Secured Debt Versus Unsecured Debt in Reorganization Bankruptcies
Is your business planning to file for reorganization bankruptcy under Chapter 11 or Subchapter V? Or are you planning to file for an individual reorganization bankruptcy under Chapter 13? If so, it is essential to understand how the nature of your debt might affect your bankruptcy case. More specifically, you will need to work with an attorney to understand whether your debts will be classified as secured or unsecured debt, and how those classifications may play important roles in your bankruptcy case.
Debt Limits Are Different for Secured and Unsecured Debt in Chapter 13 Cases and Cannot Be Combined
First, if you are planning to file for Chapter 13 bankruptcy — as an individual or sole proprietor — it is crucial to know that there are set debt limits that include thresholds for secured and unsecured debt separately. At present, the limits are $1,580,125 for secured debt and $526,700 for unsecured debt. You cannot combine secured debt amounts with unsecured debt to meet the debt ceiling requirement.
There is also a debt limit for Subchapter V bankruptcy, but that threshold of $3,024,725 includes combined secured and unsecured debt.
Secured Debt Must Be Repaid in Full in Your Reorganization Bankruptcy Plan
In any type of reorganization bankruptcy, whether you are a business debtor or individual debtor, you will need to create a repayment plan with terms that involve repaying your secured debt in full. Secured debt is any debt you have for which there is associated collateral, such as a home loan, commercial property loan, or vehicle loan.
Priority Unsecured Debt Also Must Be Repaid Fully in Your Reorganization Case
Some types of unsecured debt that are classified as priority debts will also need to be repaid in full. Accordingly, you will need to work with your bankruptcy lawyer to determine which of your unsecured debts must be repaid in full. Priority debts are typically set by the Bankruptcy Code, and they can include employee wages owed, for example, or family support owed.
Unsecured Nonpriority Debt May Be Eligible for Discharge at the End of Your Bankruptcy
Depending on your financial circumstances, unsecured nonpriority debt may be eligible for discharge at the end of your reorganization bankruptcy case if you meet all of the requirements and complete the terms of your repayment plan.
Contact Our West Palm Beach Bankruptcy Attorneys for Assistance with Your Reorganization Bankruptcy in Florida
Whether you are a business planning to file for Chapter 11 or Subchapter V, or you are an individual planning to file for Chapter 13 bankruptcy, it is essential to understand how secured and unsecured debts are treated in reorganization bankruptcy cases. As we discussed above, the differences in these types of debt can have a significant impact on the amount that you will need to pay as part of your repayment plan, and whether certain debts you owe can be eligible for discharge. To have your questions answered or to begin working on your bankruptcy petition, you should get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC. Contact our firm today to learn more about how we can assist you.
Source:
law.cornell.edu/uscode/text/11
