For people in Tennessee facing crushing debt and other serious financial problems, bankruptcy can be a way to get a fresh start. However, there is an upper limit on the amount of debt that an individual can have to qualify for Chapter 13 bankruptcy. People who have secured debt greater than $1,149,525 or unsecured debt greater than $383,175 are excluded from filing for Chapter 13.
Instead, people with higher debt levels are directed to file for Chapter 11 bankruptcy, a more costly and challenging option. Some judges and lawyers are urging an upward adjustment of the debt limit or its elimination in full. Chapter 13 bankruptcy allows people who have a regular income to receive relief from their debts while keeping their property, such as real estate. This type of bankruptcy includes an approved plan to repay all or some of the debt over a period of several years.
The debt limits were created in 1978 to exclude people like real estate investors with multiple properties from filing for Chapter 13 as a way of hanging on to extensive real estate portfolios. However, over the decades that have followed, debt limits have become a significant hurdle, especially in areas of the country with expensive real estate values and markets. In these areas, a mortgage can exceed the debt limit for Chapter 13.
Lawyers and judges who work on bankruptcy have stated that Chapter 11 bankruptcy, while perhaps supportable for corporations, is not appropriate for individuals, even those who are wealthy. They noted that it is very difficult for an individual to successfully complete a Chapter 11 bankruptcy. People struggling with a high debt burden do have options. A bankruptcy lawyer may be able to provide advice and representation for someone who is overwhelmed with debt and needs a new financial beginning by filing for Chapter 13.