Filing for Chapter 13 bankruptcy has several benefits if you are overwhelmed by debt. Also referred to as a wage earner’s plan or reorganization bankrutpcy, Chapter 13 allows you to create a plan to reorganize your debts to repay all or part of what you owe over a three to five year period. Because this plan uses your own income to repay your debts, in many cases, you will be able to keep your home and other property.
Requirements to file
If you wish to file for Chapter 13 bankruptcy, there are several requirements you must meet. These include the following:
- You cannot file as a business.
- You cannot be ineligible based on past bankruptcies.
- You cannot file if a court dismissed your prior bankruptcy attempt in the past 180 days.
- You must have participated in credit counseling within the past 180 days.
- Your unsecured debt must be under $419,275.
- Your secured debt must be under $1,257,850.
- You must have filed your taxes for each of the last four years.
- You must have a detailed plan for repaying your debts.
You can file even if your income is relatively high. However, if your income is too low to sufficiently pay your debts under your restructured plan, while also paying for your other regular living expenses, Chapter 13 is likely not the best option for you.
Understanding the requirements
As you can see, there are many rules and requirements to understand before proceeding with a reorganization bankruptcy. Other complications can arise while developing your repayment plan, including sorting out your priority debts and secured debts.
If you’re feeling overwhelmed by debt, you might benefit from consulting a lawyer with experience in bankruptcy law. Whether you’re eligible for Chapter 13 bankruptcy or not, it’s vital to take action regarding your debt to pursue a fresh start.