Do I Have Too Much Debt to File Chapter 13?
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When you consider filing for bankruptcy relief, do you worry about having too much debt to qualify for filing a bankruptcy case? Would any person be worried about having too much debt to file Chapter 13? Isn’t that the reason for filing a bankruptcy case is because you have too much debt to handle? Why would there be debt limits for filing a bankruptcy case?
While many people assume that there are no debt limits for filing bankruptcy, this is not necessarily true in all cases. In a Chapter 7 bankruptcy and a Chapter 11 bankruptcy, there are no limits on the amount of debt owed. However, there are debt limits for Chapter 13 cases. Therefore, you could actually owe too much to file a Chapter 13 bankruptcy.
What Are the Current Debt Limits for Filing Chapter 13?
First, you probably do not exceed the limits for filing under this chapter of bankruptcy. Most people do not have too much debt to file a Chapter 13 bankruptcy petition. The debt limits for Chapter 13 are reviewed every three years and adjusted for changes in the cost of living.
The current debt limits for Chapter 13 were increased and set on April 1, 2016. To be eligible to file under Chapter 13 of the Bankruptcy Code, your unsecured debts cannot exceed $394,725. Your secured debts cannot exceed $1,184,200. However, calculating your debts to determine if you exceed these limits is not as simple as adding together your unsecured debts and secured debts because some situations can impact the calculation of these amounts.
Exceptions to Debt Limits for Chapter 13 Cases
In some situations, you do not count certain debts when you calculate the amount of unsecured debt and secured debt. For example, unliquidated and contingent debts are not included in these totals. However, determining whether a debt is unliquidated or contingent can be difficult.
We strongly urge you to consult with our Arizona bankruptcy lawyer if you believe your debts may be too high for Chapter 13. An experienced bankruptcy lawyer understands the complex rules and laws governing the designation of a debt as contingent or unliquidated. A less experienced attorney may try to place you in a Chapter 11 bankruptcy, which is far more complicated, time-consuming, and costly compared to a Chapter 13 case. We work diligently to keep you in a Chapter 13 case to avoid the expense and time involved in filing a Chapter 11 case.
When you are determining whether a debt is countable as an unsecured debt or secured debt, there are many factors to consider. We will analyze each debt in a high-debt Chapter 13 case to determine if we can designate the debt as unliquidated or contingent to leave it out of the calculation for total debts.
Examples of debts that might not count toward the debt limits in a Chapter 13 case include:
- Debts related to pending litigation;
- Joint or co-signed debts;
- Business-related or self-employed debts;
- Secured debts where the collateral is worth less than the amount owed to the creditor; and,
- Debts that have a valid reason for a dispute.
If you have questions about debt limitations for filing a Chapter 13 case, contact our office for a free case review. You might still qualify to file under this chapter of bankruptcy once we review your case and apply all applicable bankruptcy laws and rules to your situation.
Do You Need to File Chapter 13 in Tucson?
Our experienced Arizona Chapter 13 bankruptcy attorneys represent clients throughout the state. Our law firm has experience handling high-debt Chapter 13 cases.
Because some Chapter 13 issues are complex, we do not suggest that you assume your situation falls under the above narrowly defined circumstances. Each case is different, and each person’s situation is unique. You need to consult with an attorney to determine if a Chapter 13 filing is the best alternative for eliminating your debt problem.