Chapter 13 bankruptcy
has several important
restrictions. Your
first step is to
see whether or
not you legally
qualify for a Chapter
13 Bankruptcy.
- Regular wages
or salary;
- Income from self-employment;
- Wages from seasonal
work;
- Commissions
from
sales or other
work;
- Pension payments;
- Social Security
benefits;
- Disability or
workers' compensation
benefits;
- Unemployment
benefits, strike
benefits and
the like;
- Public
benefits (welfare
payments);
- Child
support or
alimony you
receive;
- Royalties
and rents;
and
- Proceeds
from
selling
property,
especially
if selling
property
is
your
primary
business.
Businesses Can't
File for Chapter
13 Bankruptcy
A business, even
a sole proprietorship,
cannot file for
Chapter 13 bankruptcy
in the name of
that business.
Businesses are
steered toward
Chapter 11 bankruptcy
when they need
help reorganizing
their debts.
If you own a business
as a sole proprietor,
however, you can
file for Chapter
13 bankruptcy as
an individual and
include the business-related
debts for which
you are personally
liable.
You Must Have
Stable and Regular
Income
You must have stable
and regular income
to be eligible
for Chapter 13
bankruptcy. That
doesn't mean you
must earn the same
amount every month.
But the income
must be steady
-- that is, likely
to continue and
it must be periodic
-- weekly, monthly,
quarterly, semi-annual,
seasonal or even
annual. You can
use the following
income to fund
a Chapter 13 plan:
You Must Have
Disposable Income
For you to qualify
for Chapter 13
bankruptcy, your
income must be
high enough so
that after you
pay for your basic
human needs, you
are likely to have
money left over
to make periodic
(usually monthly)
payments to the
bankruptcy court
for three to five
years. The total
amount you must
pay will depend
on how much you
owe, the type of
debts you have
-- certain debts
have to be paid
in full; others
don't -- and your
court's attitude.
A few courts allow
you to repay nothing
on debts, which
legally, don't
have to be repaid
in full, as long
as you repay 100%
of the others.
Some courts push
you to repay as
close to 100% of
your debts as possible.
Most courts fall
somewhere in between.
To determine if
your disposable
income is high
enough to fund
a Chapter 13 plan,
you must create
a reasonable monthly
budget. If you
are not proposing
to repay 100% of
your debts and
the court, the
trustee or a creditor
thinks your budget
is too generous
-- that is, it
includes expenses
other than necessities
-- your budget
could be highly
scrutinized.
Your Debts Must
Not Be Too High
You do not qualify
for Chapter 13
bankruptcy if your
secured debts exceed
$922,975.00. A
debt is secured
if you stand to
lose specific property
if you don't make
your payments to
the creditor. Home
loans and car loans
are the most common
examples of secured
debts. But a debt
might also be secured
if a creditor --
such as the IRS
-- has filed a
lien (notice of
claim) against
your property.
In addition, for
you to be eligible
for Chapter 13
bankruptcy, your
unsecured debts
cannot exceed $290,000.
An unsecured debt
is any debt for
which you haven't
pledged collateral.
The debt is not
related to any
particular property
you possess, and
failure to repay
the debt will not
entitle the creditor
to repossess property.
Most debts are
unsecured, including
bank credit card
debts, medical
and legal bills,
student loans,
back utility bills
and department
store charges.
If you're uncertain
as to whether you qualify
for a chapter 13 or
a chapter 7, call our
office and make an
appointment for a FREE
Consultation!
< back to previous page
|
