For debtors with a steady income who are still struggling to keep up with monthly bills, Chapter 13 may be the solution. Filing for this chapter allows a debtor to repay debts under a more manageable plan, with smaller installments and a lengthier repayment period. Most importantly, the borrower will be able to keep his or her nonexempt property.
Chapter 13 differs from other bankruptcy options in that it is specifically “wage earners,” or individuals who receive regular wages through a job or self-employment. Therefore, not everyone can qualify for the debt-relief method. Below, our West Palm Beach bankruptcy attorneys outline six key requirements for a Chapter 13 bankruptcy repayment plan.
1. Must be a personal filer
In order to file under Chapter 13, one must be seeking a repayment plan for personal debts, meaning this option is not able to be pursued on behalf of a business. One exception to this is if the filer is a sole practitioner, in which case a repayment plan is able to be achieved with the right legal approach.
2. Must be able to make payments
A Chapter 13 filer must have regular income that meets or exceeds the monthly payments under the new repayment plan. Essentially, if one cannot keep up with the proposed payments, the plan will not be approved. These payments must satisfy all required debts, which include: priority debts, such as child support, and secured debts, such as a mortgage or tax liens. Additionally, one must be able to repay unsecured creditors an amount that matches or exceed the value of any nonexempt property he or she currently holds.
3. Must not be excluded by previous filings
If the individual has previously filed for Chapter 13 bankruptcy, he or she will not be able to file again for at least two years. Similarly, those who have filed Chapter 7 within the last four years will not be able to secure a Chapter 13 repayment plan. Additionally, if the borrower unsuccessfully filed for either Chapter 13 or Chapter 7 in the past 180 days, he or she will not be able to file again until that time has passed if the petition was dismissed due to a violated court order or the debtor requested its dismissal.
4. Must not exceed debt limits
The fourth requirement is that one’s debt falls within Florida’s Chapter 13 bankruptcy standards. Only those with less than $1,184,200 in secured debt and $394,725 in unsecured debt are eligible to file Chapter 13 bankruptcy.
5. Must be current on income tax returns
In order to obtain approval for a Chapter 13 repayment plan, the debtor must have filed a federal tax return on time for the previous four years. Also, if he or she previously resided in a state that requires state income tax, those must have been filed for the previous four years as well. Proof of this must be provided to the trustee before approval is granted.
6. Must have undergone credit counseling
A debtor must complete credit counseling at least 180 days before submitting a petition for Chapter 13 bankruptcy. In order to fulfill this eligibility requirement, the debtor must receive the counseling from an approved debt counseling agency and present a certificate of proof to the bankruptcy court.
If a Chapter 13 repayment plan sounds like an answer to your debt struggles, our West Palm Beach bankruptcy attorneys can advise you on the best course of action. We offer free consultations to all prospective bankruptcy filers, so give us a call today to schedule yours and begin the filing process.