Step aside February 29th, April 1st is the real leap year for 2016. No, the calendar didn’t change; rather, the federal government will adjust the Bankruptcy Code’s dollar amounts to correspond with inflation, something it does once every three years. Specifically, section 104(a) lists all of the parts of the Bankruptcy Code containing dollar figures and adjusts them to rise with the consumer price index as published by the Labor Department, rounding them to the nearest $25 amount. The Judicial Conference of the United States has obliged, publishing the updated figures in February along with one modification in March.
Bankruptcy inflation adjustments help debtors quite a bit because in most circumstances they allow debtors to keep more money away from creditors or out of the bankruptcy estate in some form or another. Here are seven examples:
(1) Federal property exemptions – Section 522(d)(1)-(8):
Automobile equity: $3,775
Household furnishings: $12,625 total with no more than $600 in any one item.
Wildcard exemption: $1,250 plus up to $11,850 for an unused homestead exemption.
Professional tools: $2,375
Accrued life insurance: $12,625
Personal injury claims: $23,675
(2) Retirement Accounts – Section 522(n):
Aggregate value exempted from individual retirement accounts: $1,283,025
(3) Chapter 13 debt limits – Section 109(e):
Noncontingent, liquidated, unsecured debts: $394,725
Noncontingent, liquidated, secured debts: $1,184,200
(4) Means test dollar amounts – Section 707(b):
No presumption of abuse if monthly disposable income is less than $7,700
Presumption of abuse if disposable monthly income is greater than $12,850
(For information on how these numbers work, read this article on the mechanics of the means test.)
(5) Exceptions to discharge – Section 523(a)(2)(C):
Consumer debts incurred within 90 days of filing bankruptcy: $675
Cash advances incurred within 70 days of filing bankruptcy: $950
(More on these exceptions here.)
(6) Education exclusions from the bankruptcy estate – Section 541(b):
Education IRA funds: $6,425
Prepaid tuition credits: $6,425
(7) Involuntary bankruptcy – Section 303(b):
Minimum aggregate claims necessary to commence involuntary chapter 7 or chapter 11 bankruptcy: $15,775
In all, the inflation index rose 3.016 between January 2013 and January 2016, rounded to the nearest $25 amount.
Although there hasn’t been much consumer-price inflation since 2013, it’s been pretty significant since the 1990s when the adjustment law was passed. It’s a good thing the increases are automatic or else debtors would lose substantial benefits from the Bankruptcy Code as time goes on. Low inflation is going to persist into the future, but filing bankruptcy shortly after April 1 rather than later will maximize the benefits of the dollar-amount adjustments.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.