Who can file for Chapter 13 Bankruptcy?
People who usually qualify for Chapter 13 make enough income to cover their living expenses but not enough to completely pay their debts.
A The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) Click for more: Chapter 13 Bankruptcy reorganization A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. allows these individuals to pay off the debt they can afford over time and then eliminate the balance of the debt owed at the end of their plan. When individuals do not qualify to file for a The chapter of the Bankruptcy Code providing for "liquidation,"(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.) Click for more: Chapter 7 Bankruptcy A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code). Click for more: Bankruptcy Introduction Video, they often will be eligible to file for a Chapter 13 bankruptcy because there is no “Section 707(b)(2) of the Bankruptcy Code applies a "means test" to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Click for more: Means Test Article” to disqualify them as there is with a Chapter 7 bankruptcy. In many situations, individuals file for Chapter 13 bankruptcy when they have suffered a temporary loss that makes it impossible for them to promptly pay all of their debt. However, prior to filing a Chapter 13 bankruptcy, it is important to realize that you must have a consistent source of income in order for your repayment plan to be approved by the court. A self-employed individual can qualify as well as the wage earner, as long as the court believes the source of income is sufficient and dependable. You must be able to pay something on your debt in addition to your monthly living expenses in order to qualify.
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