Chapter 13 Bankruptcy Limits

Filing for bankruptcy under chapter 13 is basically a way to reorganize the payment of one's debt. In case of chapter 13 one pays his debt in fixed (3 to 5 years) period of time, once approved by the bankruptcy court. There are various factors that determine you payment structure.

However, sometimes there are chances that you owe too much of money. In that case filing of chapter 13 can be difficult. Hence, before you file for chapter 13. You need to know what are the approved limits set by the government.

A very common question asked before filing of chapter 13: "is there any debt limit in case of filing for chapter 13?" To this the answer is yes and you will find the answer in Section 109 (e) of the U.S. Bankruptcy Code that describes the debt limits.

According to this section a person with regular income can only apply for chapter 13. The individual's liquidated and unsecured debt on the date of filing for bankruptcy should be less than $250,000 whereas in case of secured debt the figure is $750,000.

This figure is subject to change as they are adjusted based on annual cost of living. This figure is decided based on Consumer Price Index for a given period of time issued by the U.S. Department of Labor.

Once you have decided that you will file for chapter 13, talk to your attorney and get some advice from him whether or not you are eligible for applying this petition and that your debt fall into the limits given under section 109 (e) of the U.S. Bankruptcy Code as on the date you are filling the petition.

In case you file for chapter 13 and your case exceeds the debt limit then, automatically you will be forced to get converted into chapter 7 or chapter 11 of U.S. Bankruptcy Code. In fact, there are even chances that your case gets dismissed and then you will have a problem in the long run.