Debt Limits for Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a powerful tool for individuals and sole proprietors (not businesses), but if your obligations exceed Chapter 13 debt limits, you won't qualify for it. You'd need to file for Chapter 11 bankruptcy instead. Learn about debt limits for Chapter 13 bankruptcy and how Chapter 13 allows you to "reorganize" your debts and pay back all or some of your obligations while receiving protection from the bankruptcy court.

Debt limits in Chapter 13 Bankruptcy

Chapter 13 is only available for people who owe less than the Chapter 13 debt limits, which are $1,395,875 of secured debt and $465,275 of unsecured debt for cases filed between April 1, 2022, and March 31, 2025. (A temporary debt limit increase to $2.75 million in total debt reverted to the above limits as of July 2024.)

Where to Find the Current Chapter 13 Debt Limits

The debt limits in Chapter 13 change periodically and sometimes temporarily, so it's essential to verify amounts. Current amounts are posted on the U.S. Courts Chapter 13 Bankruptcy Basics webpage.

Understanding Secured and Unsecured Chapter 13 Debt Limits

Essentially, you'll need to understand how to categorize your debts before determining whether your debts exceed either debt threshold.

Unsecured Debt Limits in Chapter 13 Bankruptcy

Unsecured debt doesn't have property or an asset serving as collateral. For example, if you don't pay most credit card debts, medical bills, utility bills, lawyer's fees, and rent, the lender can't take back the property you purchased on credit.

Before an unsecured creditor can take drastic collection actions, the lender must go to court and get a money judgment against you. A lender with a money judgment can take money out of your bank account with a bank levy or out of your paycheck using wage garnishment. The lender could even seize property. But protections exist. Most states use the same exemptions used in bankruptcy to limit the amount a creditor can take from you.

Secured Debt Limits in Chapter 13 Bankruptcy

To qualify for Chapter 13 bankruptcy, you must have less than $1,395,875 in secured debt for cases filed between April 1, 2022, and March 31, 2025. It's more likely that a Chapter 13 debtor will have a problem with the secured debt limit than the limit on unsecured debt, and here's why.

A secured debt is attached to property serving as collateral. The lender can take the property if the debtor "defaults" or doesn't pay on the loan. The two most familiar types of secured debt are real estate mortgages and car loans. A secured lender you don't pay could foreclose on a house or other real estate or repossess a vehicle.

Remember that other creditors can have 'liens' on your property, which is important because the lien creates a secured debt. Liens on credit purchases for jewelry, furnishings, mattresses, appliances, and electronics are common. Some lenders create a secured debt by putting a lien on your property when you owe taxes or student debt or don't pay for home repairs.

Removing Liens in Bankruptcy

Filers can remove some liens in bankruptcy, such as judgment liens, which reduce your ability to protect property with a bankruptcy exemption. However, liens you voluntarily agree to, such as a mortgage or car loan, or those allowed by statute, will remain. You can learn more about what happens to liens in bankruptcy by reading about lien avoidance in bankruptcy and judgment liens in bankruptcy.