In June, the president signed into law new bankruptcy legislation that expanded and simplified eligibility for Chapter 13 bankruptcy by changing and increasing the debt limits. In the bankruptcy world, this is incredible news, as it may be incredible news for you.

Chapter 13 debtors now can have up to $2.75M in debts and qualify for the Chapter 13 reorganization. You no longer have to do a two-part analysis that counts secured and unsecured debts separately. The distinction has been eliminated. Thus, regardless of how a person’s debts are divided between secured and unsecured debts, so long as the total liquidated debt is under $2.75M, they can qualify for Chapter 13 relief.

Why is this increase so important?

Homeowners in high-cost real estate markets needing bankruptcy protection may no longer be pushed into individual Chapter 11 cases. Chapter 11 cases are much more complex, costly, and often less successful than Chapter 13. In fact, the attorney fees in Chapter 11 are quite often not affordable for most people. Chapter 13 is a much simpler, more cost-effective method to reorganize. An example of who Chapter 13 may help includes the small business owner who invests in rental properties. Previously, under the old law, if you had secured debts of more than $1,395,875, you did not qualify for Chapter 13. Now, with the higher debt ceiling, many additional individuals will qualify.

Another group that stands to benefit are individuals in business, who either do business as individuals or who have guaranteed the debts of their corporation. The list can go on: those with high tax debt, large judgments, or massive student loans also now have Chapter 13 relief as an option.

The new Chapter 13 law basically makes reorganization for high-debt individuals affordable. While Chapter 11 is basically financially out of reach for most people, the increased debt limits in Chapter 13 allow a whole group of people to have an opportunity to fix their financial problems and save their assets.

If you or someone you know has significant debt but was told that Chapter 11 was their only hope, Chapter 13 may now be their best option. For a free consultation to discuss your debt issues, please contact me at 888.235.4357, and we will find your financial solution.

Have a great weekend,


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