Posted on August 25,2022 in Bankruptcy
If you are struggling with debts due to financial issues that have affected your ability to repay what you owe, you may be considering bankruptcy. By filing for bankruptcy, you can put a stop to creditors' attempts to collect debts, and when you complete the bankruptcy process, certain debts may be eliminated, allowing you to receive a fresh start. However, there are requirements that must be met in order to qualify for different types of bankruptcy, and debt limits may apply in some cases. Recent changes to the bankruptcy laws may affect whether you can qualify for a Chapter 13 bankruptcy or whether you may need to file for Chapter 7 bankruptcy.
How Have Chapter 13 Debt Limits Changed?
In June of 2022, Congress passed the Bankruptcy Threshold Adjustment and Technical Corrections Act, which changed the debt limits for Chapter 13 bankruptcy cases. Previously, different limits applied to secured and unsecured debts. However, the passage of this law eliminated this distinction, and now, the total debt limit for Chapter 13 cases is $2.75 million. If a debtor's total debts are under this limit, they will be able to file for Chapter 13 bankruptcy.
In a Chapter 13 case, a person's debts will be consolidated together, and a repayment plan will be created. This repayment plan will last for three to five years, and during this time, the debtor will make payments to a bankruptcy trustee, who will then distribute the payments to creditors. After the repayment plan is completed, any remaining balances on qualifying debts will be discharged.
Chapter 13 is often the preferred option for debtors who wish to keep certain assets, such as a home, vehicles, or other valuable property. A debtor can make payments toward secured debts, such as a home mortgage or auto loan, as they complete their Chapter 13 repayment plan. This will allow them to eliminate other types of debts, such as balances on credit cards or medical bills, once they have completed the Chapter 13 bankruptcy process.
If a debtor does not qualify for Chapter 13 bankruptcy because they have more than $2.75 million in debts, they may file for Chapter 7 bankruptcy instead. There are no debt limits for Chapter 7 cases, and this form of bankruptcy may allow all unsecured debts to be completely eliminated. However, a debtor will likely need to turn over certain non-exempt assets to the bankruptcy trustee, who will liquidate these assets and make payments to creditors. While secured debts may be discharged through Chapter 7, this will typically result in the repossession of collateral or a home foreclosure. However, debtors may reaffirm secured debts during a Chapter 7 bankruptcy, and the elimination of other types of debts will ensure that they can continue making payments toward the debts that they choose not to discharge.
Contact Our New Braunfels Bankruptcy Lawyer
If you are struggling with debts, bankruptcy may help you to get the fresh start that you need. At the Law Offices of Chance M. McGhee, our Boerne bankruptcy attorney can review your debt situation and help you determine whether you qualify for bankruptcy and the type of bankruptcy that will fit your situation. We can guide you through every step of the bankruptcy process and help you make the best choices for your future. Call us today at 210-342-3400 to schedule a free consultation.
Sources:
https://www.law.cornell.edu/uscode/text/11/109
https://www.congress.gov/bill/117th-congress/senate-bill/3823/text
