If you have significant debt but have been told that you cannot file a Chapter 13 consumer bankruptcy, now you can file bankruptcy and not risk dismissal by the U.S. Trustees office. This change occurred because the Bankruptcy Threshold Adjustment and Technical Corrections Act was signed into law yesterday. Prior to this Act, someone with high debt was forced into a Chapter 11 — which is extraordinarily expensive and time consuming for the average consumer. A Chapter 13 is much more cost-effective and efficient to reorganize someone’s finances.
While the name of this Act is thoroughly boring, it is very practical and necessary. This Act fixes a recurring problem that has reared its head more in the past year than ever before. Student debt has reached such a high number for many borrowers, that it was actually preventing someone from filing bankruptcy to address that student debt, or even to get rid of ordinary household debt or stop a foreclosure.
Now the debt limit for an individual filing a Chapter 13 is $2.75 million and the Act also removes the distinction between secured and unsecured debt. This new law is temporary and will sunset on June 21, 2024. So basically, this means that if you wait two years to file, you will NOT receive the benefit of this debt increase and may again, be prohibited from filing bankruptcy.