What if I’m Over the Chapter 13 Debt Limit?

There are monetary limits to the amount of unsecured and secured debts in a Chapter 13, currently set at $383,175 in unsecured debts and $1,149,525 in secured debts. Debtors who exceed these limits are not eligible for Chapter 13 relief and should consider a Chapter 11 reorganization bankruptcy.

The Bankruptcy Code does not allow joint debtors to double the Chapter 13 debt limits. See 11 U.S.C. § 109(e); see also In re Kersner, 412 B.R. 733 (Bankr. D. Md. 2009). Most courts apply the plain meaning of the statute and disqualify couples who exceed the debt limits. See In re Miller, No. 13 B 2178  (Bankr. N.D.E.D.IL., 2013); In re Archibald, 314 B.R. 876 (Bankr. S.D. Ga. 2004).

A minority of courts will look at the individual debtor’s debts to determine whether the individual falls under the debt limits. If both debtors are individually under the debt limits, the joint case is allowed to proceed. See In re Werts, 410 B.R. 677 (Bankr. D. Kan. 2009). If only one debtor qualifies and the other debtor does not, the qualifying debtor may continue with her Chapter 13 case, while the nonqualifying debtor must convert to another chapter. See In re Butler, 2010 WL 2035373 (Bankr. D. Dist. Col. 2010); In re Tabor, 232 B.R. 85 (Bankr. N.D. Ohio 1999).

When pushing Chapter 13 debt limits in a joint case, the debtors should consider: (1) filing separate cases for married couples (and consider filing a Chapter 7 for one spouse and a Chapter 13 for the other); and (2) using Chapter 20 (filing a Chapter 7 case to eliminate dischargeable unsecured debts, then filing a Chapter 13 case to deal with secured or nondischargeable debts).

There are many options available to debtors in bankruptcy. It takes an experienced guide to help you choose the right path to a financial fresh start. Call today and find the best road to success in your case.