Who is Eligible to Apply for Chapter 13 Bankruptcy?

To petition for bankruptcy under this chapter, a debtor must meet the Chapter 13 requirements. Unlike a Chapter 7 bankruptcy, which allows the debtor to discharge some debts in exchange for the sale of nonexempt property to pay creditors, a Chapter 13 bankruptcy allows the debtor to keep their property while repaying creditors over a three- or five-year period through a court-approved repayment plan.

Chapter 13 Bankruptcy Requirements

You must meet the following criteria to qualify for Chapter 13 relief under the United States Bankruptcy Law.

You Are Not a Legal Entity

Individuals and those filing jointly as couples are the only ones who can petition for Chapter 13 bankruptcy. For example, corporations and limited liability firms (LLCs) are ineligible for Chapter 13 bankruptcy and must instead apply for Chapter 11. While a business owner cannot file in the company's name, if you own the company as a lone proprietor or with a partner, you can file in your name for the personally liable debts. Therefore, stockbrokers and commodity brokers are not qualified under Chapter 13.

A Prior Bankruptcy Does Not Preclude You from Applying

You are ineligible for a Chapter 13 discharge if you discharged debt in a Chapter 13 bankruptcy during the last two years or a Chapter 7 bankruptcy within the previous four years. A prior bankruptcy case has yet to be dismissed during the previous 180 days.

A debtor might not apply for Chapter 13 or Chapter 7 bankruptcy if a previous bankruptcy petition was dismissed within the last 180 days for any of the following reasons:

• The debtor deliberately disobeyed a court order or failed to appear.
• The debtor petitioned the court to dismiss the matter after a creditor asked to lift an automatic stay

You Have Completed Your Credit Counselling Requirement

A Chapter 13 debtor must file with the bankruptcy court a certificate of proof demonstrating that debt counselling was offered by an approved credit counselling service at least 180 days before filing for Chapter 13. If the credit counselling agency prepared a debt management plan, the debtor must give a copy to the court. The certificate must also be filed with the initial petition or provided within 15 days of filing for bankruptcy.

Your Debts Must Be Not So High

The amount of debt that can be discharged under Chapter 13 is limited. Individual debtors with less than $419,275 in unsecured debt (debts not secured by property, such as credit card debt and medical expenses) and less than $1,257,850 in secured debt are eligible for Chapter 13. (Obligations in which a creditor can take the property securing the debt if it is not paid). Debt restrictions are adjusted for inflation every three years.

You Have Submitted Your Tax Returns

You must submit proof of filing state and federal income tax returns for the prior four years to meet Chapter 13 criteria. You must submit the trustee with a copy or transcript of the most recent federal tax return filed with the IRS at least seven days before the first meeting of creditors.

You Can Repay Unsecured Creditors Up to a Specified Amount

Unsecured nonpriority creditors may also be entitled to repayment. Because a debtor can maintain the nonexempt property in Chapter 13 bankruptcy, they must return nonpriority, unsecured creditors at least the value of the nonexempt property throughout the repayment plan. Household appliances and furnishings, inexpensive jewelry, and a certain amount of home or motor vehicle equity are examples of nonexempt property.

There Are No Income Restrictions

Compared to Chapter 7, there is no means test to determine whether your salary is too high to file for Chapter 13. Instead, the courts will consider whether your income is insufficient to satisfy the loan (more on this below).

Can You File For Chapter 13 Bankruptcy? Find Out With the Assistance of an Attorney

If you need clarification on whether bankruptcy is the best option, a personalized assessment of your goals and situation is essential. Harassing collection attempts and limited finances might lead to hasty decisions and further confusion. Get in touch with an Alabama Bankruptcy Attorney today.

Article source: https://article-realm.com/article/Finance/41463-Who-is-Eligible-to-Apply-for-Chapter-13-Bankruptcy.html