On April 1, 2016, the debt limit to file for Chapter 13 Bankruptcy increased:

Secured Debt Limit is $1,184,200

Unsecured Debt Limit is $394,725

This means that people who could not file for Chapter 13 Bankruptcy protection because of the amount of their debts prior to the April 1, 2016 increased might qualify now that the debt limit increased.

Only noncontingent, liquidated debt applies to the debt limit.  Debts that are contingent, unliquidated or disputed are not counted toward the debt limits.

Contingent Debt is a debt that is triggered or depends on an event.  If the event does not occur, then there is no debt.

Unliquidated Debt is a debt where the exact amount is unknown.

Disputed Debt is a debt where the existence and amount is in dispute.

Secured debts are debts that are secured by a collateral so that if borrower defaults the lender can foreclose or repossess the property.  Some examples are mortgage on your house or commercial property, car loan, auto title loan, furniture loan, equipment loan, etc.  It does not have to be loan used to purchase the property but are attached to a specific property like auto title loan, property tax, IRS tax lien, etc.

Unsecured debts are debts that are not secured by any collateral.  For example, credit cards, medical bills, student loans, payday loans, unsecured IRS tax debt.

If the amount of debt exceeds the debt limit, another option is Chapter 7 Bankruptcy if income qualifies under the means test.  However, Chapter 7 Bankruptcy is liquidation and should be chosen with caution if the value of your assets falls outside the protection of the California exemptions.  Another option is Chapter 11 Bankruptcy if there is concerns about liquidation of assets.  However, the costs and disadvantages of Chapter 11 Bankruptcy should be balanced against the benefits.

For more information about Chapter 13 Bankruptcy qualification, call Muoi Chea, Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA, where she also helped residents of surrounding cities like Elk Grove, Citrus Heights, Roseville, Natomas, Davis, Yuba, Vacaville, Tracy, and Modesto, CA, etc get out of debt.