Chapter 13 bankruptcy could be a good choice for some people who owe money. This option lets someone with a steady income pay certain creditors less than the full amount owed, all while holding onto their things like cars and houses. But not everyone can use this option. Learn more about Chapter 13 Bankruptcy and who can use it.
Qualifying for Chapter 13 Bankruptcy
This chapter lets you pay back some debts, not all of them. You do this with a plan that lasts three to five years. Before the court can say “yes” to your plan, you have to fill out the right bankruptcy papers.
- Up-to-date on tax filings
- Within debt limits
- If you are employed, and your income is sufficient to cover the monthly payment required by the program, then
- An individual is not a company (however, bankruptcy includes all aspects of a sole proprietor’s business).
All Income Tax Returns Must Be Current
You have to show proof that you filed your federal and/or state income tax returns for the four years before you filed for bankruptcy. The court might delay things if you need more time to catch up on your filings but don’t rely on that. If you can’t provide the tax transcripts or returns for those four years, your Chapter 13 case might get dismissed.
You Must Have a Sufficient Income to Spend
To be eligible for Chapter 13 bankruptcy, you need to prove to the court that you make enough money to pay your debts. This means subtracting all the allowed expenses and necessary payments for things like car loans or mortgages. If you don’t fully pay some debts, the judge might not agree to your plan.
You can fund your Chapter 13 plan with the income you receive from:
- Regular wage or salary
- Self-employment income
- Seasonal work and its earnings
- Commissions on sales or other works
- Pension payments
- Social Security benefits
- Disability or Workers’ Compensation benefits
- Unemployment benefits, strike benefits, and similar benefits
- Public benefits (welfare payments)
- Child support or alimony
- Rents and royalties are two types of fees.
- Proceeds from the sale of property if it is a part of your main business property.
Your income doesn’t have to be yours if you are married. The spouse who is not working can still file and claim the income of a spouse who works. Unemployed spouses can file jointly with their working spouses.
Why File for Chapter 13 Bankruptcy?
A lot of folks decide on Chapter 7 bankruptcy because they don’t need to pay back what they owe. However, not everyone can do this. On the other hand, some choose Chapter 13 bankruptcy because it gives choices that Chapter 7 doesn’t. This often makes Chapter 13 the better choice.
List of reasons why a person might choose to file for Chapter 13:
- Debtors whose income is higher than the Chapter 7 minimum means test are not eligible for a Chapter 7 dissolution to wipe out their qualifying debt.
- If a homeowner is behind in their mortgage payments, they can make up the difference over three to five years and still keep the home (the same applies to a late car payment).
- In a repayment plan, a debtor may be able to avoid a collection action, such as wage garnishment, while paying a tax bill or overdue support.
- A debtor may keep property that is not exempt, which would be sold otherwise in a Chapter 7 bankruptcy. (The debtor must pay the non-exempt portion of the repayment plan over three to five years.
You Can’t Have Too Many Debts
If the total of your secured and unsecured loans is more than a certain amount, you can’t go for Chapter 13 bankruptcy. For cases filed between April 1 and March 31, 2025, the limits are $465,275 for unsecured loans and $1,395,875 for secured loans.
When you’re dealing with debts, you have to fill out official paperwork. This means sharing all your money details—how much you make, and spend, what you own, and who you owe. You also have to spill the beans on past money moves. Once you hand in all your forms, plus any other needed things like the filing fee and proof of finishing a credit counseling course, you can kick off your case. If the court doesn’t give you more time, you’ve got 14 days to submit your Chapter 13 plan.
Speak With a Jacksonville Chapter 13 Attorney
Explore the fundamentals of Chapter 13 bankruptcy to safeguard your belongings and manage debt gradually. Since Chapter 13 can get a bit tricky, it’s wise to have a chat with a bankruptcy attorney.
With more than 30 years of expertise, Bruner Wright P.A. is your reliable Florida bankruptcy law firm. Let’s simplify the process for you—reach out for the information you need.
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