How to Know if You Qualify for a Chapter 13 Bankruptcy
The most important factor in determining whether you qualify for Chapter 13 bankruptcy is your income. Your income must be somewhat predictable and high enough to make certain payments. Additionally, your debts must be below a certain level. You must be current on your income tax filings and you may not file if you are a stockbroker or commodities broker. Lastly, only individuals, not companies, can file under this chapter.
Before filing a Chapter 13 bankruptcy, it is important to understand what it is and how it works. Chapter 13 is often referred to as debt reorganization because it combines and lowers the payments for the filer’s unsecured debts, leaving them with money to pay their secured debts. After a period of three to five years, some debts are discharged.
In order for a federal bankruptcy judge to approve your payment plan, you must make enough money from any type of income to pay your secured debts each month while still having sufficient disposable income to put towards your unsecured debts. This means you must be able to pay your mortgage, car note and any other debt that is secured by property. You must also be able to pay back some of your debts in full over the course of the program. You will also need to make enough to have some money to provide for yourself and your family’s basic needs.
There are federal limits on the debt that can be brought into a Chapter 13 filing. These numbers change periodically, but the maximum amount in secured debts allowed until April 1, 2016 is $1,149,525. On that date, a new limit will be established based on inflation. Your unsecured debts, such as medical and credit card debts, cannot exceed $383,175. This number will also increase in 2016.
In order to file for debt reorganization, your federal and state taxes must have been filed for the past four years. This does not mean you need to be current on your payments, but you will need to provide proof of your filings. You must also not be barred because of a recent bankruptcy filing.
Those who do not qualify for Chapter 13 debt reorganization may be eligible for a Chapter 7 bankruptcy filing. To learn which options are available to you, we encourage you to meet with a bankruptcy attorney at DebtStoppers. We offer free one-on-one debt consultations with experienced professionals. To schedule your consultation, call us now at 678-673-2142 or contact us online.