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|

I made a mistake on my tax return, what should I do?

If you made a mathematical error on your return, often times the IRS will automatically fix the error.  After correcting the mistake, the IRS will send you a notice that shows the changes made to your return (usually a CP11 or CP12).  Before correcting your return for a mathematical error, you may want to call the IRS at 1-800-829-1040 to see if they have fixed it for you.

If you forgot to include a form or schedule to your return, it is very likely that the IRS will send you a notice requesting just the missing form(s) and/or schedule(s) which means you will not need to do anything other than send in the requested items. (more…)

What Is A Homestead Exemption?

Debtors often ask us what will happen to their home if they file for bankruptcy protection.  Fortunately, federal bankruptcy law and most states provide for what is often called a “homestead exemption”.  A homestead exemption acts as a shield against the claims of certain creditors.  It does this by protecting up to a specific dollar amount in real property.  Homestead exemptions are particularly important for debtors with equity in their home.  On the other hand, where a consensual lien on real property, such as a mortgage, exceeds the home’s value, the homestead exemption does not apply since there is usually no equity in the home to protect.

There are certain requirements for the homestead exemption to apply.  For instance, the real property typically must be kept as the debtor’s residence.   And depending on the state where the debtor resides, the debtor may elect to apply the federal homestead exemption over their state’s homestead exemption.  As of April 2010, the federal homestead exemption was $21,625.  Federal exemptions are not generally available to Oregon residents.  However, Oregon has protected much more home equity for its residents. (more…)