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Any individual, sole proprietor, a self-employed or an unincorporated business owner can file for chapter 13 bankruptcy if they are struggling to pay off a huge amount of debt. Unfortunately, corporations and partnerships do not have the luxury to opt for this option. Unlike chapter 7, chapter 13 has debt limits for qualifying under this bankruptcy chapter. This limit is tied to consumer price index say Los Angeles based bankruptcy law firm Recovery Law Group lawyers. Currently, individuals having an unsecured debt of up to $360,475 and secured debt up to $1,081,400 are eligible to file for chapter 13 bankruptcy. Other important requirements which can affect your chapter 13 eligibility include:
- If within the past 180 days their bankruptcy petition was dismissed due to the inability to appear or comply or if the debtor themselves had voluntarily dismissed the bankruptcy petition.
- Mandatory credit counseling must have been done from an approved agency at least 180 days prior to a bankruptcy filing.
Individual debtors who have regular income can choose to get rid of their debts through chapter 13 bankruptcy by reorganizing their debts and repaying the creditors over a period of 3-5 years. In this case, the debtor makes monthly payments (depending on their disposable income) to the bankruptcy trustee who then disburses them to creditors as per the court-approved repayment plan.
Key requirements of filing for chapter 13 bankruptcy
In the case of chapter 13 bankruptcy, the debtor after filing a bankruptcy petition in the court, also need to file the following documents:
- Current income and expenses
- Any assets and liabilities
- Financial records for a specified period
- Credit counseling proof and copy of repayment plan created during its course
- Any executory contracts and unexpired leases
- Monthly net income and any increase in income or expenses anticipated by the filer
- Any proof of payments received from employer 60 days prior to a bankruptcy filing
- A written record of debtor’s interest in qualified education or tuition accounts
The repayment plan developed in credit counseling is submitted to the bankruptcy trustee and then to the court for approval. The debtor is expected to make plan payments to bankruptcy trustee within 30 days of the bankruptcy filing, irrespective of court approval.
Why choose chapter 13 bankruptcy?
You can protect even your non-exempt property unlike chapter 7 where the non-exempt property is liquidated. You can prevent foreclosure proceedings as chapter 13 allows you to catch up on past payments through the repayment plan. If a bankruptcy filer fails to qualify for chapter 7, they can convert it to a chapter 13 bankruptcy to get rid of their debts. Additionally, unlike chapter 7 bankruptcy which remains on credit report for 10 years, a chapter 13 bankruptcy is mentioned on your credit report for just 7 years. You can know more about chapter 13 bankruptcy by speaking with experienced bankruptcy lawyers at 888-297-6023.