Section 104 of the Bankruptcy Code authorizes adjustments of certain dollar amounts every three years to account for inflation. The effective date of the most recent changes was April 1, 2013 and increased bankruptcy dollar amounts by 6.3%. The next adjustment will occur on April 1, 2016. These increases affect many aspects of bankruptcy, including property exemptions; means test calculations; and fraudulent transfers.
Here are some of the changes:
Federal Exemptions
• The federal bankruptcy homestead exemption amount increased from $21,625 to $22,975.
• The federal motor vehicle exemption amount increased from $3,450 to $3,675.
• All other federal exemption amounts increased.
Chapter 13 Bankruptcy Eligibility
The debt limit for eligibility to file Chapter 13 bankruptcy increased. To qualify for Chapter 13, a debtor must have secured debts less than $1,149, 525 (previously it was $1,081,400) and unsecured debts less than $383,175 (previously it was $360,475).
Credit Card and Cash Advance Limits
To prevent debtors from charging up credit cards on a pre-bankruptcy spending spree, Congress established limits on credit card charges and cash advanced. These limits have increased. Now if you charge more than $650 in luxury goods within 90 days of your bankruptcy filing, or taken out more than $925 in cash advances within 70 days of your bankruptcy filing, those charges are presumed to be non-dischargeable. Both of these limits were increased by $50 from their former amounts.
Means Test Threshold
The means test is the gatekeeper for Chapter 7 eligibility. A case is “presumed abusive” if, after applying statutorily allowed deductions, too much income remains. The amount that determines “too much” income has increased from $11,725 to $12,475 in one case and $7,025 to $7,425 in another.
No two bankruptcy cases are identical. For many bankruptcy cases, the process is part law, part accounting, and part creativity. Applying the bankruptcy laws creatively to your financial situation is the recipe for a successful bankruptcy outcome. If you are struggling with debt, make sure that your attorney is experienced, knowledgeable about the law, and will zealously represent you during the bankruptcy process.