Chapter 13 Debt Limit Scheduled to Return to Lower Level if Congress Does Not Act

Responding to the COVID-19 pandemic, Congress in 2022 passed the Bankruptcy Threshold Adjustment and Technical Corrections Act (BTATCA). This legislation greatly expanded the scope of relief granted to debtors under the Small Business Reorganization Act (SBRA) and Chapter 13 of the Bankruptcy Code. Specifically, the law raised debt limits for filers, expanding eligibility for bankruptcy protection and offering a lifeline to debtors by extending measures enacted to combat the economic hardships caused by the coronavirus. However, these increases included a sunset provision, and are now set to expire on June 21 unless Congress intervenes to extend them or make them permanent.  

Under the BTATCA, the debt limit for companies seeking Chapter 11, Subchapter V relief under the SBRA was raised to $7,500,000, while the threshold for Chapter 13 filings was simplified and increased to $2,750,000. Now, the $7.5 million small business debt limit is slated to drop back to approximately $3 million. Likewise, if Congress does not act, individuals submitting Chapter 13 filings cannot have unsecured debts exceeding $465,275 or secured debts exceeding $1,395,875.

While individuals and businesses whose debt load exceeds the old thresholds can hope that lawmakers will maintain the revised limits, they should prepare for what could happen if no action is taken. Timely decision-making is more important than ever for debtors considering bankruptcy. Do not hesitate to speak with an attorney who is aware of the latest developments affecting Chapter 13 and small business bankruptcies. 

The impending deadline seemingly has spurred action from many debtors. There has been a sharp rise in small business bankruptcies where the increased debt limit applies during the first half of 2024. A bipartisan group of lawmakers has drafted a bill that would extend the increased levels for another two years, but until that legislation is passed and signed, you should prepare for what happens when the BTATCA expires. 

Jeff Field & Associates has six Georgia offices to assist individuals and companies facing serious debt issues. You can always rely on us to be up-to-date on bankruptcy laws and how they affect our clients. If you’re considering a Chapter 11 or Chapter 13 bankruptcy, there might not be time to wait before your rights are significantly curtailed. Please call 404-381-1278 or contact us online today for a free initial consultation.