Eligibility for Chapter 13 Bankruptcy Filing
When you strategize about how to file bankruptcy Chapter 13, you must first consider what it takes to qualify for a Chapter 13 bankruptcy filing. First, do some research online by reading attorney blogs, just so you know what you are getting into. Secondly, get a bankruptcy attorney from your state, because laws on bankruptcy differ from one state to another. You can ask your relatives or friends who have gone through the process to recommend a good lawyer.
Not everyone can qualify for Chapter 13 bankruptcy. Here are some of the required criteria:
You must prove that you have enough disposable income - To qualify for a Chapter 13 bankruptcy, you will need to prove that you have a sufficient flow of income, that is, after the deduction of expenses and other secured debts such as a mortgage or car loan. The court wants to ensure that you are in a position to meet your repayment responsibilities. You will need to produce copies of your pay slip and income from your business as well as commissions garnered from your side income generating activities, if any.
Wages, pension payments and social security benefits are also acceptable if you are wondering how to file Chapter 13 bankruptcy. Individuals who receive any form of support such as child support or alimony should produce evidence of these forms of support; compensation benefits, royalties, rents, public and unemployment benefits, rents and money garnered from property sale are also acceptable. Note that married petitioners can also use their spouse’s benefits or any other forms of income as proof that they can sustain the Chapter 13 payment plan.
Your debts must be within a certain limit - When filing for Chapter 13 bankruptcy, you must ensure that your debts are not exceedingly high. Any individual with unsecured debts beyond $1,149,525 cannot qualify for a Chapter 13. A secured debt means that you are likely to lose some property in the event that you fail to furnish your creditor with payment. Home and car loans are prime examples of debts that are secured, such that the creditor can repossess or sell the property to recover what he is owed. In some instances, creditors file a lien on your property and this automatically renders the debt secure. Perfect examples include legal bills, credit card debts and medical bills.
Your income tax filings must be up to date - For you to qualify for Chapter 13, you must prove that both your state income and federal tax returns are up to date for four consecutive years prior to the date that you file for bankruptcy. In the event that you wish to update your filings, the court may put the proceedings on hold until you can produce your return transcripts.
Who can file for Chapter 7 Bankruptcy?
Reasons to file for Chapter 13 as opposed to Chapter 7
Why would a debtor want to file for a Chapter 13 as opposed to a Chapter 7 bankruptcy? Well, here are some of the reasons:
- You are not eligible for Chapter 7 bankruptcy
- You want to stop your creditors from repossessing your property, primarily your home
- You intend to repay the debt after some time or after you have regained your financial stability
- You want to bar your creditors from foreclosing on your home
- You have a co-debtor and have debts that do not have a dischargeable clause under the Chapter 7 bankruptcy file petition, such as court fees, marital debts, and condominium fees as well as debts created to furnish non-dischargeable taxes
- You want to retain a non-exempt property
- In the event that you wish to service your non-dischargeable debt over a certain period
- In case of a co-debtor
- In the event that you wish to have your repayment plan extended or need relief from your creditors
Business entities are not eligible for Chapter 13
Business entities cannot file for a Chapter 13 bankruptcy. They can consider Chapter 11, which accommodates them in the event that they may need to file for a bankruptcy petition. However, an individual within a business can file for Chapter 13 individually. In the petition, you can include or mention that you are filing because of business related debts, that is, if you are liable for them.
Stockbrokers and commodity brokers who wish to know how to file for Chapter 13 bankruptcy should understand that they are barred from filing Chapter 13 bankruptcy petitions, even in the event that they want to sort out their personal debts.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
To schedule an appointment, call (435) 901-3449
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