Chapter 13 bankruptcy offers individuals a way to reorganize their debts and create a manageable repayment plan. However, not everyone qualifies for this type of bankruptcy.
Income requirements
To qualify for Chapter 13 bankruptcy, you must have a regular income that allows you to meet the obligations of a repayment plan. If your income is too low or irregular, the court may decide that you cannot feasibly follow through with a Chapter 13 repayment plan. This doesn’t necessarily mean you can’t file for bankruptcy at all, but you may need to consider Chapter 7, which doesn’t require a repayment plan.
Debt limits
Chapter 13 bankruptcy has specific debt limits. As of the most recent guidelines, your unsecured debts (like credit card debt or medical bills) must be less than $465,275. Also, your secured debts (like mortgages or car loans) must be less than $1,395,875. If your debts exceed these limits, you won’t qualify for Chapter 13 and may need to explore other options.
Previous bankruptcy filings
If you’ve filed for bankruptcy before, this could affect your eligibility for Chapter 13. Specifically, if you received a discharge from a previous Chapter 7 bankruptcy within the last four years or from a Chapter 13 bankruptcy within the last two years. The court imposes these time limits to prevent abuse of the bankruptcy system.
Failure to file tax returns
Another factor that can disqualify you is failing to file required tax returns. The court requires you to be current on your tax filings for at least the last four years before you can proceed with Chapter 13. If you haven’t filed your tax returns, you’ll need to do so before the court will allow you to move forward with your case.
Understanding disqualification
Chapter 13 bankruptcy offers many benefits, but it comes with strict eligibility requirements. Understanding these disqualification factors can help you determine the best path forward for your financial situation.
