Chapter 13 Debt Limits

Chapter 13 bankruptcy is designed to help debtors seek financial independence by helping them reorganize and restructure their debts in order to pay them off over a period of three to five years. However, there are limits on how much debt you can have in order to file for this particular type of bankruptcy. Let’s take a closer look at these limits and discuss how you can fit under them through carefully categorizing your debts.

Debt Limitations

As of 2016, the debt limitations are as follows:

  • Secured debt (mortgages and liens) cannot total to more than $1,184,200
  • Unsecured debt (credit cards, medical bills) cannot total to more than $394,725

That might seem like a fairly high number, but it’s fairly easy to accumulate that amount of debt, especially in the event of an emergency or catastrophe, such as a major illness or huge property loss. If all of your debt totals up to be less than these amounts, you may be able to benefit from Chapter 13 bankruptcy.

Making Yourself Eligible

However, if your debt totals are above these thresholds, that doesn’t necessarily mean you are ineligible. You could potentially reinstate your eligibility by carefully categorizing your debts. Some of your debts don’t count towards the debt limit, while others could be divided into both secured and unsecured portions, thus helping you fit in under the limits.

Two types of debt must be listed in your bankruptcy filing paperwork, but don’t actually count towards your debt limit: contingent debts and unliquidated debts. Contingent debts are those which you have no obligation to pay unless a specific event occurs, known as a contingency.

Unliquidated debts are those where your responsibility to pay has not yet been determined, or the amount of the debt cannot be easily determined. For example, if you have been found at fault in an accident and have a pending personal injury lawsuit against you, there’s not always an easy way to know how much you’ll owe the impacted party, thus there’s no way to know how much your debt will be, just that you will have one. Any legal issue where the amount of the damages can be easily determined cannot count as an unliquidated debt.

To find out if you qualify for Chapter 13 bankruptcy, call Lam Law, LLC today at (843) 695-7700 to request a free case evaluation!