Can someone explain "debt limits"

[anuta]

On another thread the subject of debt limits was touched on. What exactly does "debt limits" mean? For example, If our unsecured debt is $350K, would that mean that we would not be able to file Chapter 13? Does it depend on income? Or is the thought by BK courts that one could not pay above the debt limit?

[optimistic1]

From the Nolo Book,

Your Debts Must Not Be Too High, Page 26

You do not qualify for Chapter 13 Bankruptcy if your secured debts exceed $1,010,650 or your unsecured debts are more than $336,900. For example if you owe two million dollars on your home, you can't file a Chapter 13 Bk. The same would be true if you owed $100,000 on a student loan, $100,000 on unsecured credit card debt, and $150,000 on a court judgment due to injuries resulting from a car accident in which you were negligent.

Make sure you have classified all of your debt correctly to determine if you really owe 350k.

If you exceed the 336,900, then you would not be able to file, period.

[justbroke]

As optimistic points out, just how do you now you have $350K in unsecured debts? Are you already including a HELOC or other secured debt that you think will become unsecured?

What optimistic posted is spot on as to the limits for Chapter 13.

[BigJohn]

Are interest and late fees included? If they are, recalculate the interest. The interest is generally calculated wrong.

[anuta]

If you exceed the 336,900, then you would not be able to file, period.

Our secured debt is $80K. Our credit card debt is $350K. All of our unsecured debt is cc's. I'd say at least 1/2 of the CC debt is interest, but I don't think that would matter. We put a whole lot of medical and dental debt on our cc's about 9 years ago and used our cc's heavily in the winters to live due to a seasonal business. My DH went back to school in 2005 and the reduction in income hit us hard--much harder than we thought it would. We struggled with min payments until last year and just couldn't make it anymore.

Due to the amount of our debt (unsecured, I believe) then we cannot file for chap. 13 and Chapter 7 is our route, is that correct?

BTW--many thanks for the replies (:

[anuta]

Also, we owe back taxes to the state for our business--we are working on a payment plan now. That is another 20K. I think this would be secured. The way I figured our unsecured debt was to go to our credit reports and see what each listed. I also used the cc statements --but almost all have stopped sending us bills. I also have letters from bill collectors saying what we owe.

[justbroke]

You can file for Chapter 11 as well, but it takes longer and is harder to deal with. If you file Chapter 11 with and through an attorney (which in all practicalities is a must), it will cost much more than a Chapter 13 or Chapter 7.

So your choice is Chapter 11 or a straight liquidation through Chapter 7... if you so qualify. If you don't qualify for Chapter 7, due to income or having the ability to pay for a Chapter 11 (needs test) you can only file the Chapter 11/13.

Not questioning you, but have you actually added up all the debt to the penny? I was personally within a few hundred dollars of the $336,900 limit! I made it by the skin of my teeth.

[anuta]

I did add up everything off of our credit report back in Dec. Just in the last few weeks I got a bill on the total of the taxes I owe--so my total is as close to accurate as I can get it. I would be ok with a Chapt 7. I don't think we would last very long in a 13 without 2 incomes. Still another year before that will happen on a regular basis.

[HHM]

Whether you're a chapter 7, or some other chapter depends on your income. If you are above median income or otherwise do not qualify for a chapter 7, and you exceed debt limits for a chapter 13, then you could file chapter 11.

Odds are, you are probably a chapter 7, but without more info, who can say.

[anuta]

Whether you're a chapter 7, or some other chapter depends on your income. If you are above median income or otherwise do not qualify for a chapter 7, and you exceed debt limits for a chapter 13, then you could file chapter 11.

Odds are, you are probably a chapter 7, but without more info, who can say.

We will probably come in slightly above the median income, however, once legit business expenses are deducted (employee wage,taxes,COGS, supplies etc) we will probably qualify.

My DH will have to work during his summer break (we need the money) and that is probably what will throw us slightly over the median.

[anuta]

Justbroke--

Would you have had to file Ch. 11 had you not made the 13?

[justbroke]

Would you have had to file Ch. 11 had you not made the 13?

Yes. And I was prepared to convert (like $700) and to also file it pro se. Chapter 11s can be fun in that you get a new title as "debtor-in-possession" You're basically your own Trustee, unless the case gets mandated to have a Trustee.

I looked into this ad naseum and you'll see some old threads of mine where I'm praying down to the last mine at like 11:59PM for claims to be filed!

[anuta]

Justbroke--you have more moxie than I --I "just" want mine to be simple. I worry it wont be, especially since we have so much unsecured debt. I've certainly had time to get used to the idea of BK--still--I feel so thin skinned about the whole process. I'll have to do some reading up on chapter 11.
Thanks for all your answers (:

[HHM]

Just go get an attorney, no case with $350K unsecured is going to be "simple". Cases with that much debt are routinely scrutinized. Don't be cheap, get help.

[justbroke]

Justbroke--you have more moxie than I --I "just" want mine to be simple. I worry it wont be, especially since we have so much unsecured debt. I've certainly had time to get used to the idea of BK--still--I feel so thin skinned about the whole process. I'll have to do some reading up on chapter 11.

I will reinforce what HHM posted and say that you should get a lawyer anyhow. You have a large debt load (almost 50% of my unsecured debt was from cramdowns and the lien strip). Of course, going Chapter 11 pro se is highly not recommended.

Sure, I can sit here and say "I was going to file Chapter 11 pro se" all I want. That's about as much moxie that I have. (BTW, I did see Night at the Museum: Battle of the Smithsonian... and Emilia did say "moxie" a bit too much! She wouldn't shut up either! )