How to Determine Eligibility for Chapter 13 Bankruptcy

 Posted on October 06, 2014 in Chapter 13 bankruptcy

For most people who file bankruptcy, the process is very unfamiliar. Many filers focus on the negative aspects of bankruptcy: its effects on credit, potential loss of assets, and others. What is important to understand, however, is that bankruptcy is not financial suicide; it is an opportunity to save your home, reduce monthly payments, and end harassment from creditors.

Unlike Chapter 7 bankruptcy, which involves the liquidation of assets to pay off debts, Chapter 13 involves the restructuring of debt. The debtor pays “priority debts” first. These include taxes, alimony, child support and any owed wages. After these, car loans and mortgages are usually next. These debts are scheduled into an approved payment plan that takes income and overall debt into account.

Unsecured debts, such as credit cards or medical bills, are often handled last. Depending on whether these can be paid in full, there may be restructuring options available.

While Chapter 13 has its advantages, there are a number of rules for applying. According to USCourts.gov, the filer must have unsecured debts amounting to less than $383,175.00 and secured debts of $1,149,525.00 or less. These numbers adjust over time based on the consumer price index.

Many filers wonder if they are ineligible because they are self-employed or operate an unincorporated business. However, as long as the person meets the financial requirements outlined above, he or she may be eligible.

It is important to note that just because a filer’s secured and unsecured debts fall within the eligibility requirements, it does not mean the person can file Chapter 13. For example, if the debtor misses court willfully, leading to the dismissal of a bankruptcy petition, or fails to comply with court orders during the 180 days preceding the filing of a Chapter 13 petition, he or she may not be eligible.

Debtors also must attend a group or individual briefing from an approved credit-counseling agency within the 180 days prior to filing. There are certain exceptions to this rule, and your Texas bankruptcy attorney can help you understand if this regulation applies to you.

If you are located in San Antonio, eligibility should only be assessed by a Texas bankruptcy attorney. If you are considering filing for Chapter 13 bankruptcy and live in San Antonio, Texas, or the surrounding areas, contact Chance M. McGhee. With more than 20 years’ experience as a San Antonio bankruptcy lawyer, Mr. McGhee can help you decide which bankruptcy option—if any—is right for you. For more information or to schedule a free consultation, please call us at 210-342-3400.