Filing for bankruptcy is never an easy option, but for some debtors, Chapter 13 Bankruptcy may seem like the best for a bad situation. Unlike Chapter 7 Bankruptcy which requires you to liquidate your assets to pay off your creditors, Chapter 13 Bankruptcy allows you to make payments on your debt over a period of several years. Although this may sound like an ideal option, not everyone is eligible to file for Chapter 13 Bankruptcy. Below, a Groce & DeArmon bankruptcy attorney discusses the eligibility requirements.
You Cannot Be Business Entity For Chapter 13 Bankruptcy
Chapter 13 Bankruptcy only applies to individuals, not business entities. Instead of filing under Chapter 13, corporations and limited liability companies (LLC) must file under Chapter 11 Bankruptcy. However, sole proprietorships are the only exception to the rule. If you own your own business, you may be able to put the debts under your name and file under Chapter 13.
Your Debts Cannot Be Too High
If your debts are too high, you will not be eligible to file under Chapter 13. The amount of debt you can accumulate adjusts for inflation, but as of 2017, your secured debt cannot exceed $1,184,200 or your unsecured debts cannot exceed $394,725. If your debts are greater than the current limits, you may have to file for Chapter 7 Bankruptcy instead.
You Must Have Sufficient Income
To qualify for Chapter 13, you must prove to the bankruptcy court that you can pay back your debt in full. Therefore, you must have sufficient disposable income to make payments after taking into account your other required expenses, such as your car loan, mortgage, and any other payment obligations. As long as you have the ability to make your debt payments, your income can come from a variety of sources, including regular working wages, self-employment, pension payments, child support, and more. To see if you have enough disposable income, consult a bankruptcy attorney.
You Must File Your Income Tax Returns
Additionally, to file for Chapter 13 Bankruptcy, you must prove that you have filed your income tax returns for the last four years. When you apply for Chapter 13, be sure to provide a transcript of your most recent tax return filed with the IRS.
Contact a Bankruptcy Attorney
Filing for Chapter 13 Bankruptcy is a difficult and time-consuming process. To meet the eligibility requirements outlined by the bankruptcy court, you must provide proof of income and other necessary paperwork. To ensure you have the greatest chance of approval, consult a bankruptcy attorney at Groce & DeArmon, P.C.. At Groce & DeArmon, our team will work with you to develop a strong application and a convincing argument in court. To learn more about our services or schedule a consultation, contact us today.