What Qualifies You for Chapter 13
Today, we’re going to talk about what qualifies a consumer for chapter 13. bankruptcy. My name’s Mike Ziegler. I’m the managing attorney for the Debt Fighters. We’re a Florida law firm focusing on helping consumers strategically eliminate serious debt.
First, just by brief background. For consumers, there’s usually two different types of bankruptcy. There’s a chapter seven liquidation and then there is a chapter 13 reorganization. A chapter 13 is a payment plan form of bankruptcy that typically lasts for three to five years. So in qualifying for chapter 13 or even talking about chapter 13, there are a few different benefits of chapter 13 that are worth pointing out.
First. We can use chapter 13 to catch up on some debts that otherwise you wouldn’t be able to eliminate in chapter seven. Things like child support, taxes, [inaudible 00:01:06]. All of those things can be included in the payment plan to make it more approachable, to be able to pay on back amounts that are owed.
In order to qualify for chapter 13, the courts look at a few different things. First, and probably most importantly, the court is looking to show that there is recurring income that can support the chapter 13 payment. So the chapter 13 payments is a slightly more complicated topic that I don’t know we’ll be able to cover in full on this video, but in short, the payment plan looks at what you’re doing with your secured debts, things like your mortgage and your car loan. If you’re catching them up as part of the process, then that would be included in your payment plan.
You may even be able to modify a mortgage through chapter 13. If you have what we call junior liens, which means things like a home equity loan, or sometimes homeowners association dues, then we may look to do a lien strip. In other words, eliminate the lien as part of the chapter 13 process. We look at the unsecured debts and there’s different rules that tell us what part of your unsecured debts are paid. And then we look at your priority debts, which again, that’s usually owed to the government, typically taxes or Department of Revenue obligations, debts that arise out of a separation, usually things like child support or alimony, and for those debts, usually you will pay at 100%, but it will be spread out over a period of time.
So once that plan is compiled, you have to show that there is enough income in your budget to be able to show that you can pay on the debts. You also generally have to show that you’re filing bankruptcy in good faith, meaning you don’t want to show that you’re filing for bankruptcy just to avoid other interactions with the legal system, or disrupt otherwise valid proceedings. You have to show that you have not filed for bankruptcy and received a discharge in chapter 13 recently before the file. If you’ve met those requirements, usually you’ll be qualified to file for chapter 13, bankruptcy.
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