Debt Limits and Eligibility Requirements for Chapter 13 Bankruptcy
Filing for bankruptcy is a significant financial decision, one that can offer relief to individuals overwhelmed by debt. Among the different types of consumer bankruptcy, Chapter 13 is often an option for those who have a regular income but are struggling to keep up with their financial obligations. It allows for the restructuring of debt into a manageable repayment plan that typically spans three to five years.
However, not everyone qualifies for Chapter 13. There are specific debt limits and eligibility requirements that must be met before someone can proceed. If you're considering this form of relief, you must have a clear understanding of the criteria involved.
At the Bond Law Office, we’ve seen firsthand how worry, uncertainty, and sleepless nights can weigh on good people trying to protect their homes, their livelihoods, and their families. That’s why we approach our work with genuine compassion—we’re not just here to talk through the legal steps, but to listen, to care, and to walk alongside you every step of the way. With offices in Fayetteville and Fort Smith, Arkansas, our firm serves clients across the River Valley area, including Harrison, Eureka Springs, Clarksville, Waldron, Mena, and Van Buren.
Here, we’ll explore the debt limits that apply to Chapter 13 bankruptcy, the various eligibility requirements, and how these factors may influence someone’s decision to file.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is often referred to as a “wage earner’s plan.” Unlike Chapter 7, which typically involves liquidating non-exempt assets to pay creditors, Chapter 13 allows debtors to keep their property while making regular payments on their debts over a period of time.
This form of bankruptcy is particularly useful for individuals who have fallen behind on mortgage payments, car loans, or tax obligations but still have a steady income. Through a court-approved plan, debtors can repay arrears over time while keeping their homes or vehicles.
Not everyone qualifies to file under Chapter 13. Eligibility depends on specific rules regarding debt limits, as well as requirements related to income, prior filings, and financial documentation.
Debt Limits in Chapter 13 Bankruptcy
One of the primary restrictions in Chapter 13 cases is the amount of debt an individual can owe. If your debts exceed the legal thresholds, you’ll be ineligible for this type of bankruptcy and may need to explore alternatives like Chapter 11.
As of the most recent figures, the debt limits for Chapter 13 bankruptcy are:
Unsecured debt: Must be less than $465,275
Secured debt: Must be less than $1,395,875
Unsecured debts include things like credit card balances, medical bills, and personal loans. Secured debts are backed by collateral—such as mortgages or car loans.
These numbers are periodically adjusted to account for inflation, so it’s important to verify the current figures if you’re considering filing. If you’re close to the limits, a detailed review of your debts may be needed to determine how they’re classified and whether they fall within the allowed amounts.
It's also worth noting that some debts might be partially secured and partially unsecured. This can complicate calculations and affect eligibility, depending on how the court treats those classifications.
Who Is Eligible for Chapter 13?
Beyond debt limits, several other eligibility requirements must be met. These rules are in place to make sure the debtor has the ability and intent to complete a repayment plan.
Here are the main criteria for qualifying under Chapter 13:
Regular income: You must have a consistent source of income that allows you to make monthly payments to a trustee. This income can come from employment, self-employment, Social Security, rental properties, or even pension payments.
Past filings: You must not have had a Chapter 13 case dismissed in the past 180 days due to willful failure to appear in court or comply with court orders.
Tax filings: You must be current on your income tax filings for the past four years. You’ll need to provide proof of these filings when submitting your bankruptcy petition.
Credit counseling: Before filing, you must complete a credit counseling course from an approved provider within 180 days before filing.
Debt within limits: As already covered, your secured and unsecured debts must fall within the statutory limits.
Meeting these requirements is critical to proceeding with your case. If you’re unable to satisfy even one of them, the court may dismiss your petition or require you to refile under a different chapter.
Filing for Chapter 13 in Arkansas
Arkansas residents considering Chapter 13 bankruptcy should be aware of local court procedures and exemptions that may affect their case. While federal bankruptcy law is consistent across the country, each state handles certain aspects differently.
In Arkansas, debtors have the option to choose between federal and state exemption systems. Exemptions determine which property you’re allowed to keep, and this choice can influence whether Chapter 13 is a better fit than Chapter 7.
The Eastern and Western Districts of Arkansas each have their own bankruptcy courts, and filings will be directed to the appropriate district based on your county of residence. Local rules, trustees, and filing procedures may vary slightly, so preparation is key.
Filing in Arkansas typically involves the following steps:
Collecting and submitting financial documentation, including tax returns, bank statements, pay stubs, and a list of assets and liabilities.
Completing the required credit counseling course.
Drafting a repayment plan that meets legal standards and fits your budget.
Attending a meeting of creditors (also known as a 341 meeting), where a trustee and creditors can ask questions about your case.
Your repayment plan must be approved by the court, and once it is, you’ll begin making monthly payments to a trustee, who then distributes the funds to your creditors.
When Chapter 13 Might Not Be Right for You
While Chapter 13 offers many advantages—such as stopping foreclosure and protecting property—it isn’t always the right solution. There are situations where another type of bankruptcy or a different financial strategy may be more appropriate.
Here are a few scenarios where Chapter 13 may not be the right path:
You don't have enough income to support a repayment plan. Even if your debt is within limits, a lack of sufficient income can disqualify you.
Your debt is primarily business-related and exceeds the statutory limits. Chapter 11 might be a better fit in that case.
You're seeking a faster discharge. Chapter 7 generally provides quicker relief if you qualify under its means test.
You’ve filed recently. If you've had a Chapter 13 case dismissed or received a discharge under another chapter, waiting periods may apply.
Before making a decision, it’s worth discussing your financial situation with an experienced bankruptcy attorney who understands both the state-specific and federal aspects of bankruptcy law.
Contact an Experienced Bankruptcy Attorney
At the Bond Law Office, we help clients across Fayetteville, Fort Smith, and the River Valley area, including Harrison, Eureka Springs, Clarksville, Waldron, Mena, and Van Buren, take the first step toward financial relief through Chapter 13 bankruptcy.
If you're thinking about filing for bankruptcy, we invite you to reach out. Let’s talk through your situation, review your options, and help you move forward with clarity and confidence. Contact us today to schedule a consultation—we're here to help.