Chapter 13 Debt Threshold May Soon Increase
Are you currently considering a Chapter 13 bankruptcy filing but concerned that you have too much debt to qualify? While Chapter 13 bankruptcy can be a lifeline for many individuals and married couples who are struggling with debt and who want to stop a foreclosure, or who do not want to file for a liquidation bankruptcy under Chapter 7, it can be frustrating to realize that your debt exceeds the eligibility limits. Currently, Chapter 13 debt limits exist separately for secured and unsecured debt, and for potential filers with a substantial amount of consumer debt, those thresholds can make it difficult to qualify. While debtors who are ineligible for Chapter 13 due to the debt ceiling can often still file for Chapter 11 bankruptcy instead, for various reasons, Chapter 13 is preferable for individuals and married couples.
Could the debt limit increase soon? Our South Florida bankruptcy lawyers can provide you with more information.
Current Chapter 13 Bankruptcy Debt Threshold
Currently, and through March 2028 unless new legislation is passed — which we will discuss in more detail below — the debt thresholds for Chapter 13 bankruptcy are $526,700 for secured debts and $1,580,125 for unsecured debts. What those thresholds mean is that if your debt is at or above those ceiling limits, you are ineligible to file for Chapter 13 bankruptcy. It is also important to understand that you cannot combine those thresholds for a total debt limit — secured and unsecured debts are assessed separately.
During the pandemic, the Chapter 13 debt ceiling was temporarily raised to allow more struggling consumers to file for this type of reorganization bankruptcy. However, that temporary debt threshold increased “sunsetted,” or came to an end, resulting in the current debt thresholds that apply to filers.
Senators Grassley and Durbin Seek Increase in Chapter 13 Debt Threshold
According to a recent news release from United States Senators Durbin and Grassley’s offices, the Chapter 13 debt threshold may soon increase if proposed legislation is passed.
The bipartisan Bankruptcy Threshold Adjustment Act of 2026, co-sponsored by Durbin and Grassley, recently passed unanimously in the Senate. Depending on how the House votes, the legislation could soon become law, raising the Chapter 13 debt threshold permanently to $2.75 million for consumers with no distinction between secured and unsecured debt.
Contact a West Palm Beach Bankruptcy Attorney Today About Your Eligibility to File for Chapter 13 Bankruptcy in Florida
When an individual, or a married couple filing jointly, wants to consider filing for Chapter 13 bankruptcy, it can be extremely frustrating to learn that there is too much existing debt to qualify. The current Chapter 13 bankruptcy debt threshold, as we discussed above, has particular limits for both secured and unsecured debt, and it does not allow debtors to mix and match in order to qualify. Instead, if a potential Chapter 13 debtor has too much secured or unsecured debt to qualify, they will typically file for Chapter 11 bankruptcy instead. While Chapter 11 bankruptcy has many of the same benefits associated with Chapter 13, it is more expensive and more complex, and thus consumers will want to file for Chapter 13 instead if they are eligible. Soon, it may be the case that the Chapter 13 threshold is changed so that more debtors qualify. To discuss your eligibility for Chapter 13 or Chapter 11 bankruptcy, contact one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC today.
Source:
congress.gov/bill/119th-congress/senate-bill/3977
