Are you an Alabama resident or small business owner feeling weighed down by overwhelming debt? Changes to the bankruptcy code that took effect on April 1, 2025, could offer many Alabamians new opportunities for financial relief.
These new regulations have set up higher monetary thresholds for bankruptcy filings. This change could allow thousands of Alabamians who might not have been eligible for help before tofile for bankruptcy.
If you’re facing financial challenges and looking for guidance on bankruptcy options in Alabama, understanding these recent changes can help you make informed decisions about your financial future.
Why Did Bankruptcy Thresholds Change?
The Judicial Conference of the United States reviews and updates bankruptcy thresholds every three years based on inflation. These updates reflect changes in the Consumer Price Index for All Urban Consumers during the previous three-year period.
These changes were officially published in the Federal Register on February 4, 2025, and took effect on April 1, 2025. The new thresholds apply to all bankruptcy cases filed on or after that date.
Changes to the Chapter 13 Debt Limit
Chapter 13 bankruptcy provides help to debtors when financial troubles feel overwhelming. This process involves creating a repayment plan for the bankruptcy court, allowing debtors to pay back all or some of their debts over 3 to 5 years while keeping their property safe.
However, to file for Chapter 13 bankruptcy, you’ll need to show the bankruptcy court that you have a steady income and that your debt is below the current limit set by bankruptcy law.
On April 1, 2025, the Chapter 13 debt limit for unsecured debts increased from $465,275 to $526,700. Unsecured debts are those not backed by collateral, such as credit card debts or medical bills. The debt limit for secured debts also increased from $1,395,875 to $1,580,125. Secured debts are backed by valuable assets, such as your home or car.
What does this mean for you? These higher limits mean more Alabama residents with substantial debt may now qualify for Chapter 13 bankruptcy.
Subchapter V Changes: Good News for Small Business Owners
If you are a small business owner dealing with debt, there is also significant news for you. The increase in the Chapter 13 debt limit means that Alabama entrepreneurs with greater amounts of business debt could now qualify for Chapter 13, allowing them to restructure their debts while keeping their businesses running.
However, if your debt limit exceeds the new Chapter 13 threshold, it’s noteworthy that the debt limit for Subchapter V of Chapter 11 has also increased to $3,424,000 from $3,024,725.
This change is noteworthy since the temporarily expanded limit of $7,500,000 expired on June 21, 2024. While the new permanent limit is lower than the temporary one, it still represents an increase that can help many small businesses in Alabama.
Seeking Professional Guidance
These new thresholds are already in effect, making now an opportune time to evaluate your bankruptcy options.Working with an experienced Alabama bankruptcy attorney can make all the difference in understanding how these regulations affect your situation.
A bankruptcy attorney helps evaluate if bankruptcy suits your financial needs, determines the best chapter to protect your interests, and manages court procedures and documentation.
If you’re struggling with debt in Alabama, don’t hesitate to contact Brock and Stout for professional guidance. Let our family help your family in your time of need.