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Having Too Much Debt Could Keep You Out of Filing a Chapter 13

Most New Jersey residents can file a chapter 13 bankruptcy to repay their debt with no problem. They can use it to get caught up on a mortgage (and thus keep their homes out of foreclosure), strip off a second mortgage, or pay a portion of their credit card debt. However, there is such a thing as having too much debt.

The chapter 13 option was created under the bankruptcy code to provide a "Chapter 11 Lite" to individual wage earners. In the past, large corporations could reorganize their debts and not lose everything, but individuals were left with chapter 7 or nothing. Now they have that option, but up to a certain amount of debt.

So What Are the Debt Caps?

As of right now, if you owe more than $383,175 in unsecured debt (credit cards, medical bills, etc.) or $1,149,525 in secured debt (like mortgages or car loans), then you cannot file! You would have to go the more expensive chapter 11 route. These rates are adjusted every three years, and are due for revision on April 1, 2016.

So as you can see, most people would have no problem with these limits. They mainly come into play with self employed individuals running sole proprietorships. Business debt can drive up much higher than consumer debt, which is when problems can arise.

So What Should I Do?

If you live in South Jersey and are considering filing bankruptcy, call my office at 856-432-4113 or contact me through this site for a free consultation to discuss your case.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.