Legal Law

Chapter 13 Bankruptcy Debt Limits: Do You Owe Too Much?

Chapter 13 bankruptcy involves a reorganization of your finances. Through the court-approved Plan, you agree to repay some or all of your debts over a period of 3-5 years. The amount of your payment depends on your income and a variety of other factors, but did you know that you could owe too much money to file for Chapter 13?

Under Section 109 (e) of the US Bankruptcy Code,

Only a person with regular income who owes, as of the petition filing date, non-contingent, liquidated, unsecured debts of less than $ 250,000 and non-contingent, liquidated and guaranteed debts of less than $ 750,000, or a person with income and The spouse of said person, except a stockbroker or a commodity broker, who owes, on the date of filing the petition, non-contingent, liquidated, and unsecured debts totaling less than $ 250,000 and non-contingent debts , settled and guaranteed of less than $ 750,000 may be debtor according to chapter 13 of this title.

Those figures are adjusted based on the annual cost of living based on the Consumer Price Index adopted by the United States Judicial Conference. The US Department of Labor issues the Consumer Price Index figures for the relevant period.

This is good news for the millions of Americans who bought homes during the housing boom of recent years. In foreclosure, they have turned to Chapter 13 only to find that they are locked in because their mortgages are too high.

When you owe too much, you may be forced to file for Chapter 11 bankruptcy to keep your home. This can be much more expensive and time consuming, requiring huge amounts of work just to accomplish the same goal that you could have accomplished in a Chapter 13.

Your other option may be a Chapter 7, which may not protect your home and other property.

For cases filed from April 1, 2007 through March 31, 2010, the Chapter 13 debt limits have been $ 1,010,650 in secured debt and $ 336,900 in unsecured debt. Some have speculated that those limits may increase 7% for cases filed from April 1, 2010 through March 31, 2010. That will undoubtedly help many consumers looking to keep their homes and properties in bankruptcy.

If you are considering filing for bankruptcy, it is important to speak with your attorney before your case is filed to make sure your debts are within the limits in effect as of the filing date. If your case is filed and you exceed the debt limits, then you could be forced to convert your case to Chapter 7 or Chapter 11; What’s worse, you could end up with your case dismissed and with very few short-term options.

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