Will I Qualify for Chapter 13 Bankruptcy?

Chapter 13 bankruptcy offers a big advantage over Chapter 7 bankruptcy, because almost everyone qualifies to file for Chapter 13 bankruptcy. If you have already explored Chapter 7 bankruptcy as an option, then you know that it has many restrictions to qualification, such as limits on income. Additionally, few assets are protected when you file for Chapter 7 bankruptcy.

Who Chooses Chapter 13 Bankruptcy?

Chapter 13 bankruptcy allows you to file for bankruptcy free from restrictions on your income and restrictions on the property you are allowed to keep, with only a few exceptions. It can be a great option for those who do not qualify for Chapter 7 or for those who have assets they want to keep that would be disallowed under Chapter 7 bankruptcy.

Chapter 13 Bankruptcy Restrictions

Although nearly everyone qualifies for Chapter 13 bankruptcy, there are a few restrictions.

  1. You cannot file if you discharged debt through a prior Chapter 13 bankruptcy less than two years ago.
  2. If you discharged debt via a previous Chapter 7 bankruptcy less than four years ago, you cannot file for Chapter 13 bankruptcy.
  3. You can’t have more debt than is allowed when filing a Chapter 13 bankruptcy (the current maximum amount is over one million dollars).
  4. You cannot be behind on any income tax filings.
  5. You must have enough disposable income to be able to afford your monthly Chapter 13 bankruptcy plan payment.

Is Chapter 13 Bankruptcy the Right Choice for Me?

If you qualify for both Chapter 13 bankruptcy and Chapter 7 bankruptcy, Chapter 13 will not necessarily be the right choice for you under your specific set of circumstances. Unlike a Chapter 7 bankruptcy which completely eliminates your unsecured debt, you will have to make a monthly payment to the court for three to five years, meaning you will have to pay at least some of your debt to your creditors.

If you have few assets that will not be protected in a Chapter 7 bankruptcy and you qualify for both chapters, Chapter 7 bankruptcy might be the better option. However, because you are allowed to keep most if not all of your assets and still file Chapter 13 bankruptcy, it may be the better option if you have a lot of assets that would not be protected in a Chapter 7.

If you need to file bankruptcy, and Chapter 13 is your only option, it still offers great opportunities for eliminating debt. Although you will have to pay a percentage of your debt off through the payment plan, you will still be eliminating a lot of debt while protecting yourself from creditors and keeping your assets.

Bankruptcy itself is not always the best option for everyone in financial trouble. It would be wise to discuss your specific situation with an experienced bankruptcy attorney to determine if it is the right choice for you.