A Chapter 13 bankruptcy is a personal bankruptcy that allows the filer to repay the debts one owes in a payment plan that is strictly structured and approved by the bankruptcy court. This type of bankruptcy is usually filed by people who don’t meet the income requirement for filing a Chapter 7 bankruptcy and those who are unable to pass the means test for Chapter 7 bankruptcy. As is the case with any bankruptcy, there are very specific rules that apply to Chapter 13 bankruptcies.
For a person to qualify for Chapter 13 bankruptcy, one must have enough income to pay one’s debts. To determine if the person qualifies, allowable expenses are deducted from one’s income. If there is money left over that enables the individual to pay one’s obligations, he or she is considered to have sufficient income. The income left must be enough to make the mandatory payments, pay the bankruptcy trustee, and pay unsecured creditors an amount that equals the value of the nonexempt property the filer retained.
In a Chapter 13 bankruptcy, there are certain debts that must be included in the plan. Secured debts that will continue to be paid after the bankruptcy is discharged, including mortgage payments, must be kept current during the bankruptcy. Priority debts, including alimony and child support, must be paid in full. Secured debts, such as tax liens, also have to be paid in full within the allotted repayment term.
All Chapter 13 bankruptcies have time limits. The limit is either three years or five years, depending on the approved plan. By paying the bankruptcy as stated in the approved plan, the filer can keep one’s property.
There are specific debt limits for people who file Chapter 13 bankruptcy. These limits are adjusted every three years for inflation. The limit for unsecured debt is considerably lower than the limit for secured debts.
A person who has previously filed for bankruptcy might be ineligible to seek protection under Chapter 13 bankruptcy. If a person has filed a Chapter 7 bankruptcy within the past four years or a Chapter 13 within the past two years, he or she might not be able to file for Chapter 13 bankruptcy. Additionally, if a bankruptcy petition was dismissed in the previous 180 days because of failing to appear before the court, willfully violating a court order, or requesting that the court dismiss the bankruptcy after an automatic stay was requested to be lifted by a creditor, filing Chapter 13 bankruptcy isn’t possible.
A person who needs to file for Chapter 13 bankruptcy will have to show proof that income tax returns have been filed for the past four tax years. One must also go through credit counseling with an approved organization at least 180 days before filing for bankruptcy.
Bankruptcy law is extremely complex. Knowing all the laws pertaining to a bankruptcy petition can be difficult. For this reason, anyone who needs to seek bankruptcy protections should contact an experienced bankruptcy lawyer for assistance.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified chapter 13 bankruptcy lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local chapter 13 bankruptcy attorney to discuss your specific legal situation.