Qualifying For Chapter 13 Bankruptcy
Qualifying for Chapter 7 bankruptcy occupies most of a debtor's concerns when considering their options; but filing Chapter 13 bankruptcy also has its own set of requirements.
Let's take a look at a few:
Businesses Need Not Apply
Chapter 13 bankruptcy is designed for consumers only. This means that corporations, partnerships and limited liability companies are not able to use Chapter 13 bankruptcy to restructure their debts. Companies must use Chapter 11 bankruptcy to restructure their debts. However, if the business owner is a sole proprietor, they are allowed to file Chapter 13 bankruptcy. Consumer debtors filing Chapter 13 bankruptcy must have debts which are mostly consumer related.
You Need A Job And Enough Income
If a debtor wants to file Chapter 13 bankruptcy, they must have regular income so that they can make monthly contributions to their bankruptcy plan. Sporadic income may not be enough to qualify for Chapter 13 bankruptcy. Working with a bankruptcy attorney, the debtor can figure out if they have enough income to meet the requirements of their proposed Chapter 13 bankruptcy plan. It's important to note that the debtor must have enough income to meet their daily living expenses and their debt repayment plan.
The bankruptcy court will not allow a debtor to propose a plan that doesn't make proper allowances for daily expenses. For example, a family of four could not propose a Chapter 13 bankruptcy plan that only allowed them $50 a month for food. They could propose a plan like that; but it's not likely it would win approval.
Must Reside In The Right Jurisdiction
While it is not required that a debtor be a U.S. citizen to file bankruptcy, they must reside inside the United States. Also, the debtor must meet the residency requirements imposed by the state in which they are filing bankruptcy. State residency rules can become somewhat complicated in that you may be required to file bankruptcy in your last state of residence instead of your current state of residence depending on how long you have been living there. Consult with a bankruptcy attorney to make sure you meet residency requirements.
You Must File Taxes
Chapter 13 bankruptcy filers must be current on all their tax return filings. This doesn't mean that all tax debt must be paid before you file bankruptcy; but it does mean that you can't avoid filing tax returns. Some debtors may need to file late tax returns before filing Chapter 13 bankruptcy.
Meet Debt Limits
Chapter 13 bankruptcy debtors must not have debt amounts which exceed limits set by the bankruptcy courts. This amount sometimes changes, so speak with a qualified bankruptcy attorney to find out if you exceed debt limits.