Ch. 13 Secured & Unsecured Debt Limits as Of June 21, 2022
S. 3823, Bankruptcy Threshold Adjustment and Technical Corrections Act has been signed by President Biden on June 21, 2022, and it goes into effect immediately.
S. 3823 increases the Chapter 13 debt limit under 109 (e) to $2.75 million, and allows both secured and unsecured debt to count towards this single limit. The distinction between secured and unsecured debt amounts for purposes of determining eligibility to be a debtor has been removed. The new single secured and unsecured debt limit is a significant increase from the previous $465,275 unsecured creditor debt limit and the $1,395,875 secured creditor debt limit. The bill also retains the application of this limit only to non-contingent, liquidated debts, as under prior law.
The Subchapter V debt limit of $7.5 million for small businesses electing to file for bankruptcy, which had expired on March 27, 2022, was also extended. Both increases have a sunset provision after two years from the date of enactment.
The sunset provision was necessary to overcome a US Senate hold on the bill by some Senators who heard concerns from some state banks regarding making the Subchapter V increase permanent. The sunset provision was the price for getting the bill through the Senate. Nonetheless, the Chapter 13 debt limit increase constitutes a win for the consumer and small business debtors, many of who have mortgage, business and/or student loan debts exceeding the prior limits and cannot afford much more significant fees and expenses associated with having to file for Chapter 11 bankruptcy relief.
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