Major Changes to Chapter 13 Bankruptcy Debt Limits: What South Carolina Residents Need to Know About the New Federal Law

The Bankruptcy Threshold Adjustment Act of 2026 expands access to Chapter 13 bankruptcy, giving South Carolina individuals with substantial secured and unsecured debts a new opportunity to reorganize their finances.

Congress has made one of the most significant changes to Chapter 13 bankruptcy eligibility in recent years. On November 10, 2026, President Trump signed the Bankruptcy Threshold Adjustment Act (H.R. 7730) into law. The legislation changes the way debt limits are calculated under Chapter 13 of the Bankruptcy Code, potentially allowing thousands of individuals who previously exceeded the eligibility limits to seek bankruptcy protection.

For individuals and families in South Carolina, this change could make a substantial difference. Previously, individuals with significant unsecured debts could find themselves disqualified from Chapter 13 bankruptcy, even when they had sufficient income to make payments through a repayment plan.

The new law eliminates the separate secured and unsecured debt limits and replaces them with a single combined debt limit of $2.75 million.

For anyone considering bankruptcy in South Carolina, understanding these changes is important. The new law may create opportunities for individuals who previously had limited options for addressing overwhelming debt.

1. What Changed Under the New Chapter 13 Bankruptcy Law?

Before the Bankruptcy Threshold Adjustment Act, Chapter 13 eligibility was determined using two separate debt limits.

For cases filed immediately before the new legislation took effect, the limits were:

• Unsecured debts: $526,700
• Secured debts: $1,580,125

These limits applied separately. An individual could exceed the unsecured debt limit and become ineligible for Chapter 13, even if the individual’s total debt was otherwise manageable.

This created problems for individuals with substantial credit card debt, personal guarantees, medical bills, business-related obligations, and other unsecured debts.

Congress addressed this issue by eliminating the separate calculations.

Under the new law, an individual with regular income may qualify for Chapter 13 bankruptcy if their combined noncontingent, liquidated secured and unsecured debts are less than $2.75 million.

In other words, the new law establishes one combined debt ceiling rather than two separate limits.

This is a major change for individuals who previously found themselves above the Chapter 13 unsecured debt threshold.

2. How the New Chapter 13 Debt Limits Affect South Carolina Residents

The changes could have a meaningful impact throughout South Carolina, including Charleston, Columbia, Greenville, Spartanburg, Rock Hill, Myrtle Beach, and surrounding communities.

Consider an individual with the following financial obligations:

• Mortgage deficiency or other secured debt: $1,000,000
• Credit cards and personal loans: $700,000
• Business-related unsecured guarantees: $400,000

The individual’s total debt is $2.1 million.

Under the previous law, the individual would exceed the $526,700 unsecured debt limit and would generally be ineligible for Chapter 13 bankruptcy.

Under the new law, the same individual may qualify because the combined debt of $2.1 million is below the new $2.75 million ceiling.

This example illustrates why the legislation is so important.

South Carolina residents who own businesses, have personally guaranteed commercial loans, experienced significant financial setbacks, or accumulated substantial unsecured debts may now have an additional bankruptcy option.

However, qualifying for Chapter 13 is not automatic. The debts must meet the statutory requirements, and the individual must satisfy the other requirements of Chapter 13, including having regular income and proposing a confirmable repayment plan.

3. Why the Change to Unsecured Debt Limits Matters

The elimination of the separate unsecured debt limit may be the most important part of this legislation for many consumers.

Unsecured debts are obligations that generally are not backed by specific collateral. Common examples include:

• Credit card balances
• Medical bills
• Personal loans
• Certain business debts
• Deficiency balances following repossession or foreclosure
• Certain personally guaranteed business obligations

Under the previous Chapter 13 limits, individuals with more than $526,700 in qualifying unsecured debt could be excluded from Chapter 13, regardless of whether they had the income and financial resources to fund a repayment plan.

That restriction could force some individuals to consider Chapter 11 bankruptcy, which can be considerably more complicated and expensive.

The new $2.75 million combined debt limit provides considerably more flexibility.

