Chapter 13 Secured & Unsecured Debt Limits in 2025
If you're dealing with overwhelming debt, bankruptcy can be a useful option to pursue debt relief. However, when considering Chapter 13 bankruptcy, it's important to understand the role of secured and unsecured debt limits. These limits refer to the maximum amount of debt you can have to be eligible to file for Chapter 13 relief.
For individuals and married couples exploring Chapter 13 as a viable option, there have been important changes to the debt limits that determine eligibility for this type of bankruptcy. For some people who need to protect their assets or catch up on arrears owed to secured creditors, the only other alternative to Chapter 13 would be a Chapter 11 bankruptcy, which is much more complicated and expensive and beyond the scope of this article.
This article examines the distinctions between secured and unsecured debts, explores the new debt limits (which actually constitutes a reversion to the previous Ch 13 debt limits that were in place before debt limits were temporarily raised as result of the COVID-19 pandemic), and provides insight as to what these changes mean for potential filers.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy, often referred to as a reorganization bankruptcy, allows individuals with regular income to develop a repayment plan for their debts. This plan typically spans three to five years, during which filers make payments to a designated Chapter 13 bankruptcy Trustee who then distributes the funds to creditors.
Unlike Chapter 7 bankruptcy, which involves liquidating non-exempt assets to pay debts (if any exist), Chapter 13 allows debtors to retain their property, while also catching up on missed payments to secured creditors. To qualify for Chapter 13, you must fall under the specific secured and unsecured debt limits. See article in the Bankruptcy Overview section of this website entitled "Bankruptcy Exemptions" as well as several other articles in the Bankruptcy Specific section of this website under the "Chapter 13 heading".
Secured vs. Unsecured Debt
When filing for Chapter 13 bankruptcy, it's important to understand the difference between secured and unsecured debts. These classifications impact how your debts will be treated in bankruptcy and, ultimately, any repayment plans proposed under a Chapter 13.
Secured debt is tied to collateral. This means the debtor has pledged an asset as security for the loan. Some common examples include mortgages and car loans. If the debtor fails to make payments, the lender can repossess or foreclose on the collateral, such as a vehicle or a house.
Unsecured debt is not backed by collateral. Some common examples include credit card debts, medical bills, and personal loans. Since these debts, for the most part, rely solely on the borrower’s promise to repay, they carry a higher risk for lenders.
Chapter 13 Debt Limits in 2025
Debt limits for Chapter 13 bankruptcy are adjusted periodically to account for inflation and changes in the economic landscape. In 2025, these limits reverted back to the previous debt limits that were in effect before the COVID-19 pandemic.
Secured Debt Limits for 2025
For cases filed in 2025, the maximum amount of secured debt individuals can have and still qualify for Chapter 13 Bankruptcy relief is $1,395,875. A debt limit is adjusted from time to time as a result of Consumer Price Index for All Urban Consumers (CPI-U) from time to time. The CPI-U is a measure of inflation that reflects the average change in prices paid by urban consumers for goods and services.
The decrease/reversion back to previous Ch Debt limits reflects an actual or perceived return to economic stability in the wake of the COVID-19 crisis. Secured loans, such as mortgages, often form the bulk of a Ch debtor(s) debt in bankruptcy cases. While the current secured debt limit represents a decrease in the potential secured debt a Chapter 13 filer can have, this decrease is from the previous $2,750,000 total debt limit which was previously in effect. Accordingly, if the secured debt limit is combined with the unsecured debt limit of $465,275 (see paragraph below) it should be noted that the total Chapter 13 debt limit has only been decreased by $888,850 (decreasing from $2,750,000-$1,861,150). The current debt limit still provides flexibility for most individual homeowners and other property owners with secured debt facing foreclosure.
Unsecured Debt Limits for 2025
In 2025, unsecured debt limit also reverted back to the pre-Covid-19 limit of $465,275. This limit applies to non-priority unsecured debts, such as credit card debt and medical bills. This limit still allows the vast majority of individual, middle income earners with overwhelming, unsecured debts, to maintain Chapter 13 as a practical option to catch up on their mortgage arrears, to protect their assets, that would otherwise be nonexempt if they had to file for Chapter 7 relief and/or or who may not otherwise meet the financial thresholds for Chapter 7 bankruptcy relief. See article in the Bankruptcy Overview section of this website entitled "Bankruptcy Exemptions" as well as several other articles in the Bankruptcy Specific section of this website under the "Chapter 13 heading".
How to File for Chapter 13 Bankruptcy?
To file for Chapter 13 bankruptcy, you will need to adhere to the requirements set forth by New Jersey law. The steps you should follow to file for Chapter 13 bankruptcy include:
Determine your eligibility: First, you must determine if you are eligible to file for Chapter 13 bankruptcy. You must meet the established debt threshold limits in order to qualify for this type of bankruptcy.
Consult with a bankruptcy attorney: Speak with an experienced bankruptcy attorney as soon as possible. An experienced bankruptcy attorney can help you determine if Chapter 13 is the best option for your financial situation and guide you through the process.
Gather the necessary documents: You will need to gather all relevant financial documents such as tax returns, pay stubs, bank statements, and any other relevant paperwork so your attorney can properly file for your Chapter 13 bankruptcy case.
Complete credit counseling: Before filing for any type of bankruptcy, you are required to complete a credit counseling course from an approved agency. This must be completed within six months of your petition date.
Create a repayment plan: Create a Ch 13 debt repayment plan that outlines how you will catch up on arrears owed to secured creditors, if you need to, and make any necessary payments for the benefit of your unsecured creditors over a period of three to five years. This is all included a Ch 13 Plan, which typically must be submitted as part of your Ch 13 bankruptcy petition.
File for bankruptcy: File a petition for bankruptcy with the United States Bankruptcy Court for the District of New Jersey. You must promptly respond to all requests for information and attend all meetings as instructed by the Court.
Why Work with The Law Office of Marc G. Alster?
Filing for Chapter 13 bankruptcy, even without changing debt limits, can be confusing. Mr. Alster has extensive experience assisting clients in northern and central New Jersey, as well as parts of New York, with personalized guidance on bankruptcy.
His team is well-versed in the new regulations slated for 2025 and is equipped to provide tailored advice that align with your unique financial circumstances. From protecting exempt assets to crafting repayment strategies to protect non-exempt assets from liquidation, his experience can help you work toward financial stability.
Consult an Experienced Attorney Today
If you are struggling with overwhelming debt, Chapter 13 bankruptcy can be a valuable tool for regaining financial stability. However, it's important to be aware of the Chapter 13 debt limits for 2025, which may impact your eligibility to file for this type of bankruptcy.
The Law Office of Marc G. Alster is committed to staying up to date on the latest changes to provide the legal advice you need. Located in Hackensack, New Jersey, the firm serves clients throughout the surrounding areas. Reach out to the firm today to schedule a consultation.