What You Need to Know About Chapter 13 Debt Limits 2022
Did you know that there are debt limits in chapter 13 bankruptcy code? The bankruptcy code under Section 109(e)specifies the limits on the highest amount of debt you can reorganize through Chapter 13 bankruptcy. The debt limits vary from secured to unsecured debts. If you intend to file bankruptcy as a couple, the limits will be calculated per debtor. Surprisingly, not any people are aware of these debt limits. Our article includes everything you need to know about Chapter 13 debt limits.
What are Chapter 13 Debt Limits and Why are the Limits Important?
Filing for Chapter 13 bankruptcy is a powerful move if you have regular income and can manage to repay some of your debts. Chapter 13 offers you a chance to reorganize our debts so you can pay them in minimum amounts over an extra period of time while getting protection from collection attempts by your creditors. Bankruptcy can be a great step towards financial freedom, especially if you felt you've been screwed before by debt settlement companies like National Debt Relief.
When filing for bankruptcy, you can choose to file Chapter 7, but you need to verify your eligibility depending on your income information. In the same case, when filing for Chapter 13 bankruptcy, you need to know if you are eligible for bankruptcy discharge. Your eligibility depends on whether your debt is within the debt limits set by the bankruptcy laws. So, you should have a certain amount of debt to qualify for debt forgiveness.
The debt limits are adjusted every three years, depending on the Consumer Price Index. The more recent debt limits were affected on April 1, 2019 and are $419,275 for liquidated unsecured debts and $1,257,850 for liquidated secured debts. These debt limits are subject to revision in 2022.
How are Unsecured Debts Different from Secured Debts?
Debt limits for unsecured debts vary from those of secured debts. Unsecured debts are amounts owed to creditors who don't have lien on collateral. Common examples of unsecured loans include; student and personal loans, credit card debts, tax debts, judgment, medical debts, utility payments and restitution etc.
On the other hand, secured debts are outstanding amounts owed to creditors who hold legally valid lien on collateral. For example car loan, UCC statement, mortgages, mechanic liens and title loans. So, when calculating debt limits, you need to distinguish between secured and unsecured loans.
Which is Better: Chapter 7 or 13 bankruptcy?
Have you considered filing for bankruptcy lately? If you aren’t sure whether or not bankruptcy may be right for you, you can take a “Should I File For Bankruptcy” Quiz to see what options are best for you.
If you decide to file for bankruptcy, you need to choose between filing Chapter 7 and Chapter 13 bankruptcy. You can use a free Chapter 13 bankruptcy calculator to estimate qualification, cost and compare Chapter 7 to Chapter 13 bankruptcy.
What Are My Options If My Debts Are Below the Chapter 13 Debt Limit
The main aim of filing for bankruptcy is to get out of debt, and a bankruptcy discharge can help. To qualify for Chapter 13 bankruptcy, you need to have a steady income and meet the specified debt limits to be eligible for a bankruptcy discharge.
So, if your debt is below the debt limit outlined in the bankruptcy code, you may qualify for debt discharge. Chapter 13 bankruptcy helps you get rid of unsecured debts without having to go through liquidation. So, it helps you save your assets, protect your home from foreclosure and in some cases, lower your car payment.
If you would like to file Chapter 13, try out the Chapter 13 payment calculator. Input your details to get an estimate of how much your plan payment may be if you proceed to file.
What If My Debts are Higher than the Chapter 13 Debt Limit?
If your total debts are more than the Chapter 13 debt limits, you can still file for Chapter 13 by reducing your debts. Here are tips on how to reduce your debts and ensure they fall within the debt limit;
- Ignore unliquidated debts when counting Chapter 13 debt limits: you should not include unliquidated debts when counting toward the debt limit since they don't have a cash value. Although disputed debts can sometimes be considered as unliquidated debts, you need to have a good reason to dispute the debt.
- Don't count contingent debts: contingent debts are not added to debts. You got into debt based on speculation on an uncertain future. For example, if you cosigned a loan with your friend, provided they don't default, you are not legally obliged to repay the debt.
- Calculate the unsecured portions of your secured debts separately: if your secured debts are more than the debt limit, you can calculate the unsecured portion of the debt and adjust accordingly.
- File Chapter 7 Bankruptcy: to qualify for Chapter 7 bankruptcy, your income needs to be less than the mean income in your state. The main challenge of Chapter 7 bankruptcy is liquidation, so you risk losing property.
- File a Chapter 11 bankruptcy: if your debts are still above the debt limits after the tips above, you should consider filing Chapter 11 bankruptcy. However, these cases are costly and could be more costly than filing Chapter 13. So, before rushing to file Chapter 11 bankruptcy consult a bankruptcy attorney for alternative debt-relief options.
Although Chapter 13 cases are easier and more straightforward, the cases can get complicated when the debts exceed or are close to the debt limits. So, you need to consult an experienced bankruptcy attorney for professional advice on the best way forward.
Consider Other Options
Are you constantly being contacted by debt collectors? Are you just hoping for some peace? Luckily, there is an 11-word phrase that will stop debt collectors from reaching out to you. While this will stop the communication, it won’t take care of your debt. Consider all your debt relief alternatives before moving forward. Bankruptcy is not always the best way out. So before filing bankruptcy and submitting your petition with the court, it is important to explore other debt relief options such as:
- Debt Payoff Planning
- Debt Settlement
- Debt Management
- Debt Consolidation
You should always consult a bankruptcy attorney who is open enough to discuss all debt-relief options with you in detail. Contact us today to choose a debt-relief option that works for you, and regain control of your financial life.