On April 1, 2019, the US government updated the Federal Register with new bankruptcy exemptions and Chapter 13 debt limits.
Changes That Were Made
Some examples of the changes are: the homestead exemption increased from $23,675 to $25,150 and the wild card exemption increased from $1,250 to $1,325, plus the unused homestead exemption from $11,850 to $12,575.
In addition, the motor vehicle exemption increased from $3,775 to $4,000, household property from $12,625 to $13,400 and jewelry from $1,600 to $1,700.
Also, tools of trade increased from $2,375 to $2,525, life insurance from $12,625 to $13,400 and a personal injury claim from $23,675 to $25,150.
Finally, the debt limitations for Chapter 13 went from $394,725 to $419,275 in unsecured debt and $1,184,200 to $1,257,850 in secured debts.
How These Changes Affect Bankruptcy Filings
These increases can impact whether you file Chapter 7 or Chapter 13.
For example, before April 1, 2019, if you owned a $200,000 home with a $155,000 mortgage and no major assets, you likely had to file Chapter 13. The trustee in Chapter 7 might have sold your home since exemptions did not cover all equity.
Today, with the higher homestead exemption of $25,150, the same homeowner may qualify for Chapter 7. Added increases in exemptions for vehicles, jewelry, tools of trade, and life insurance give more protection. This makes it less likely that a trustee will sell your property.
The Advantage of Higher Debt Limits
The new debt limits also expand Chapter 13 eligibility.
Earlier, if unsecured debt exceeded $394,725 or secured debt exceeded $1,184,200, Chapter 13 was not an option. Many people were forced into Chapter 11, which is costly and complex.
Now, with limits raised to $419,275 unsecured and $1,257,850 secured, more debtors with property can reorganize under Chapter 13.
Conclusion
The changes in exemptions and debt limits give more people access to Chapter 7 protection. They also make Chapter 13 reorganization easier for those with higher debts. These updates can help debtors save property and reduce repayment amounts.
Steven N. Taieb, Esq. has been a South Jersey Bankruptcy Attorney for over 34 years. He is board-certified in consumer bankruptcy law by The American Board of Certification, accredited by The American Bar Association.
