There’s a common misconception that, if you fail to meet the means test to file for protection under Chapter 7 of the bankruptcy laws, you can always file for debtor’s reorganization under Chapter 13, obtaining the benefit of the automatic stay and setting up new payment arrangements with your creditors. To the contrary, there are certain minimum requirements you must meet to be eligible for Chapter 13 bankruptcy protection.
You Must Be an Individual
Chapter 13 is not available to businesses of any kind. Even if you were running your business as a sole proprietor, you cannot seek protection under Chapter 13. All business reorganizations under the bankruptcy laws are under Chapter 11 (with extremely limited exceptions). If you own a business, but are not seeking to protect the business, you can qualify for Chapter 13 with respect to any business debts for which you are personally liable.
You Must Have Enough Income
This is essentially the flipside of the means test under Chapter 7. A Chapter 13 is a reorganization plan, where you make new agreements to repay your creditors. The bankruptcy trustee and the bankruptcy court won’t approve your plan if you can’t show that you’ll be able to make the proposed payments.
Your Debts Must Be Manageable, Based on Your Disposable Income
There’s a ceiling on the amount of debt that can be restructured through a Chapter 13 petition. Currently, you won’t qualify if your secured debt exceeds $1,184,200 or your unsecured debt is more than $394,725.
You Must Be Current on All Income Tax Filings
To qualify, you must verify that you have filed all state and federal tax returns for the last four years.
Contact Neuner & Ventura, LLP
At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
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