How Do I Qualify for a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy allows individuals to reorganize their debts into a manageable repayment plan that typically lasts three to five years. Unlike Chapter 7, which liquidates assets to settle debts, Chapter 13 helps filers keep their property while making scheduled payments. This option is often ideal for those with a steady income who want to avoid foreclosure or regain control over their financial obligations.

Meeting the Income Requirement

To qualify for Chapter 13, you must have a reliable source of income that enables you to make monthly payments under a court-approved plan. Your income can come from wages, self-employment, Social Security, rental properties, or other consistent sources. The bankruptcy court will review your income and expenses to ensure you can sustain the repayment plan while covering essential living costs.

Staying Within Debt Limits

There are specific debt limitations for Chapter 13 bankruptcy. As of 2024, unsecured debts (such as credit cards and medical bills) must be below $465,275, and secured debts (such as mortgages and car loans) must be under $1,395,875. These limits are adjusted periodically, so it’s important to verify the latest figures before filing. If your debts exceed these thresholds, other options may need to be explored.

Filing as an Individual or Business Owner

Chapter 13 is available to individuals, married couples, and sole proprietors, but not corporations or partnerships. If you own a business, you can still file for Chapter 13 in your name to restructure personal debts, including those tied to your business. However, business debts under a separate entity will require a different legal approach.

Staying Up to Date on Tax Filings

To be eligible for Chapter 13, you must have filed your federal and state tax returns for the past four years. The court requires proof of these filings before approving a repayment plan. If tax returns are missing, they must be submitted before proceeding with your case, as failure to comply could result in dismissal.

Chapter 13 bankruptcy offers a path to financial stability for those who meet the income, debt, and filing requirements. By structuring a repayment plan, individuals can regain control over their finances while keeping their assets. If you’re considering Chapter 13 in Van Buren, Arkansas, Carl W. Hopkins, PA can help you move forward with confidence. Contact our office today to discuss whether this option is right for you.