To file bankruptcy under Chapter 13, a debtor must satisfy the Chapter 13 requirements. Chapter 13 is different from Chapter 7, which allows the debtors to discharge certain debts in return for the sale or extinguishment of property that will pay creditors. Chapter 13 allows debtors to keep their property and to repay creditors under a court-approved three- to five-year repayment plan.
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- Requirements to file Chapter 13 bankruptcy
- To be eligible for Chapter 13 under the U.S. Bankruptcy code, you must meet these criteria.
- You are not a business entity
Chapter 13 bankruptcy can only be filed by individuals or those filing jointly as spouses. Businesses that are limited liability companies (LLCs) or corporations are not eligible for Chapter 13 bankruptcy. Instead, they must file for Chapter 11 bankruptcy.
A business owner cannot file under the business’s name. However, if the business is owned by a sole proprietor or a partner, then you can file under your name for any debts that you are personally responsible for. However, Chapter 13 is not available to stockbrokers or commodity brokers.
A prior bankruptcy does not bar you from filing for bankruptcy again
You are not eligible for Chapter 13 discharge if you have discharged any debts in Chapter 13 bankruptcy in the past two years or in Chapter 7 bankruptcy in the last four years.
An Old Bankruptcy Case was Not Dismissed within the Past 180 Days
If a bankruptcy petition has been dismissed in the past 180 days, a debtor can’t file Chapter 13 or Chapter 7 bankruptcy.
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The debtor violated a court order and failed to appear in court
After a creditor had asked for the lifting of an automatic stay, the debtor requested the court dismiss the case
You have met the credit counseling requirements
A Chapter 13 debtor must file with bankruptcy court a proof that a credit counseling agency approved provided debt counseling within 180 days of the Chapter 13 filing.
The debtor must give a copy of the debt management plan created by the credit counseling agency to the court. The certificate must be filed with the original paperwork, or it must be provided within 15 days of filing bankruptcy.
You don’t have to be in debt too much
Chapter 13 restrictions limit the amount of debt a filer can have. Individual debtors who have less than $419275 in unsecured debt (debts not secured by property such as credit cards or medical bills) and less that $1,257.850 in secured debt (debts where a creditor can seize the property to secure the debt if it isn’t paid) are eligible for Chapter 13. Inflation is taken into account when debt limits are adjusted each three years.
You have filed your income tax returns
You must show proof that you have filed income tax returns for both state and federal income taxes in order to meet Chapter 13 requirements. You must give the trustee a copy of or a transcript of your most recent federal tax return, at least seven days prior to the first meeting.
Your plan proposes to repay all required debts
- Chapter 13 bankruptcy law mandates that some debts must be repaid in full. This category includes:
- Priority debts are unsecured debts such as child support or alimony, support payments, and nondischargeable tax.
- Secured debts that can survive the repayment program: Secured debts such as a mortgage and a vehicle loan must be current during the repayment period. Other secured debts.
You can pay a certain amount to unsecure creditors
Repayment may be available to nonpriority and unsecured creditors. A debtor can keep nonexempt assets under Chapter 13 bankruptcy. However, they must repay nonpriority,unsecured creditors at the least the same amount as their nonexempt property during the term of the repayment plan. Nonexempt property includes furniture and household appliances, as well as inexpensive jewelry and equity in a house or motor vehicle.
There are no income limits
There is no means test, unlike Chapter 7, to determine if your income is too high for Chapter 13 bankruptcy. The courts will determine if your income is low enough to repay the debt.
You have enough income to pay your debts
After deducting any allowable expenses, a debtor must have sufficient income to meet all of his or her debt obligations. Even if the spouse hasn’t filed for bankruptcy jointly, income from a spouse working may be included, as well as wages and salary, income from self-employment, Social Security benefits and unemployment benefits.
Chapter 13 is only available to those who have sufficient income to cover expenses, mandatory payments to priority or unsecured creditors, as well as payments to unsecured creditors that are at least equal to the value of the debtor’s property exempted from creditors. A percentage of all payments in the plan must be paid by the debtor to the trustee.
Are you eligible to file for Chapter 13? Get help from an attorney to find out
A personalized assessment of your situation and goals is crucial if you are unsure whether bankruptcy is right for you. Harassing collection efforts and straining finances can lead to rash choices and further confusion. Get help from a bankruptcy attorney to assess your situation.