Chapter 13 bankruptcy is a format of debt reorganization most common for individuals and some types of businesses. Overseen and administered by a standing bankruptcy trustee, a Chapter 13 case takes secured, unsecured, and priority debts and alters them into a consolidated repayment plan that lasts three to five years depending on the debt amount of the filer. If you have a steady income and want to protect your assets from the liquidation that could occur in a Chapter 7 case, Chapter 13 may be the best choice for you. With the guidance of Behm Law Group, Ltd., you can successfully file for Chapter 13 bankruptcy in Windom, MN and obtain long-term debt relief.
While Chapter 13 is a highly effective bankruptcy option for people in a broad range of financial situations, it has limitations and guidelines like any other type of legal process. The most basic of these limitations decides who can and can’t file.
Who can file?
- For an individual to qualify for Chapter 13 bankruptcy, they must have a steady income that allows for reasonable and necessary expenses for living to be factored out of their repayment plan while still meeting monthly payments.
- They must have undergone credit counseling within 180 days prior to filing.
- They cannot have secured debts exceeding $1,184,200 or unsecured debts exceeding $394,725.
- They must have filed all of their income tax returns for the past four years prior to filing.
- They cannot have filed a Chapter 13 case within the past two years or a Chapter 7 case within the past four years.
- They cannot have filed and had dismissed another bankruptcy case within the last 180 days.
- Spouses can file a joint Chapter 13 case involving both of their debts and combined incomes if they have also met all the requirements listed for individual filers.
- Some businesses are eligible to file for Chapter 13 bankruptcy. Specifically, those whose owners are personally liable for the business debts.
- This includes sole proprietorships and business partnerships.
Other limitations and guidelines of Chapter 13 bankruptcy outline the repayment plan itself.
What is an accepted repayment plan?
- For a filer’s repayment plan proposal to be accepted by their trustee and the court, it must meet specific requirements designed in fairness to creditors.
- In their repayment plan, a filer must be able to repay allowed secured creditors’, under adjusted loan terms/conditions, in full over a three to five-year period.
- Their priority debts such as tax debts, child support debts, alimony, criminal fines, etc., must be included in the plan and must be repaid in full over a three to five-year period.
- Unsecured debts must be repaid the value of the filer’s non-exempt assets that would have otherwise been liquidated in a Chapter 7 process. This is informally referred to as the “Best Interests Test”. For example, if a filer would have non-exempt assets totaling $10,000.00 in a hypothetical Chapter 7 case, the filer must pay that amount over a three to five-year period to their creditors in a Chapter 13 case.
While there are many guidelines to follow and limitations to adhere to in the process of Chapter 13 bankruptcy in Windom, MN, it’s undeniable that it has been an effective treatment for a wide variety of debtors. To learn more about the process or to get started, contact Behm Law Group, Ltd. at (507) 387-7200 today.