for inflation. Knowing if your debt falls beneath this limit is an important step in qualifying for bankruptcy.

To connect with a lawyer practicing in your area and learn more about your debt and whether you might qualify for Chapter 13, please fill out this form.

Limits for Secured and Unsecured Debt in Chapter 13

The U.S. Bankruptcy Code includes limits on how much of secured and unsecured debt a filer can have in order to qualify for Chapter 13 bankruptcy protection. The most recent figures are:

  • Secured debt limit: $1,081,400 Filers can qualify for Chapter 13 bankruptcy only if their secured debt does not exceed $1,081,400. This means that all secured debts (including loans for houses, cars, boats and anything else tied to property) must total less than that amount.
  • Unsecured debt limit: $360,475 Additionally, filers can have up to $360,475 in unsecured debts. This means that credit card debt, payday loans, medical bills and other debt not tied to any property must not exceed that amount.

If your debts exceed these amounts, there may still be options available. Individuals are eligible to file Chapter 11 bankruptcy, a form of reorganization typically used by corporations to restructure debt. You may also be able to discharge these debts in Chapter 7 bankruptcy if you qualify under the means test.

Please keep in mind that these limits may be adjusted periodically for inflation.

Secured and Unsecured Debt in Bankruptcy

Bankruptcy law distinguishes between two types of debt, secured and unsecured, and sets separate limits for each.

  • Secured debts: These are debts that are linked to property. Mortgages and car loans are classic examples of secured debts. The property connected to the debt is said to "secure" the loan because a borrower has a built-in incentive to make payments – if he stops making payments, the lender can seize the property connected to the loan.
  • Unsecured debts: These are debts not attached to any property. Classic examples include credit card debt and student loans. While a creditor can take legal action against a debtor who has defaulted on an unsecured loan, the creditor cannot directly seize any property to compensate for missed payments.

Other Chapter 13 Filing Requirements

In addition to limits on debts, there are other requirements you must meet in order to file Chapter 13 bankruptcy. Read on to see if you might qualify:

  • A steady, dependable income: Because Chapter 13 requires filers to make regular payments for three to five years in a repayment plan, it's important to know you'll have paying work for the next several years. Self-employed individuals are also able to file Chapter 13.
  • A credit counseling session: Since the introduction of a new bankruptcy law in 2005, all filers have had to complete a credit counseling briefing before filing for bankruptcy (both Chapter 7 and Chapter 13).
  • You are outside the waiting period: For those who have filed bankruptcy in the past, a waiting period may apply. The waiting period differs depending on the type of bankruptcy. A lawyer can help you determine whether you're eligible to file again if you've filed in the past.

Ask a Lawyer about Your Debt Options

To find out whether your personal debts fall within the limits for Chapter 13 filers, consult with a personal bankruptcy lawyer today. Simply fill out the below form today to arrange a free, no-obligation consultation.