2022 New Law Alert - Debt Limit Increase in Chapter 11 (Subchapter V) and Chapter 13 Cases
On June 21, 2022, the “Bankruptcy Threshold Adjustment And Technical Corrections Act” (“Act”) was signed into law. The Act adopts new chapter 13 and chapter 11 (Subchapter V) eligibility parameters. It will expire, however, in two (2) years i.e., June 20, 2024.
$2.75 million debt limit for chapter 13 debtorsThe Act now provides that an individual with regular income can file under chapter 13 if the individual owes noncontingent, liquidated debts of less than $2.75 million as of the date of the filing. In the other words, there is no longer distinction between secured and unsecured debt limits, and instead, the Act enacts one debt limit of $2.75 million. By significantly increasing the overall debt limit and eliminating any reference to secured and unsecured debt limits, chapter 13 bankruptcies are now available to more individual debtors who were previously forced to file under chapter 11 primarily due to large mortgages.
$7.5 million debt limit for chapter 11 debtors electing Subchapter VThe Act increased the aggregate debt limit of $7.5 million in Subchapter V cases.