Chapter 13 Limits Increase to $2,750,000

Today, June 21, 2022, President Joe Biden signed the Bankruptcy Threshold Adjustment and Technical Corrections Act which increased the debt limits of Chapter 13 bankruptcy proceedings to a combined total of $2,750,000.  Until today, 11 USC §109(e) limited the eligibility for Chapter 13 proceedings to  individuals with unsecured debts of no more than $465,275 and secured debts of no more than $1,395,875.  Under SB 3823, debtors no longer are required to limit debts in specific categories as secured and unsecured.  Total combined unsecured and secured noncontingent, liquidated debts need only be limited to $2,750,000.

The legislation will sunset in two years and the elibibility limits of Chapter 13 under 11 USC §109(e) will revert to the prior amounts if the statutory change is not extended or modified.  The Act was adopted by unanimous consent in the Senate.  It was introduced by Senator Chuck Grassley (R-IA), with cosponsorship from Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and John Cornyn (R-TX).  SB 3823 was enacted in the House with an overwhelming bipartisan vote of 392 for and only 21 against. This extensive support signals that the debt limits may well be extended again or made permanent before the bill sunsets in two years.

With inflation running at its highest rate in more than 40 years and skyrocketing home prices, this change in the law will allow more financially troubled homeowners and consumer debtors to seek help from the bankruptcy court in reorganizing their finances.  Even some small business owners with debts that exceed the prior limits, many of whom were victims of the COVID-19 related downturn, can now look to Chapter 13 as a viable alternative to bankruptcy liquidation under Chapter 7 or a much more expensive Chapter 11 proceeding.

By |Jun 21, 2022|Categories: Uncategorized|

2022 Increases in Filing and Exemption Limits for Bankruptcy Cases

The Bankruptcy Code is full of specific dollar limitations and allowances. These figures include dollar limits on eligibility for use of Chapter 13 and many other amounts, such as the value of exemptions permitted to bankruptcy debtors under 11 USC §522. All of these dollar amounts are adjusted by the amount of change in the Consumer Price Index for All Urban Consumers in the manner set out in 11 USC §104(a), a part of the bankruptcy code. The adjustment occurs every three years on April 1st and is based on the amount of change that has occurred over the previous three years ending December 31 the year before the adjustment. Dollar amounts are rounded to the nearest $25 and the adjustment applies to other limits set forth in the bankruptcy code.

The Judicial Conference of the United States has given notice of the changes going into effect for cases filed after March 31, 2022. Chapter 13 cases are now permitted for individuals with unsecured debts of no more than $465,275 and secured debts of no more than $1,395,875 in all cases filed April 1, 2022, and later. This is an increase of more than $25,000, about the same amount of increase announced in 2019 for unsecured debt.   Secured debt increased by $138,025 over the Chapter 13 limit previously imposed.

In states where federal exemptions are allowed, such as Oregon, the federal homestead exemption will be increased to $27,900 per person. The federal exemption for a car is now $4,450, probably an inadequate exemption in view of the supply related increases for vehicles occasioned by COVID-19 influenced supply shortages of computer chips.

Under the statute governing many federal bankruptcy dollar limitations, if the amount is indexed with an increase due to inflation, it must go up by at least $25.  While many states have opted out of federal exemptions and limit bankruptcy exemptions to those provided in state statute, many other dollar amounts apply to all cases filed in bankruptcy court.  Federal exemptions were allowed in Oregon as of July 1, 2013. These new dollar figures will only come into play for filings on or after the April 1, 2022 effective date, but they may allow more flexibility in Chapter 13 filings.

Relief from Tax Filing Deadline for Oregonians in Wildfire Areas

In a September 16, 2020 press release, the IRS offered Oregonians living in certain counties affected by the recent wildfires some breathing room from the upcoming October 15, 2020 deadline to file their returns. This relief assumes the taxpayer filed the automatic extension from the already extended July 15, 2020 deadline for this tax season due to the Covid-19 pandemic. The Oregon Department of Revenue has also released guidance stating Oregon has followed the IRS and extended the filing deadline for the required state returns.

Who benefits from this tax filing deadline relief? Oregonians living in or operating a business in Clackamas, Douglas, Jackson, Klamath, Lane, Linn, Lincoln, and Marion counties. The IRS and Oregon Department of Revenue will now allow additional time for those taxpayers from the listed counties to file their 2019 tax returns.

How much time? Until January 15, 2021. The recent guidance does not state anything needs to be filed or requested in advance for this filing extension. Nor do you need to have experienced a loss of your home or personal belongings to benefit from this extension in the listed counties.

What exactly is extended to January 15, 2021? Third quarter estimated tax payments that were due September 15, 2020; individual, corporate, and estate and trust income tax returns; partnership returns; S corporation returns; trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and, employment and certain excise tax returns that have an original or extended due date occurring on or after September 7, 2020 and before January 15, 2021 are now all due on or by January 15, 2021.

Not all filings are covered by these extensions. The information returns in the W-2, 1094, 1095, 1097, 1098, and 1099 series are still due. As are Form 1042-S, 3921, 3922, or 8027 and Employment and Excise tax deposits. Penalties on those deposits due on or after September 7 and before September 22, 2020 can be abated as long as the tax deposits were made by September 22, 2020, according to the September 16, 2020 IRS press release.

For those that have experienced losses, not just expenses for evacuation, have the option of claiming disaster related casualty losses on their federal income tax return for the year the loss occurred or in the prior year. Those taxpayers in the affected areas claiming the disaster loss on the 2019 or 2020 tax years should make sure to write “Oregon – Wildfires and Straight-line Winds” in bold letters across the top of Form 4684, Casualties and Thefts. A reference to the disaster declaration number for FEMA is also appropriate on these returns. The disaster number is FEMA 4562. See Publication 547 for details or schedule an appointment with Kent Anderson Law Office for assistance.