Debt Ceiling and Student Loans
There is a debt ceiling in a chapter 13 bankruptcy. Too much debt and a debtor needs to look at chapter 7, or likely, chapter 11. Under Section 109(e) of the bankruptcy code, the limit for unsecured debt in a chapter 13 case is $394,725. In the 7th Circuit, 2 recent cases have stated that if a huge student loan pushes the unsecured debt over the debt ceiling, the chapter 13 bankruptcy case can be confirmed over a trustee’s objection.
In re Pratola, 578 B.R. 414 (Bankr. N.D. Ill. Dec. 27, 2017)
In the cited case, the debtor had $570,000 in student loans alone. Judge Baer confirmed the case over the Trustee’s objection, and further denied a motion by the chapter 13 trustee for stay upon appeal.
In re Fishel, 17-14180 (Bankr. W.D. Wis. March 30, 2018)
Another 7th Circuit judge ruled similarly in Wisconsin too. Judge Furay denied a trustee motion to dismiss and said that dismissing this case by a literal interpretation of the statute “would lead to an absurd result,” Judge Furay said, because the “debtor has no other option.” There were no other objections aside from the trustee’s, and the debtor proposed a feasible plan.