Debt Restrictions In Bankruptcy : Finance

Both Chapter 7 and Chapter 13 bankruptcy have acceptability specifications which can stop individuals from being able to file under that specific chapter. The most well known being the mean-test need under Chapter 7. Basically if an individual earns above a specific amount, that person won't be fit for Chapter 7 protection, and may only be eligible to file for Chapter 13. Unlike Chapter 7 , however , Chapter 13 has debt restrictions which have increasingly caused more folk to not have eligibility to file.

Section 109(e) of the Bankruptcy code places constraints on the amount of debt that an individual might have so as to file for Chapter 13. So as to be accepted to file for Chapter 13, an individual must have less than $360,475 of unsecured debt, and must have less than $1,081,400 of secured debt. Since these numbers on first look seem exceedingly high, plenty of our clients are typically shocked when they discover that they will not be admissible because they surpass those debt limits.

The reason why more of our customers are having issues with surpassing the debt limitations of 109(e) is thanks to the shortage of equity in their houses. The collapse of the housing market hit SW Florida as hard as anywhere else in the USA. A direct effect of the housing market collapse is that many people in SW. Florida now owe more on their home than it is worth. The amount that a homeowner is underwater on their home counts toward the $360,475 unsecured debt limit. Also , if a homeowner is underwater on their first loan and they have also got a 2nd mortgage, that complete second mortgage would be considered unsecured. Since so many house owners are underwater on their houses, many of them are discovering that they would surpass the unsecured debt limit regardless of if their other debt is low.

Fresh Florida cases have eased these limitations somewhat , at least for married debtors who file jointly. In In Re Scholz and In Re Hannon the bankruptcy court held that married people can stack their debt limits while each spouse would be in a position to file their own individual Chapter 13. In In Re Scholz, a married couple filed a Chapter 13 petition with $386,221.31 of unsecured debt and the Chapter 13 Trustee moved to dismiss the argument for surpassing the unsecured debt limitation. The Judge overruled the Trustee?s objection and authorized the couple to continue with their joint Chapter 13 because as individuals, each debtor was below the $360,475 limit. It was just when their debt was mixed that they exceeded the debt limits. If married debtors are each able to file individual Chapter 13 Petitions, they may file a joint Chapter 13 petition regardless of a mixed debt total which exceeds the 109(e) limits.

See In re Scholz, no. 6:10-bk-08466-ABB (Bankr. M.D. Fla. 2011) and In re Hannon, 23 Fla. L. Weekly Fed. B132 (Bankr. S.D. Fla. 2011).

Jonathan Bierfeld is a Fort Myers bankruptcy lawyer with The Martin Law Firm, P.L. He?s admitted to practice law in the State of Florida and the Fed. Court for the Middle District of Florida. If you happen to be looking for Fort Myers, Cape Coral or Naples Bankruptcy lawyers contact The Martin Law Firm today.

Source: http://www.theyellowads.com/finance/debt-restrictions-in-bankruptcy

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