HOW DOES THE CHANGE OF EXEMPTIONS AND CHAPTER 13 DEBT LIMITS  HELP ME WITH MY BANKRUPTCY FILING?

On April 1, 2019, the US government updated the Federal Register with new bankruptcy exemptions and Chapter 13 debt limits.

Some examples of the changes are the homestead exemption increased from $23,675 to $25,150 and the wild card exemption increased from $1,250 to $1,325 plus the unused homestead exemption from $11,850 to $12,575.

In addition the motor vehicle exemption increased from $3,775 to $4,000, household property from $12,625 to $13,400 and jewelry from $1,600 to $1,700.  Also tools of trade increased from $2,375 to $2,525, life insurance from $12,625 to $13,400 and a personal injury claim from $23,675 to $25,150.

Finally, the debt limitations for Chapter 13 from $394,725 to $419,275 in unsecured debt and $1,184,200 to $1,257,850 in secured debts.

Because of the increase in exemptions, it could make a difference whether you have to file a Chapter 7 or Chapter 13.

For example, if you owned a home that you were current on which was worth $200,000 and you had a mortgage balance of $155,000 and no other substantial assets or financial accounts, I would have recommended that you file a Chapter 13 prior to April 1, 2019 because there would be a possibility that a Chapter 7 trustee would sell your home since you would have a few thousand dollars of non-exempt equity.  However, with the same facts today, you would be eligible for a Chapter 7 since the exemptions have increased from $23,675 to $25,150 which would cover your exemption.  Also, when you add the increased exemptions from automobiles, tools of the trade, jewelry and life insurance, it could make a difference whether a trustee will sell your property with the higher exemption.

Thus, the new exemptions can help you qualify for a Chapter 7 when you didn’t before or lower your payments to general unsecured creditors in Chapter 13.

The other major advantage under the new adjustments is that there are increased debt limitations for a Chapter 13.

In the past if you wanted to save your property, you would not be eligible for Chapter 13 if you had unsecured debt over $394,725 or secured debt over $1,184,200.  In the past, people would be forced to file an individual Chapter 11 to save their property which is extremely costly.  Thus, with the changes in the law, debtors with substantial property may be able to qualify for an individual reorganization under Chapter 13.

Steven N. Taieb, Esq. has been a South Jersey Bankruptcy Attorney for over 34 years and is board certified in consumer bankruptcy law by The American Board of Certification which is accredited by The American Bar Association.