At least for the next two (2) years, House has approved and President Biden has signed legislation that would expand the availability of Chapter 13 for Debtors. This expansion will take effect immediately. The Bankruptcy Threshold Adjustment and Technical Corrections Act is the name of the law that raises the debt limits for admission to Chapter 13 to a single debt maximum of $2.75 million. This law was passed in October of 2013. In the past, the limit for unsecured debt was set at $465,275, while the limit for secured debt was set at $1,395,875. It’s best to discuss your situation with Bankruptcy Lawyer in New York beforehand.
The new development forces those with large mortgages, businesses, and other non-consumer obligations to consider Chapter 11 options.
Mortgage arrears, the possibility of losing assets in Chapter 7 liquidation proceedings, or an income that exceeds the census-enforced median income for a household of a similar size in a particular jurisdiction can be used as a basis for filing under Chapter 13 of the United States Bankruptcy Code by individuals with primarily consumer debts.
It allows for a repayment period of up to five (5) years and reorganisation of debt, most of the time with very little or no payments made against the unsecured loan. It is an extremely efficient method of giving clients significant debt relief while at the same time protecting important assets that could otherwise be in jeopardy.
In too many cases, we have been forced to tell clients that they either do not qualify for Chapter 7 bankruptcy or will lose valuable assets if they file for bankruptcy while also exceeding the debt limits for Chapter 13 bankruptcy. Neither of these outcomes is ideal.
As a result of the exorbitant nature of the Chapter 11 expenses and procedural requirements for most persons, there was simply no option for bankruptcy that these individuals could pursue. The passage of this legislation is long overdue.
The existing legislation is set to expire in June of 2024 unless it is either made permanent by Congress or given an extension. If you think filing for bankruptcy under Chapter 13 could benefit you, please contact a certified lawyer.