The requirements of a Chapter 13 bankruptcy filing
Despite the decrease in negative stigma surrounding bankruptcy, many people still see it as an easy way out, a way to simply erase debt with no consequences. Well, anyone who has considered or filed for bankruptcy knows that to be completely untrue. For most people, the decision to file for bankruptcy comes after a major event, such as the loss of a job, and the resulting inability to make ends meet. In addition, many people seek Chapter 13 bankruptcy in an effort to save their home and avoid foreclosure.
However, potential filers should take note that not everyone who files for bankruptcy protection will qualify for Chapter 13. This is because it involves repaying, to some degree, the filer’s creditors, and therefore the filer must have a regular income that is sufficient to pay on those debts while still allowing the filer enough money to live on.
Chapter 13 bankruptcies follow a specific process. After filing, a debtor will propose a repayment plan under which he or she will make payments to creditors over a period of three to five years. If a debtor’s monthly income is below the applicable state median, the plan will be for three years; if it is above the median, the plan will be for five years.
Only individuals may file for Chapter 13 bankruptcy, and not businesses. However, a business owner may file for bankruptcy as an individual, and may include any business debts for which he or she is personally liable. Also, a debtor must show proof that he or she is current on Georgia state and federal income tax filings.
Finally, a filer must not have debt above the ceiling that is set by the federal bankruptcy code. This limit is $336,900 for unsecured debt and $1,010,650 for secured debt.
Source: Bankruptcy Home, “Not Everyone Qualifies to File for Chapter 13,” 2 June 2011