There are many situations where people may struggle with debt, and this often occurs due to circumstances that are out of a person’s control. Those who are experiencing harassment from creditors and struggling to cover their ongoing expenses in addition to paying what they owe will need to consider their options, and in many cases, bankruptcy can provide an ideal solution. By completing this process, a person, family, or small business owner can eliminate certain types of debts and regain financial stability. However, debtors who are considering bankruptcy may need to be aware of some recent changes to the laws that may affect their eligibility for debt relief based on the amount they owe.
Chapter 13 bankruptcy, also known as “wage earner’s bankruptcy,” is an option that may be pursued by debtors who own a home and wish to avoid foreclosure or who do not want to liquidate certain assets during the bankruptcy process. This type of bankruptcy will allow unsecured debts such as credit card balances, medical bills, and missed mortgage payments into a single repayment plan. Depending on certain factors, this repayment plan will last either three or five years, and after a person has made all monthly payments in the plan, any remaining unsecured debts will be discharged.
The U.S. Bankruptcy Code defines certain limits for the amount of debt a person can have in order to qualify for Chapter 13. This limit was increased recently by the passage of a federal law, the Bankruptcy Threshold Adjustment and Technical Corrections Act (S. 3823). Previously, the Bankruptcy Code distinguished between secured and unsecured debts when determining the debt limit. However, under the new law, a debtor will qualify for Chapter 13 if the total amount of their secured and unsecured debts is less than $2.75 million. This may allow more people to qualify for a wage earner’s bankruptcy. Those who have debts in excess of this limit may need to file for Chapter 7 bankruptcy, which has no debt limits.
S. 3823 also ensured that the debt limit which had previously been in place for bankruptcies filed by small businesses under Subchapter V of Chapter 11 would remain in effect. This limit is $7.5 million, and it had expired on March 27, 2022. Qualifying small businesses may still be able to take advantage of this streamlined bankruptcy process (commonly known as “Chapter 5 bankruptcy”) if they have aggregate debts that are below this limit.
The debt limit increases put in place by S. 3823 are scheduled to last for two years, and they sunset on June 21, 2024. If you have questions about whether you qualify for bankruptcy, which type of bankruptcy is best for your situation, or the requirements you will need to meet to receive relief from your debts, The Elliot Legal Group, P.A. can assist you. We will guide you through the bankruptcy process and help you move forward to a more stable financial future. Contact our Plantation bankruptcy attorney today at 754-332-2101 to set up an appointment and discuss your options.
Sources:
https://www.congress.gov/bill/117th-congress/senate-bill/3823
https://www.law.cornell.edu/uscode/text/11/109
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