Bankruptcy Code Section 109(e) sets out what are known as the “debt limits” for Chapter 13 cases. This Code section provides that only a person whose debts are less than a certain amount may file a Chapter 13 case.
As of April 1, 2016, those limits have changed. For cases filed April 1, 2016 and later, the limits are now $1,184,200 for non-contingent, liquidated secured debt (up from $1,149,525) and $394,725 for non-contingent, liquidated unsecured debt (up from $383,175).
If you owe more than these debt limits you are not eligible to file Chapter 13 – you can only file Chapter 7 or Chapter 11.
Note that the Code refers to non-contingent and liquidated debt.
A contingent debt is one that comes due only if something else happens. For example, if you sign a personal guarantee for $10 million corporate loan that would obligate you if the corporation defaults, you could still file Chapter 13 because the guarantee is a contingent debt. On the other hand, if the corporation has defaulted and the guarantee has been exercised, the debt would be non-contingent and you could not file Chapter 13.
A liquidated debt is one where the amount you owe can be calculated. For example, if a tree in your yard fell on a neighbor’s house and caused personal injury and property damage, and you are sued for “an amount to be determined and pain and suffering,” the debt you owe cannot be calculated. On the other hand, if your neighbor sues you and obtains a judgment for $2,153,425.33, that debt is liquidated because we know exactly how much you owe.
If you owe or potentially owe debt that approaches the Chapter 13 debt limits, it would be wise to consult with a bankruptcy lawyer sooner rather than later as the timing of your filing could be important.
There are no “debt limits” for Chapter 7 cases, but you have to meet other qualifications for Chapter 7.