Above unsecured debt limits, what happens now?

[louie123]

Hi,

I am above my unsecured debt limits in claims by about $18K.

What happens now?

My attorney states he has “no idea”.

Are the trustees deadlocked with the ceiling of the unsecured limit of $419,250?

[justbroke]

There is no debt limit for a Chapter 7.

The debt limit, found in 11 USC 109(e), has to do with "who can be a debtor" in a Chapter 13s. A debtor that is not filing a Chapter 7, and wish to file a reorganization, such as under Chapter 13, may not file a Chapter 13 if they are outside certain limits. This is because a Chapter 11 deals better with large amounts of debt, and a debtor that is outside the Chapter 13 limits will be forced to convert to a Chapter 11.

So long as you fit into a Chapter 7, there is no issue at all since there is no debt limit for a Chapter 7.

[despritfreya]

Has anyone (other than yourself and your attorney) raised this issue. As I indicated in your other thread, you would typically be facing a Motion to Dismiss or an objection by the Trustee in his/her recommendation.

Debt limits are jurisdictional however, I have seen cases pass through when no one raised the issue. If you do get caught you would either convert to a 7 or 11 or let the case get dismissed. No way for us to comment on what might be better since we do not know your circumstances. This is for a discussion with your attorney. If he/she does not handle Chapter 11 cases he/she should be able to refer you to an attorney that does.

Des.

[justbroke]

I'm lost. This was posted in the Chapter 7 area of the forums. I didn't make the connection that louie123 filed a Chapter 13. It appears that this was cross-posted in both the Chapter 13 and Chapter 7 area of BKForum.

My original post was based on the fact that this was also cross-posted into the Chapter 7 area.

I'm merging this into the Chapter 13 area post https://www.bkforum.com/forum/before...at-happens-now

[despritfreya]

I'm lost.

No you're not. You are right where you are suppose to be.

[louie123]

Has anyone (other than yourself and your attorney) raised this issue. As I indicated in your other thread, you would typically be facing a Motion to Dismiss or an objection by the Trustee in his/her recommendation.

Debt limits are jurisdictional however, I have seen cases pass through when no one raised the issue. If you do get caught you would either convert to a 7 or 11 or let the case get dismissed. No way for us to comment on what might be better since we do not know your circumstances. This is for a discussion with your attorney. If he/she does not handle Chapter 11 cases he/she should be able to refer you to an attorney that does.

Des.

Hi, the trustee has not made a motion to dismiss, yet. However, the day I filed, I was below the limits by a few thousand dollars. I remember you spelling out the law “on the day of filing”. Obviously some interest and fees were tacked on from the day I filed until the day the creditors received notice of the CH13 filing.

The claims deadline is tomorrow, so not sure if the trustee waits until after that time to make any objections.

Furthermore, I heard that a creditor AND the trustee must object to being over the limits, not just one or the other. Any truth to this?

I cannot see them throwing it out, just speaking from a sensical point-of-view. If they did, and I decided not to pay any creditor a penny, no one would get anything, not even the trustee get their fee.

However, I’m trying to do the correct thing here, file, make payments and get a discharge like a man.

[despritfreya]

I heard that a creditor AND the trustee must object to being over the limits, not just one or the other. Any truth to this?

Not correct. Debt limit is jurisdictional meaning the court cannot (should not) allow the case to proceed. The issue can be raised by any interested party and/or the judge. However, cases do slip through because no one is looking.

Des.

[justbroke]

At least some of the Florida bankruptcy courts have opined that they can only look to the schedules and not the claims. However, they also opined that should the schedules show debt as contingent or subject to litigation (unliquidated), then the court could determine whether those scheduled debts should be included in the limit.

Ordinarily, the Court is limited to reviewing the Debtors’ schedules in determining the Debtors’ eligibility for Chapter 13 relief. The Court cannot look to the proofs of claim actually filed to determine whether the Debtors are eligible for relief under Chapter 13 when the Debtors are otherwise ineligible on the face of their schedules. The Court, however, can look beyond the Debtors’ schedules to determine whether certain debts are contingent or unliquidated if the Debtors did not file their schedules in good faith.

(From a 5 case consolidated opinion from a Florida bankruptcy court in 2011.)

This ruling is based, in part, on the 11th Circuit's 1996 case. That case was United States v. Verdunn, 89 F.3d 799, 802 (11th Cir. 1996) and was about determining what is unknown or unliquidated, versus what is known.) So, at least in Florida, they will normally just go by what was scheduled. If something looks fishy -- as in the debtor marked some larger debts as contingent/unliquidated to avoid the 109(e) limitations -- then the court could look beyond the schedules. Otherwise, we pretty much go by the schedules here.

I do not know how Pennsylvania handles this.