For South Carolina residents with substantial unsecured obligations, Chapter 13 may now offer a more accessible and cost-effective restructuring alternative.

It is important to understand that not every unsecured obligation necessarily counts toward the statutory limit. The Bankruptcy Code uses the terms noncontingent and liquidated, and certain debts may require closer legal analysis.

4. What About Secured Debts?

The new law also changes how secured debts are treated when determining Chapter 13 eligibility.

Secured debts are obligations supported by collateral. Common examples include:

• Residential mortgages
• Vehicle loans
• Investment property mortgages
• Certain commercial loans secured by real estate
• Other loans secured by personal or business property

Previously, Chapter 13 debtors were subject to a separate secured debt ceiling of $1,580,125.

The new legislation eliminates that separate limit.

Instead, secured debts are combined with qualifying unsecured debts when determining whether an individual falls below the $2.75 million threshold.

This could benefit individuals with substantial mortgage obligations, investment property debt, or other secured loans, particularly when combined with significant unsecured liabilities.

Importantly, the change does not eliminate the underlying rights of secured creditors. Mortgage liens, vehicle liens, and other valid security interests must still be addressed through the bankruptcy process.

The new law changes eligibility. It does not automatically eliminate secured debts or liens.

5. What Does This Mean for Bankruptcy Attorneys in South Carolina?

The new legislation will likely require bankruptcy attorneys throughout South Carolina to reevaluate cases that previously appeared ineligible for Chapter 13.

For years, the separate unsecured debt limit created a significant obstacle for individuals with substantial financial obligations.

Now, bankruptcy attorneys have greater flexibility when evaluating potential Chapter 13 cases. I really think this will help Chapter 13 attorneys in SC be able to help more consumer debtors obtain Chapter 13 bankruptcy relief in the coming years. I cant tell you how many case I have had in the last twenty years I had to tell the potential client that Chapter 13 would not be an option due to the debt limits. So this new legislation is good news for SC consumers!

This may be particularly important for:

• Business owners with substantial personally guaranteed debt.
• Individuals with significant credit card and personal loan obligations.
• Real estate investors with multiple secured loans.
• Individuals with substantial mortgage and unsecured debt.
• Families seeking to reorganize their financial obligations while protecting important assets.

Chapter 13 offers several potential advantages over other bankruptcy chapters.

Depending on the circumstances, individuals may be able to stop foreclosure proceedings, address mortgage arrears over time, retain vehicles and other property, and repay unsecured creditors through a court-approved repayment plan.

The ability to reorganize debt while retaining important assets is one of the primary reasons Chapter 13 remains an important bankruptcy option.

The new legislation expands the number of individuals who may be able to take advantage of these protections.

6. Does the New Law Apply to Existing Bankruptcy Cases?

There is an important timing issue.

The Bankruptcy Threshold Adjustment Act became effective on November 10, 2026.

The new debt limits apply to bankruptcy cases commenced on or after that date.

Individuals who filed bankruptcy before November 10, 2026, generally remain subject to the previous debt limits.

The legislation does not automatically reopen previously filed cases or change the eligibility calculations for pending bankruptcy proceedings.

Consequently, the date a bankruptcy petition is filed is extremely important.

Anyone who previously believed they were ineligible for Chapter 13 because of the unsecured debt limit should consider having their financial circumstances reevaluated.

7. Should You Speak With a South Carolina Bankruptcy Attorney?

The changes to Chapter 13 eligibility represent a significant expansion of bankruptcy options for individuals with substantial debt.

However, determining whether Chapter 13 is the appropriate solution requires more than simply comparing total debt against the new $2.75 million limit.

A bankruptcy attorney must evaluate the nature of the debts, whether they are contingent or liquidated, the individual’s income, available exemptions, assets, secured creditors, and the feasibility of a repayment plan.

In some situations, Chapter 7 or Chapter 11 may still be more appropriate.

The important point is that individuals who previously exceeded the Chapter 13 unsecured debt limit may now have an opportunity to pursue a repayment. If you would like to learn more about how these changes could apply to you, please feel free to call the Stone Law