Many people are surprised to realize that there are debt limits in Chapter 13 bankruptcy cases. In other words, you can only have a certain amount of debt to qualify for a bankruptcy discharge (debt forgiveness) under Chapter 13. There are no debt limits in Chapter 7 or Chapter 11.
Chapter 13 debt limits adjust every three years based on changes in the Consumer Price Index. Though the most recent change to the limits became effective as of April 1, 2019. The Federal Register typically publishes notices when dollar amounts are revised pursuant to the Bankruptcy Code.
For instance, the debt limits for Chapter 13 cases filed on or after April 1, 2022 (source), are:
Also, these debt limits are scheduled for revision on April 1, 2025, so these should be good for case filings through 2024.
Unsecured debts are sums owed to creditors who do not hold a valid lien on collateral. For example, unsecured debts include:
Secured debts are sums that you owe a creditor who holds a valid lien on collateral. Examples of secured debts include mortgages, car loans, title loans, mechanic’s liens, and UCC statements.
It is important to distinguish between unsecured debts and secured debts when calculating debt limits for Chapter 13.
A common question is whether you should do Chapter 7 or Chapter 13 bankruptcy. Take the following free calculator based on the bankruptcy forms to estimate cost and qualification for Chapter 7 and compare that against Chapter 13 bankruptcy monthly cost.
Chapter 13 bankruptcy cases permit individuals, married couples, and self-employed individuals to reorganize or restructure their debts. Debtors (individuals who seek bankruptcy relief) must have a steady income and meet the Chapter 13 debt limits to receive a bankruptcy discharge under Chapter 13.
If your debt is below the Chapter 13 debt limit, you may qualify for a Chapter 13 bankruptcy case. In a Chapter 13 case, you can get rid of most unsecured debts, save your home from foreclosure, and potentially lower your car payment. You can also protect assets from being used to repay unsecured creditors.
If you are interested in a Chapter 13 bankruptcy case, try our Chapter 13 payment calculator to estimate how much your Chapter 13 bankruptcy plan payment would be if you choose to file for Chapter 13 bankruptcy relief.
If your debt exceeds the Chapter 13 debt limits, you may still qualify to file under Chapter 13 under certain circumstances. Strategies for reducing debts to fall within Chapter 13 debt limits include:
Cases that involve debts that are close to or exceed the debt limits can be tricky. Consulting an experienced bankruptcy lawyer is typically the best way to proceed if you are determined to file for bankruptcy relief.
You may want to explore other debt-relief options before filing Chapter 13 bankruptcy. You may find that you can solve your debt problem without filing for bankruptcy relief. Non-bankruptcy alternatives for debt relief include:
Ascend helps you explore all the options for getting out of debt. We believe that you deserve to have all your options explained in a way that makes sense so that you can choose the option for getting rid of debt that works best for you.
If you have questions or need help, contact Ascend online or call/text us at 833-272-3631 to speak with a representative. Our goal is to help you become debt-free and take control of your finances so that you can have a strong, secure financial future.