Most experts agree that filing for bankruptcy should be a last resort. If you have slipped behind on various payments and your debt has become insurmountable, you might ask a bankruptcy lawyer about your options. If you file Chapter 13 bankruptcy, you will develop a three-to-five-year repayment plan and keep your property. However, not everyone is eligible to file Chapter 13 bankruptcy. Read on to learn about the key eligibility criteria.
Individual vs. Business
Chapter 13 is reserved only for individuals and married couples. Corporations, partnerships, and even sole proprietorships cannot file for Chapter 13 bankruptcy. Business entities looking to file bankruptcy must opt for Chapter 11 bankruptcy instead. Though Chapter 13 bankruptcy is not an option for businesses, an individual who owns a business may file as an individual and discharge his personal debts through Chapter 13, which may help improve his business finances.
You’re more likely to be eligible for Chapter 7 bankruptcy if you have no or little income. However, since Chapter 13 bankruptcy involves repaying your outstanding debts over a three-to-five-year period, you need to prove that you have a steady income before you are deemed eligible. You must subtract your necessary living expenses from your total income and show the bankruptcy court that your disposable income can cover the payments outlined in your repayment plan.
There are also limits to how much debt you can discharge through Chapter 13 bankruptcy. You must have no more than $1,149,525 in secured debts (mortgage, car loan, etc.) and $383,175 in unsecured debts (credit card debt, medical bills, etc.). If your debt exceeds the limit, you may be better off filing Chapter 11 bankruptcy. Finally, you must be completely up to date on your income tax to be eligible for Chapter 13 bankruptcy.
If you are in dire financial straits and your debt relief measures are not working, set up a meeting with Cutler & Associates, Ltd. Our Aurora bankruptcy attorneys have nearly 25 years of experience handling bankruptcy.