Although Chapter 13 bankruptcy is available for many debtors, there are specific requirements the debtors must first meet. Filing Chapter 13 bankruptcy allows debtors to complete a three or five year debt repayment plan and repay their creditors all or a portion of what they owe. Unlike Chapter 7 bankruptcy, which allows debtors to immediately discharge debts, if you file Chapter 13 bankruptcy you will not have your unsecured debts immediately discharged.
Recently on our bankruptcy forum a user asked, “What makes someone ineligible for Chapter 13 bankruptcy?” According to current Chapter 13 bankruptcy code, if you are considering filing Chapter 13 bankruptcy you must meet the following requirements:
Chapter 13 eligibility
Chapter 13 bankruptcy is available to individuals or those debtors who are filing jointly with their spouse. Sole proprietors or those with a business partner may file for Chapter 13 bankruptcy for their personal debts, but corporations or limited liability corporations must file Chapter 11 bankruptcy. Commodity brokers and stockbrokers are also limited in their ability to file Chapter 13.
Debtors who have filed a recent bankruptcy and either had that bankruptcy dismissed within the preceding 180 days or who have had their debt discharged recently may also not be allowed to file Chapter 13 bankruptcy.
For instance, if you have filed Chapter 7 bankruptcy and received a discharged within the last 4 years or you have filed Chapter 13 bankruptcy and received a discharge within the last 2 years, you cannot file again.
If you have had your bankruptcy dismissed in the last 180 days because you did not appear in court, you ask the court to dismiss the bankruptcy case because a creditor asked to resume debt collection, or you did not follow a court order, you will be ineligible to file Chapter 13 bankruptcy.
Your debts are too high for Chapter 13 bankruptcy
Debtors must also meet specific debt limits to file Chapter 13 bankruptcy. If you have unsecured debts which exceed $336,900 or secured debts which exceed $1,010,650, you will not be allowed to file Chapter 13 bankruptcy. Keep in mind, the debt limits are periodically adjusted for inflation.
Income to repay a portion of your debts
Debtors will also be ineligible to file Chapter 13 bankruptcy if they do not have sufficient income to repay their debts under their debt repayment plan. If the court determines the debtor and their spouse (regardless of whether the couple filed jointly) lacks the income, including salary, federal benefits, or unemployment benefits to repay their debts, they will be barred from filing Chapter 13 bankruptcy.
Miscellaneous other requirements
Other requirements which must be met to file Chapter 13 include completing a credit counseling course at least 180 days prior to filing for Chapter 13 and submitting your completion certificate with the court and proof that you have filed your state and federal taxes for the past four years.
Is Chapter 13 bankruptcy right for me?
Filing bankruptcy is an important financial decision. It is not the right choice for everyone. Talk to a lawyer to determine if it is the best choice for you.
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