Filing Chapter 13

Filing Chapter 13 – What Requirements Should You Meet?

To be eligble to file Chapter 13 bankruptcy, there are several requirements.

  • You must be an individual, including sole proprietors.  Corporations cannot file under Chapter 13.  Rather, corporations seeking a reorganization must do so under Chapter 11.
  • There are debt limits for both secured and unsecured debt which are automatically increased every 3 years. As of April, 2016, the limit for secured debt such as mortgages is $1,184,200.00, and the limit for unsecured debt is $394,725.00 
  • You must have regular income with which to fund the Chapter 13 Plan 

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Filing Chapter 13 

Repeat Filings

In 2005, the Bankruptcy Code was amended to address repeat filings. Specifically, Congress sought to eliminate bankruptcy abuse by filers who only intended to stop execution such as sheriff's sales, without actually having the likelihood of successfully completing a Chapter 13 case.

Since then, the automatic stay on a second bankruptcy filed within one calendar year of a previous case is only in effect for 30 days after filing.  The debtor must promtply file a Motion to Extend the Automatic Stay and a hearing on the Motion must be held prior to expiration of the deadline.  Typically, such Motions are granted as the courts wish to allow a debtor a second chance.  However, it is not guaranteed and you may be required to appear in court and verify that both cases were filed in good faith.

A third filing within one year of the first does not have the protection of the Automatic Stay, at all.  Rather, the debtor must file a Motion to Reimpose the Stay and can only succeed if the debtor proves all 3 filings were in good faith.

Consequently, we only advise filing a Chapter 13 when it is a last resort and there is a substantial likelihood of success.            

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When it comes to filing bankruptcy Chapter 13, the bankruptcy laws require repayment of some debts in full. These debts include priority debts which are unsecured debts, such as alimony, child support, maintenance, and non-dischargeable taxes. Filing for bankruptcy under Chapter 13 also requires full payment of secured debts that have survived the repayment plan, such as a vehicle or mortgage loan and these must remain current during the repayment plan. Finally, when learning how to file, it will be explained that other secured debts, such as tax and judicial liens also have to be paid in full during your repayment time.

How to File for Bankruptcy Chapter 13 – The Ins and Outs

You can use income from the below sources to fund a Chapter 13 plan. Your attorney will discuss these with you when discussing how to file for bankruptcy Chapter 13:

  • Income from self-employment
  • Regular salary or wages
  • Earnings from seasonal work
  • Social Security benefits
  • Pension payments
  • Commissions from other work or sales
  • Public benefits, such as welfare payments
  • Worker’s compensation benefits
  • Child support
  • Proceeds from selling property

When discussing how to file for bankruptcy Chapter 13 with your attorney, you will learn that you can repay a certain amount to your unsecured creditors. Unsecured, nonpriority creditors are entitled to repayment when filing for bankruptcy. Since the debtor may be permitted to keep the nonexempt property under this form of bankruptcy, they may repay nonpriority creditors an amount that is at least equal in value to their nonexempt property. This can be done over the life of your repayment plan. Nonexempt property includes inexpensive jewelry, household furniture and appliances and a certain amount of equity. You will be required to have sufficient income to pay the debt, after deducting allowable expenses. You are able to include revenue from a working spouse, even if your spouse has not filed for a joint bankruptcy.

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