13 Aug Do I Owe Too Much to File for Chapter 13?
In recent years, many clients have learned that they owe too much to file for Chapter 13 reorganization. Unlike Chapter 7 and Chapter 11, there are limits to how much you can owe for you to qualify for Chapter 13. Currently (the numbers are indexed for inflation) you cannot owe more than $360,475 in unsecured debt, or more than $1,081,400 in secured debt.
Secured debt is debt where you have pledged collateral as security for the loan. Typically, car loans and mortgages are secured.
Unsecured debt includes not only things such as most credit cards, personal loans and doctor’s bills, it also covers most taxes and, if your owe more on your car or house than it’s worth, the difference. For example, if you have a house that is worth $200,000, and have a $250,000 mortgage, $50,000 is treated as unsecured.
Given today’s economy and the housing market, many clients end up over the debt limits, and need to file a Chapter 11 instead.
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