Chapter 13 Eligibility

Not everyone qualifies to file a Chapter 13 bankruptcy. The bankruptcy attorney’s at Bankruptcy Professionals can tell you whether you are eligible to file a Chapter 13 case

Residency and Income Requirements

Any individual who has regular income and resides in, is domiciled, or has a place of business or business property located in the U.S. may file Chapter 13 bankruptcy. A corporation, partnership, or other business entity may not file a Chapter 13 bankruptcy.

The Bankruptcy Code defines regular income as income that is sufficiently stable and regular as to allow the debtor to make the payments set forth in his Chapter 13 plan. Income can be from salary or wages, government benefits, alimony and support payments, or any other income received by the debtor on a regular basis including:

  • Pension and retirement benefits;
  • Royalties and rents;
  • Unemployment benefits;
  • Commissions from sales or other work;
  • Self-employment;
  • Proceeds from selling property (especially is selling such property is the debtor’s primary business or source of income); and
  • Rental income, including rent received from roommates or borders.

Debt Limitations – To file a Chapter 13 bankruptcy, a debtor may not have liquidated unsecured debts in excess of $336,900. Moreover, a debtor’s secured debts may not exceed $1,015,650.

Disposable Income Requirement – In order to file a Chapter 13 bankruptcy, a debtor must have sufficient disposable income to fund the Chapter 13 plan. This determination involves a number of calculations. First, the debtor’s currently monthly income is calculated by averaging his income from all sources for the six month period before the bankruptcy petition is to be filed. Next, the allowable deductions are subtracted from the current monthly income figure to arrive at the debtor’s current net monthly income. The allowable deductions include:

  • Federal and state taxes;
  • Social security
  • Health insurance;
  • Union dues; and
  • Other payroll deductions.

Next, the debtor’s expenses are subtracted from the currently net monthly income figure. The difference is known as the monthly net disposable income. If the monthly net disposable income figure is a positive number, the debtor may file a Chapter 13 bankruptcy. Other factors which impact a debtor’s eligibility to file a Chapter 13 bankruptcy include:

  • Exactly how must much the monthly net disposable figure is ;
  • Whether the majority of the debtor’s debts are secured, priority unsecured, or general unsecured debts;
  • The amount owed on the each type of debt;
  • The length of the Chapter 13 plan;
  • The composition of the Chapter 13 plan;
  • Whether the bankruptcy court deems the plan to have been proposed in “good faith”; and
  • A variety of other factor which may arise depending on the fact and circumstances of the debtor’s case.

If the monthly net disposable income figure is negative, the debtor is ineligible to file Chapter 13. If a debtor has insufficient disposable income to fund a Chapter 13 plan, he may be eligible to file a Chapter 7 bankruptcy case. However, he would need to speak with a knowledgeable bankruptcy attorney to determine whether he qualifies to file a Chapter 7 case.

Although filing bankruptcy is a complex process, the bankruptcy attorney’s at Bankruptcy Professionals are well-versed in all aspects of bankruptcy law with over 20 years of bankruptcy experience. Our bankruptcy attorneys are prepared to review your financial situation and advise you of whether you qualify to file a Chapter 13 case. So, give us a call today to schedule a consultation 888-970-1090.

Bankruptcy Professionals

×
Contact Us

×