Is There a Limit to How Much Debt Can Be Discharged in Bankruptcy?

TRI Writer • July 20, 2020

Are you considering filing bankruptcy? Are you unsure if it will be beneficial in your situation? Have you ever caught yourself dismissing the possibility because you feel you may have too much debt?

Is There a Limit to How Much Debt Can Be Discharged in Bankruptcy?

When filing Chapter 7 bankruptcy, there is no maximum limit to the amount of debt eligible for discharge. For Chapter 13 bankruptcy, there are limitations.

What Are the Chapter 13 Debt Limits?

In Chapter 13 bankruptcy cases , there is a maximum dollar amount of debt that is eligible (determined by bankruptcy law). The amounts are adjusted every three years. As of April 2019, the maximum secured debts to qualify for Chapter 13 bankruptcy is $1,257,850, and the maximum unsecured debts to be eligible for Chapter 13 bankruptcy is $419,275. If your debts in either category exceed these limits, Chapter 13 bankruptcy may not be available to you. (Secured debts refer to loans against property such as a home or auto loan, while unsecured debts refer to loans that are not secured by property such as medical bills, credit card balances, etc.)

What To Do When You Are At or Near the Debt Limits for Chapter 13 Bankruptcy:

If you are hoping to file Chapter 13 bankruptcy and you are at or near the maximum debt limits set by bankruptcy code, speak with an experienced attorney about determining what rules exist in the applicable Court for determining whether debts are secured or unsecured. This area of bankruptcy code is evolving. While limits are set by federal law, each Court jurisdiction may have different rules in place to calculate the numbers as well as different variables that all go into the equation determining the final debt calculations. Determining eligibility is not always cut and dry, particularly if debt totals are close to the maximums set by federal law.

Discuss Your Case With an Experienced Bankruptcy Attorney:

If you are hoping to file Chapter 13 bankruptcy and are discouraged by the maximum debt limits set by federal law, don’t give up on the idea until you sit down with an experienced attorney. Bankruptcy code can be complicated – you can’t count on getting an accurate final answer on whether or not you qualify unless you discuss your case in detail with an attorney experienced in your local area and Chapter 13 bankruptcy specifically.

Do you have questions about bankruptcy law and how to determine your eligibility to file bankruptcy? The experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. can help. We help good people through bad times every day, and we can help you, too.

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Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.
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