Who Is Eligible to File Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy allows the debtor to discharge some debts without completely liquidating the debtor's assets. This process is in contrast to a Chapter 7 bankruptcy, where a trustee sells off the debtor's nonexempt assets to pay creditors. Chapter 13, often referred to as reorganization or restructuring, allows the debtor to retain property and pay back creditors based on a three- to five-year payment plan approved by the bankruptcy judge. Not everyone, however, is eligible for Chapter 13 bankruptcy; several eligibility requirements exist.
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Eligibility
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Business entities, including corporations and limited liability companies, aren't eligible to file Chapter 13---only individuals or married couples may file for this type of bankruptcy. Business entities must instead file for Chapter 11 bankruptcy. There is an exception to this requirement: Business owners who file individually and are personally liable for the debts of their sole proprietorship or partnership debts can file for Chapter 13 personally and list the debts of their business with their other personal debts.
Prior Bankruptcy
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Debtors who previously filed for Chapter 13 and discharged debt within the last two years cannot file for Chapter 13. In addition, debtors who filed for Chapter 7 in the last four years cannot file for Chapter 13. This requirement extends to bankruptcy cases that were dismissed as well. If a debtor had any bankruptcy petition dismissed during the last 180 days, then the debtor cannot file for Chapter 13 if the case was dismissed for one of two reasons. First, if the debtor violated a court order or didn't show up for court and the case was dismissed, the debtor is ineligible for Chapter 13. The debtor is also ineligible to file for Chapter 13 if the court dismissed the case after a creditor moved the court to lift the automatic stay.
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Credit Counseling
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A debtor must complete approved credit counseling at least 180 days prior to filing Chapter 13 bankruptcy. If the debtor cannot provide proof that she completed approved credit counseling, then she can't file for Chapter 13. The debtor must provide a copy of the certificate within 15 days of filing the Chapter 13 petition.
Debt Manageability
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Chapter 13 bankruptcies reorganize and restructure debt into manageable payment plans. If the debtor has too much debt, not enough time to pay or both, he cannot file for Chapter 13. To be eligible for Chapter 13, the debtor cannot have in excess of $336,900 in unsecured debt and $1,010,650 in secured debts, as of September 2010. These limits are adjusted every three years to take inflation into consideration. The debtor must also have income sufficient to make payments according to a court-approved payment plan.
Tax Returns
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A debtor must have filed state and federal income tax returns for the past four years to be eligible to file for Chapter 13. The debtor must provide proof of these returns to the bankruptcy court.
Warning
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To find out how the facts of your individual situation apply to Chapter 13 bankruptcy eligibility, please contact a qualified bankruptcy attorney.
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