Do I Qualify For Chapter 13 Bankruptcy?

When you claim a Chapter 13 bankruptcy, you propose a repayment plan for your outstanding debts. The court must approve the plan then a trustee is appointed to collect payments from you and distribute them to creditors.

You must remain compliant with the Chapter 13 repayment schedule and pay a trustee fee. So how do you know if you qualify for a Chapter 13 bankruptcy?

Are You A Business?

Businesses cannot file for Chapter 13 bankruptcy. All businesses, including a sole proprietorship, need to file Chapter 11 bankruptcy. Only individuals can claim Chapter 13 bankruptcy. The sole exception is commodity brokers and stockbrokers who are not allowed to file Chapter 13 bankruptcy under any circumstances.

What Is Your Disposable Income?

To qualify for Chapter 13 bankruptcy, you must have sufficient disposable income. Subtract secured debts such as a car loan or mortgages along with necessary living expenses to determine your disposable income. The trustee may require certain debts to be paid in full to allow you to proceed.

What Type Income Can Be Used For Chapter 13 Bankruptcy?

Various earnings can be used to pay off debts in accordance with your Chapter 13 bankruptcy plan:

• salary and wages from a regular job;

• wages from seasonal employment;

• self-employment income;

• commissions;

• Social Security benefits;

• workers’ compensation or disability benefits;

• unemployment benefits;

• welfare benefits;

• alimony;

• child support;

• rental income;

• royalties;

• pension monies; and

• proceeds from the sale of property.

Do I Have To Be Employed To Claim Chapter 13 Bankruptcy?

You must show income to claim Chapter 13 bankruptcy. The income does not have to be from employment. If you are married, a unemployed spouse can refer to the working spouse’s earnings as a source of income. A nonworking spouse can also file jointly with an employed spouse for Chapter 13 bankruptcy.

Do I Have Too Much Debt To Claim Chapter 13 Bankruptcy?

If your secured debts total more than $1,010,650, you cannot claim Chapter 13 bankruptcy. Secured debts include car loans, home loans and other liens against your property. Your unsecured debts cannot exceed $336,900 to qualify for Chapter 13 bankruptcy. Unsecured debts include credit cards, department store accounts, past due utilities, legal bills and medical bills.

Can I File For Chapter 13 Bankruptcy If I Haven’t Filed My Income Taxes?

To qualify for Chapter 13, you must provide proof that you filed both federal and state income taxes for four tax years prior to filing for bankruptcy. The court will postpone proceedings to allow you to get current on your income tax filings. If you fail to file current tax returns, your Chapter 13 bankruptcy case will ultimately get dismissed.

Do I Really Have To Learn About Money To File For Chapter 13 Bankruptcy?

Before a final order is issued by the bankruptcy court, they expect you to get educated about your finances. You will be required to meet with a credit counselor and attend personal money management classes before your bankruptcy is finalized.

What Do I Have To Give Up To Qualify For Chapter 13 Bankruptcy?

A major reason for filing Chapter 13 bankruptcy is to protect property so you can keep major assets such as your house and car. What you will give up is a great deal of financial freedom. For three to five years, the bankruptcy trustee will control your income to ensure repayment of your debts. You will live on strict budget imposed by the court.

Check Out These Related Posts:

1. Secured Debts In a Chapter 7 Bankruptcy
2. Chapter 13 Bankruptcy
3. Earned Income Tax Credit In New York Bankruptcy Cases
4. Debts Not Discharged in a Chapter 7 Bankruptcy
5. Chapter 7 Bankruptcy “Income” Hinges On Filing Date, Says Brooklyn Judge