Chicago District Judge Reestablishes Chapter 13 Debt Limits on Student Loans

A district judge in Chicago reversed Bankruptcy Judge Janet S. Baer, who had ruled in December that having student loans exceeding the chapter 13 unsecured debt limit does not require dismissing an individual’s chapter 13 petition. In his August 31 opinion, District Judge Robert M. Dow, Jr. held that the plain language of Section 109(e) makes a debtor with huge student loan debt ineligible for chapter 13 and provides “cause” to dismiss or covert the case under Section 1307(c). When a debtor is ineligible for chapter 13, failing to dismiss is an abuse of discretion, he held. The chapter 13 debtor owed about $570,000 on student loans and another $22,500 on credit cards. He was living paycheck to paycheck, Judge Baer said. His monthly take-home pay of some $2,700 left him with about $475 in disposable income.

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