Eligibility Requirements for Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals to clear their debts without liquidating their property. Unlike Chapter 7, a person who files for Chapter 13 does not risk losing most of his or her possessions to pay back debts. Instead, Chapter 13 allows a person to restructure his or her finances and create a plan to use saved income to pay back debts over a set amount of time. While Chapter 13 may be a more preferable bankruptcy option for many people, it does have some strict eligibility limitations that exclude some from employing this option.
Unsecured and Secured Debt Limits
One of the downsides to Chapter 13 is that, unlike Chapter 7, it limits how much debt a person may have to file for bankruptcy. To qualify for Chapter 13, an individual must meet the following debt restrictions:
- Less than $336,900 in unsecured debts
- Less than $1,010,650 in secured debts
- These must be individual debts. No partnerships or corporations may file for Chapter 13.
As long as an individual has debts below these limits, he or she may be eligible to file for bankruptcy under Chapter 13.
Reliable Income
Another restriction that is required of anyone who files for Chapter 13 is that filers have a reliable source of income that will allow them to save money beyond their necessary expenses. Typically a repayment plan is created that will allow the debtor to pay back outstanding debts in 3 to 5 years. A reliable income allows the filer to keep this promise so that he or she will have all debts paid back by the end of the repayment plan. Without a reliable income that allows the filer to save money, he or she may not be eligible for Chapter 13 and may have to opt for Chapter 7 instead.
Contact Us
To learn more about the bankruptcy eligibility requirements for Chapter 13 and how a bankruptcy lawyer can guide you through this difficult financial time, contact the experienced New Orleans bankruptcy attorneys of Kervin & Young, LLC today at 504-599-5906.