What Are The Requirements For A Chapter 13 Bankruptcy?
Primarily, only individuals can file for Chapter 13 bankruptcy, not corporations, LLCs, stock or commodity brokers. You must be an individual or individuals, such as husband and wife. You have to file your case in the federal district where you resided for the majority of the previous 180 days; this means you must have lived somewhere for at least 180 days or the greater part of 180 days in any one place, so it’s residence-specific. The courts are also going to require proof that you can afford a Chapter 13 payment plan after allowing for your household budget. For example, if your income doesn’t provide enough money to pay off all or some of your debts, then you wouldn’t qualify.
Your monthly payment must be adequate to protect your secured creditors’ collateral, and the creditors should eventually receive more money from a Chapter 13 plan than if real property were liquidated under Chapter 7. These are specific legal requirements. There are also some debt limitations. Your debt cannot exceed a certain amount, and that amount typically changes every year, but those amounts are in the code and must be met.
What Types Of Debt Cannot Be Discharged In A Chapter 13 Bankruptcy?
Typically, child support is not forgiven in a Chapter 13 bankruptcy, along with alimony, criminal fines and income taxes less than three years old; these cannot be discharged, so you have to pay them anyway.
What Assets Can Someone Keep In A Chapter 13 Bankruptcy?
In a Chapter 13 bankruptcy, there is a federal scheme and a state scheme, and in Texas, there is both. For example, in a Chapter 13, you can keep your car, your house, your furnishings, your clothes, your retirement benefits and insurance proceeds. There is a whole list under the schedules in the Texas Property Code that differentiate between what’s exempt and what’s non-exempt. You can also keep non-exempt property, as long as you at least pay the value of that in your plan. Let’s say you had $10,000 in the bank that was not exempt; as long as you pay more than that $10,000 in your plan, you can keep that too. There are other rules; but basically if you pay above and beyond what you have, you could possibly even keep that in a Chapter 13. It depends on the other provisions of the case.
How Do I Know If a Chapter 13 Bankruptcy Is Right For Me?
I would recommend that you come in and talk to us or a bankruptcy attorney to become aware of the requirements, what your disposable income is and your specific situation. There is usually a reason that you want to hold onto your house that might be facing foreclosure or hold onto a car that’s due to be re-possessed, or you just have some non-exempt property you want to keep. You have to ask yourself: Why would I be devoting a portion of my income for the next three to five years, unless there is something you want to keep, and a Chapter 13 will let you keep it. Or you may have to go through a Chapter 13 because you don’t qualify for a Chapter 7.
There can be different reasons why a Chapter 13 is the best scenario; probably the most appropriate thing for you to do is to talk to an attorney and become aware of the differences between the two and why you might want one or the other. Sometimes you have to do a Chapter 13 because you have no other choice; sometimes you may have a specific reason for opting to pursue a Chapter 13 over a Chapter 7. For example, if you’re behind on your mortgage payment and can’t afford to make any further payments, a Chapter 7 may be appropriate; however, if you can make the regular payments, as well as devote a part of the money you pay to the trustee to paying the arrearages or back payments on your house, you can keep it in a Chapter 13.
In effect, a Chapter 13 bankruptcy stops the foreclosure of your house or the repossession of your car, so the quickest way to determine which one is right for you is to talk to your attorney, find out what requirements you can meet, and whether one is better for you than the other and why. Since every case is different, it’s typically best to talk to an attorney who has a lot of experience doing bankruptcy law.
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