Chapter 13 Debt Limits (Updated in 2023)

Chapter 13 debt limits newly updated
Information in this article does not constitute legal advice, it is for informational purposes only, and may not constitute the most up-to-date information. Readers should contact their attorney for advice on any particular legal matter.

It is essential to know the debt control in Chapter 13 bankruptcy cases.  These limits determine if you certify for bankruptcy liquidation in Chapter 13. 

Unlike Chapter 7 or Chapter 11, there is specific debt control in Chapter 13 bankruptcy which is adjusted every three years to keep up with changes in the consumer price Index. 

The most recent adjustment became effective on April 1, 2019.  The Federal Register often publishes notices regarding changes to these dollar amounts, ensuring that individuals are well informed about the current debt control for Chapter 13 bankruptcy.

It is crucial to understand these limits and seek a bankruptcy attorney's advice to determine if Chapter 13 is the right debt-relief option for you, given your unique financial situation.

The debt control for Chapter 13 bankruptcy cases, which were filed on, or after April 1, 2022, is as follows:

  • $465,275 for debts that are not backed by collateral
  • $1,395,875 for debts backed by collateral

These limits are subject to revision, and the next update is expected to take place on April 1, 2025.  It is advisable to keep track of any changes to these debt limits.

Table of Contents

Comparing Secured Debts and Unsecured Debts

It is crucial to understand the difference between unsecured debts and secured debts in the context of bankruptcy.  Unsecured debts refer to sums owed to trustees who do not have a valid lien on any collateral.

Unsecured debts include deficits, student loans, collateral loans, tax arrears, judgments, medical debts, old rent, and utility payments. 

Secured debts are sums owed to trustees who hold a valid claim on collateral, such as homeowners’ loans, small business loans, mechanic's liens, and title loans.  It is crucial to accurately categorize and account for unsecured and secured debts when determining debt control for Chapter 13 bankruptcy.

Failure to do so could result in an inaccurate estimate of your eligibility for a Chapter 13 discharge and your potential payment plan amount. 

Which bankruptcy is Best for me, Chapter 7 or Chapter 13?

One of the most important decisions in bankruptcy is choosing between Chapter 7 and Chapter 13.  You can use our free calculator to get the costs and qualification estimates for Chapter 7 and Chapter 13 bankruptcy. 

Alternatives for Managing Debts Below the Limit for Chapter 13 Bankruptcy

Chapter 13 bankruptcy is an option for individuals, married couples, and self-employed individuals looking to reorganize or restructure their debts.  Debtors must have a steady source of income to be eligible for a Chapter 13 bankruptcy discharge.

The Chapter 13 bankruptcy provides several benefits, including:

  • Elimination of most unsecured debts
  • Prevention of foreclosure on your home
  • Potential reduction of car payments
  • Protection of assets from being used to repay unsecured creditors.

The court only approves a payment plan based on your income and expenses.  Throughout the program, lasting three to five years, you will make regular payments to the Chapter 13 trustee, who will distribute payments to your lenders.  At the end of the plan, the court will discharge any remaining unsecured debt. 

Alternatives for Managing Debts That Exceed the Limit for Chapter 13 Bankruptcy

You may still be eligible to file for Chapter 13 bankruptcy under certain circumstances, even if you exceed the debt limits.  There are policies for reducing debts in a Chapter 13 bankruptcy.

One way to reduce debt and fall within limits is to exclude contingent debts.  Contingent debts are obligations that depend on an event occurring in the future that may or may not happen.  For example, if you registered a loan for someone and they can repay it, you would not be responsible for paying back the debt.

Another strategy is negotiating with creditors to lower the debt owed.  You may also be able to consolidate multiple debts into one manageable payment. 

Filing for Chapter 13 bankruptcy can help you get a fresh start by allowing you to reorganize your debt and make payments over three to five years.  

If your debt exceeds Chapter 13 debt limits, it is vital to explore your options and determine the best way to get back on the path to financial stability.

Unliquidated debts, however, do not factor into Chapter 13 debt limits.  Such debts refer to obligations that do not have a readily determinable cash value.  They may include disputed debts as long as you have a valid reason for disputing the debt.

Another effective way to reduce your debt and potentially fall within Chapter 13 debt limits is to calculate the unsecured segment of your secured debts.

If the merit of the asset-securing debt is lower than the amount of the debt, the excess amount is regarded as unsecured debt and can be discharged in a Chapter 13 bankruptcy case.

Individuals with debts exceeding the limits for Chapter 13 can consider Chapter 11 or Chapter 7 bankruptcy cases.  However, these cases are more complex and expensive than chapter 13 cases. 

It is challenging to navigate the bankruptcy process for individuals facing large debts.  In such cases, seeking the guidance of knowledgeable bankruptcy lawyers can provide much-needed support and ensure the best outcome.

Factors to Weigh Before Filing for Chapter 13 Bankruptcy

Some of the options that you may want to consider before proceeding with debt relief are:

  • Credit counseling
  • Budgeting and financial planning
  • Negotiating with creditors
  • Working with a financial advisor or debt coach.

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