Earlier this year, President Biden signed the Bankruptcy Threshold Adjustment and Technical Corrections Act (the “Act”) updating certain statutory thresholds for eligibility to be a debtor in Chapter 13 and Subchapter V of Chapter 11. The changes significantly increased the ceiling for eligibility for Chapter 13 relief. Previously, to be a debtor in Chapter 13, an individual with regular income could have no more than $465,275 non-contingent, liquidated unsecured debts and no more than $1,395.875 in non-contingent, liquidated secured debts. Under the new Act, eligible debtors can have up to $2,750,000 in aggregate debts, without regard to whether they are secured or unsecured. The expanded debt limits are effectively retroactively to April 1, 2022.
Additionally, the Act reinstates the debt ceiling for eligibility under the Small Business Reorganization Act (“Subchapter V”) at $7,500,000. The debt limit under Subchapter V eligibility was originally set at $2,725,625 when it was enacted in 2019 but was temporarily expanded to $7,500.000 under the CARES Act in 2020. That expansion lapsed on March 27, 2022, and the debt limit reverted back to the original amount of $2,725,625. The Act’s reinstatement of the limit to $7,500,000 is retroactive to March 27, 2022.
The expansion of the debt limits in both Chapter 13 and Subchapter 5 were greatly needed, especially in high coast areas like Massachusetts where the prior debt limited disqualified many individuals with large home mortgages. Unfortunately, these changes are only temporary and, unless extended again by Congress, it will sunset on June 21, 2024. The changes made by this Act makes Chapter 13 and Subchapter V relief available to many more individuals and small businesses that otherwise would not have qualified to file under their preferred Chapter. With the costs of living and doing business rising and a recession predicted, greater access to bankruptcy relief could benefit thousands of people and businesses.
If you are struggling to pay personal or business debts, Attorney Marques Lipton can help. He has helped hundreds of Massachusetts residents restructure and/or eliminate their debts through bankruptcy, while keeping the things that are most important to them. Call today for a free initial consultation.