Tri-Annual Statutory Inflation Adjustments

On April 1, 2013, certain dollar amounts contained in the U.S. Code will undergo their three year adjustment.  The full adjustments can be found here, but I want to highlight the numbers that will impact clients of Holbus Law Office, LLC the most.
11 U.S.C. § 109(e).  Although almost any individual is eligible to file Chapter 13 (even if you’re not eligible for a discharge), there are debt limitations to Chapter 13.  That maximum amount of secured debt allowable in Chapter 13 is being raised from $1,081.400 to $1,149,525.  The maximum amount of unsecured debt allowable in Chapter 13 is being raised from $,360,475 to $383,175.
11 U.S.C. § 507(a).  Some debts that are owed to creditors are entitled to priority treatment.  Certain dollar amount restrictions placed on creditors have been increased.  Specifically, wages earned within 180 days of the petition or cessation of business have been increased from $11,725 to $12,475.  Allowable security deposits are being increased from $2,600 to $2,775.
11 U.S.C. § 522(d).  Federal exemption limits are increasing – always good news for the debtors.  The homestead exemption is increasing from $21,625 to $22,975.  The vehicle exemption from $3,450 to $3,675.  The household good exemptions are increasing from $11,525 to $12,250.  Jewelry from $1,450 to $1,550.  Wildcard from $1,150 (+ $10,825 in unused homestead exemption) to $1,225 (+ $11,500 in unused homestead exemption).  Tools of the trade from $2,175 to $2,300.  Life insurance policies with cash value, from $11,525 to $12,250.  Personal injury from $21,625 to $22,975.
11 U.S.C. § 523(a)(2)(C)(i).  Presumption of non-dischargeability on debts incurred just prior to filing for bankruptcy.  The dollar threshold being increased from $600 to $650 for consumer debts incurred within 90 days of filing, and from $875 to $925 for cash advances incurred within 70 days of filing.
11 U.S.C. § 707. Deductions and allowances on the Means Test.  I’m not going to go through each number here, but there are 8 provisions that have been increased anywhere from 5.6% to 8%.
It’s also worth noting that there have also been suggested changes to the bankruptcy forms, which you can read more about here.

Bankruptcy MythBusting #7

Myth:  I don’t have enough debt to file bankruptcy.
Fact:  There is no legal requirement or minimum amount of debt necessary to file for bankruptcy.  There may be more pragmatic concerns, such as whether you have enough debt to make filing bankruptcy worthwhile.  I generally try to discourage people from filing for bankruptcy with less than $6k in unsecured debt because the cost to benefit ratio becomes small, though I’ve had clients insist on filing bankruptcy over less than $4k in debt.  Usually, there is some other factor motivating bankruptcy, not just the amount of debt.  Most people have somewhere between $20k to $80 in unsecured debt.
You can have too much debt.  Chapter 13 has limitations on how much debt you can have.  If your debt exceeds those amounts, and do not qualify for a Chapter 7 Bankruptcy, you could be stuck with the much dreaded Chapter 11 bankruptcy (which is usually for corporations, but individuals sometimes file Chapter 11, too).  Fortunately, very few people have so much debt that they are faced with this scenario.
The good news is that an experienced bankruptcy attorney can look over the facts of your case and determine whether Chapter 7 or Chapter 13 is best for you before you make any commitments. Call (920) 490-6160 now to schedule a free consultation.

New Federal Adjustments

Effective April 1, 2010:
The secured debt limit for a Chapter 13 is $360,475
The unsecured debt limit for a Chapter 13 is $1,081,400
Each debtor can exempt $21,625 in their primary residence (up from $20,200, but still far below the state of Wisconsin’s new $75,000 figure)
The auto exemption is $3,450
The household goods exemption is $11,525
The wildcard exemption is up to $11,975 (assuming there is enough unused homestead exemption)
Additional changes can be found in the February 25, 2010 edition of the Federal Register (Vo. 75, No. 37).