The most common route for filing bankruptcy in New York is file for Chapter 7 bankruptcy. It’s quicker than Chapter 13 and allows people to discharge many types of debt. In some cases, though, a person may be ineligible for Chapter 7 and must file in Chapter 13, which is often called a “wage earners plan” or an “adjustment of debts.” This chapter prevents debtors from losing important types of property, like houses.
However, it’s important to be aware that not everyone is eligible for Chapter 13 due to limits on the amount of debt people can owe. What are these?
For unsecured debt, such as credit card debt, it’s $360,475. For secured debt (houses, cars, etc.) it’s $1,081,400. These numbers are relatively high, so most New Yorkers planning to file for bankruptcy do not need to worry about them interfering with their Chapter 13 filing.
Moreover, the debt limits increase every three years on April 1. In April 2007, for example, the limit for unsecured debt went from $307,675 to $336,900, and from $922,975 to $1,010,650 for secured debt. The last increase saw the limits increase 7% in April 2010; the next one will occur in April, 2013.
The debt limit increases are especially important for people who carry non-dischargeable debt, particularly student loans, which are getting increasing attention in the media because tuition keeps increasing at universities while income for American households does not. Even though these debts are rarely discharged in bankruptcy due to the difficult-to-meet “undue hardship” test, they do count towards the Chapter 13 debt limit. The increases every three years allow people to remain eligible for Chapter 13.
What happens if you are one of the rare individuals whose debt breaches the limit? Other chapters of the bankruptcy code are available, including Chapter 11. People who owe this much money are often the kinds of businesspeople that Chapter 11 was designed for anyway. Consequently, debt limits aren’t something most people really need worry about when deciding to file bankruptcy in New York. However, it’s important to consult with an experienced New York bankruptcy lawyer to guide you to the appropriate chapter.
For more questions about Chapter 7, Chapter 13 Bankruptcy Attorney Brooklyn NY and debt limits, please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.