New debt limits for Chapter 13 become effective on April Fool’s Day, 2019.
The new numbers are effective for cases filed April 1, 2019 and will control for the next 3 years.
And those limits are:
Unsecured debt = $ 419,175
Secured debt = $$1,257,850
The current limits effective through March 31, 2019 are
unsecured debt = $394,725
secured debt = $1,184,200
In the Bay Area, that will mean more families will be eligible to file Chapter 13.
Why Chapter 13 rocks
Chapter 13 bankruptcy allows individuals to strip off worthless liens, cure home loan defaults, and pay recent taxes over time, without interest.
In Chapter 13, the person filing keeps ownership and control of their assets. They create a plan to repay creditors, in whole, or more usually, in part from future income.
While in 13, they are protected by the automatic stay from collection actions. They have access to the bankruptcy court to enforce that protection. The bankruptcy judge is also available to resolve disputes about the allowance of claims or mortgage accounting.
Is debt secured or unsecured
The debt limits apply to debts that are liquidated and not contingent.
Secured debts are those for which the creditor has collateral. The most common secured debts are mortgages, home equity lines of credit, and car loans.
Tax liens and judgment liens also fall into the secured debt pile, but only to the extent that the lien attaches to value in your possessions.
More about secured debts in bankruptcy .
Unsecured debts are those where there is no collateral or where the lien is greater than the available collateral.
In my Bankruptcy Alphabet, U is for Unsecured.
A great recent decision by the 9th Circuit determined that you don’t have to count liens that have passed through a previous bankruptcy as unsecured.
There are no debt limits in Chapter 7 or Chapter 11.
Exemptions expand
The value of items protected by exemptions under the bankruptcy code also increased April 1.
This means little to Californians since the federal bankruptcy exemptions aren’t available in California.
Instead, we have the Code of Civil Procedure 703.140 series of exemptions which mimic the federal exemptions. The dollar amounts of the §703 exemptions are found here.
The Federal Register published the Bankruptcy Code changes of other dollar amounts found in the Code, such as the cap on priority employee wage claims, preference safe harbors, and luxury goods purchases.
Enjoy the increases. They are with us for another three years.
Image courtesy of geehall2.
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