If you are struggling with excessive debts and other difficult financial problems, you may have considered types of bankruptcies for individuals. Depending on your financial situation, it may be impossible to file for Chapter 7 or Chapter 13 bankruptcy.
- Chapter 13 bankruptcy: In Chapter 13 bankruptcy, there are limits for secured and unsecured debts. These limits periodically change. As of April, 2016, filers must have no more than $1,184,200 in secured debts and no more than $394,725 in unsecured debts. Remember, unsecured debts are not backed by property. This can include medical bills and some credit cards. Secured debts are backed by property such as a home or car.
- Chapter 7 bankruptcy: There is no debt limit for Chapter 7 bankruptcy, but there are income ceilings in most circumstances. You must take the Chapter 7 means test to determine whether you can file. However, there is one large exception to the need to take the means test… and that is if more than 50% of your debts can be classified as business debts. If so, you may qualify for Chapter 7 regardless of income.
Despite these limitations, there are still options if you are ineligible for Chapter 7 or Chapter 13 bankruptcy.
Do Other Types of Bankruptcies for Individuals Exist?
If you exceed the Chapter 13 debt limits and Chapter 7 income ceiling, Chapter 11 bankruptcy may be the right choice. Individuals can file for Chapter 11 bankruptcy. There are no income or debt ceilings for filing. Nick Denton, the founder of Gawker Media, recently utilized Chapter 11 bankruptcy protections. He listed assets of $10 to $50 million, and $100 to $500 million in liabilities.
You may find there are benefits to using Chapter 11 bankruptcy over other options. Repayment plans in a Chapter 11 bankruptcy can last for up to ten years. Compare this to a Chapter 13 bankruptcy, where the repayment plan can last for up to five years! This means you could have smaller payments over a longer period.