Requirements to Qualify for Chapter 13 Bankruptcy

A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

Eligibility

Any individual, even if self-employed or operating an unincorporated business is eligible for Chapter 13 relief. Eligibility is contingent on the fact that the individual's unsecured and secured debts are between certain dollar amounts that are adjusted annually by statute. Chapter 13 Bankruptcy allows debtors to retain their assets as long as they make payment according to the repayment plan. The repayment plan is supervised by the court. The repayment plan allows the debtor to use future earnings to pay off the debts. In order to qualify for Chapter 13 bankruptcy, you will have to show the bankruptcy court that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts (such as a car loan or mortgage), to meet your repayment obligations.

Restrictions

Your unsecured debts should less than $360,475 and secured debts less than $1,081,400. You cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to your willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. If you previously filed a Chapter 13 bankruptcy, you may file a new Chapter 13 bankruptcy after as little as two years after the original petition was filed. If you previously filed a Chapter 7 bankruptcy, you are eligible to file for a new Chapter 13 bankruptcy after four years from the chapter 7 filing.

Credit Counseling

You must undergo credit counseling before you can file for bankruptcy. The credit counseling services check out whether debtors can pay at least 60% or more of their debts so that they don't have to file bankruptcy. You must undergo this counseling within the 180 days prior to the filing. During the credit counseling, you will be advised to completely review all your finances in order to make the best decision possible whether filing for bankruptcy is the best option for you.

Getting Legal Help

You should consult with an experienced bankruptcy attorney. The attorney will study your case and let you know if you are eligible for chapter 13 protection. If you file under a wrong chapter, your petition can be dismissed and you may be prevented from filing again in the near future.

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