Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
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How debt limits may burden debtors

To qualify for Chapter 13 bankruptcy, a Tennessee resident needs to have secured debts of equal to or less than $1,149,525. Furthermore, that person or anyone else in America with unsecured debts of greater than $383,175 cannot file for Chapter 13 bankruptcy. These limits were established in 1978 to make sure that those who have multiple properties would file for Chapter 11 instead of Chapter 13 bankruptcy.

Compared to a Chapter 13 filing, a Chapter 11 filing is generally more complicated and expensive. However, some in the legal field say that the limits are arbitrary and that it is easy for individuals with a single property to meet or exceed those limits. In some parts of the country, it may be possible to have a single mortgage with a balance of $1.2 million or more. For many individuals, it may not make sense to file for Chapter 11 bankruptcy based on their current circumstances.

It is important to note that creditors may have greater protections in a Chapter 13 filing. Most Chapter 13 cases can be resolved in a timely manner, which may benefit both debtors and creditors. Suggestions to ease the burden to debtors include extending the repayment period, increasing debt limits or eliminating Chapter 13 debt limits altogether.

Filing for Chapter 13 bankruptcy may make it easier to get a fresh financial start. Those with secured debts may be able to retain property while attempting to get current on those debts. While creditors are not required to renegotiate loan terms, they are not allowed to seize property or otherwise make an effort to collect a debt during the repayment period. Repayment periods last for three or five years, and any balances left after the period ends may be discharged.

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Nashville, TN 37219

Phone: 615-686-2279
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