Notice: All dollar amounts in US Bankruptcy Code increased by 13.2% on 4/1/25
Every 3 years, the dollar amounts in the US Bankruptcy Code, 11 USC 101 et seq, are adjusted for inflation. On 4/1/25, all the dollar amounts in the US Bankruptcy Code adjusted for inflation. Because there has been a total of 13.2% inflation in the past 3 years (last adjustment before 4/1/25 was on 4/1/22) the dollar amounts in the U.S. Bankruptcy Code each increased by 13.2%.
Chapter 13 bankruptcy, and “SubV” Chapter 11 bankruptcy each have debt limits. A person cannot file Chapter 13 bankruptcy (individual wage earner repayment plan bankruptcy) or SubV Chapter 11 bankruptcy, unless dollar amount of debt that person owes are below the debt limit for Chapter 13, or for SubV Chapter 11. There are also additional requirements to be eligible for Chapter 13 bankruptcy, or for SubV Chapter 11 bankruptcy.
The 13.2% increase in Chapter 13 debt limits, and the 13.2% increase in SubV Chapter 11 debt limits, will allow some people who were above the debt limits, before 4/1/25, to now be below the debt limits. All the new dollar amounts as of 4/1/25 are published in tFederal Register.
Chapter 13 debt Limits:
Chapter 13 is often utilized by small business owners and individuals with assets and income who need financial relief. Chapter 13 is typically much more affordable than a chapter 11 filing. Prior to 4/1/25, only individuals with total unsecured debt under $465,275 and total secured debt under $1,395,875, were eligible to file Chapter 13 bankruptcy. On 4/1/25, those Chapter 13 debt limits increased to $526,700 for unsecured debt and $1,580,125 for secured debt.
Subchapter V Chapter 11 debt limits:
For a couple of years, subchapter V of chapter 11 had a debt limit of $7,500,000. But that expired, and the SubV debt limit reverted to $3,024,725 on June 21, 2024. On 4/1/25, the SubV debt limit increased to $3,424,000, meaning a business with total debts (including secured, unsecured, priority debts) of less than $3,424,000 will now be under the SubV Chapter 11 debt limit. However, to be eligible to file a SubV Chapter 11, there are additional requirements which must be met. One of those additional requirements is that 50% of the total debt must be from operating a business. In general, Sub V Chapter 11 is more affordable and efficient and more favorable to debtors, than is a regular chapter 11 case.
US Bankruptcy Code Priority Claim Adjustments:
Creditors owed certain debts receive priority status in bankruptcy proceedings and may receive payment before general unsecured claims. These limits have increased in key areas as follows:
- Wages and Salaries: Priority status for employee wages owed within 180 days before a bankruptcy filing increase from $15,150 to $17,150.
- Consumer Deposits: Consumers who paid in advance for goods or services can now claim priority status up to $3,800, an increase from $3,350.
Federal exemption dollar amounts went up 13.2% on 4/1/25:
Federal exemptions, and California exemptions, each allow a debtor filing for bankruptcy to protect certain assets up a certain dollar value during bankruptcy, meaning that no bankruptcy trustee or creditor may force a sale of an asset if it is exempt. All federal exemptions will increase, including the following:
- Residence Exemption: Each debtor can now protect up to $31,575 in home equity, which is up from $27,900. A married couple jointly filing may exempt up to $63,150 of property that they own together.
- Motor Vehicle Exemption: The exemption for equity in a vehicle rises to $5,025 from $4,450. (For example, if you own a car valued at $25,000 and a lender has a lien against the car and is owed $20,000, the car is exempt).
- Household goods: The per-item limit for household goods increases to $800 from $700, with an aggregate cap of all household goods and furnishings rising to $16,850 from $14,875.
- Tools of Trade: Work-related tools are now exempt up to $3,175, which is up from $2,800.
A majority of individuals filing bankruptcy in California are entitled to claim the California state exemptions, instead of the federal exemptions stated in 11 USC 522 of the Bankruptcy Code. The California exemptions are generally higher dollar amounts than the federal exemption amounts stated in Bankruptcy Code 11 USC 522.
California exemption dollar amounts also increased on 4/1/25, pursuant to California state law (not pursuant to federal law): Individuals who have resided continuously in California for over 2 years, at the time the individual files bankruptcy, use the California state exemptions, choosing either the CA CCP 704 or the CA CCP 703 set of exemptions.