The two most common forms of bankruptcy are Chapter 7 and a Chapter 13 bankruptcy. Depending on your financial circumstances, income, assets and other related issues, you may only qualify for Chapter 13 and not Chapter 7. Chapter 7 is reserved for people with few assets and little or no income. It discharges unsecured debt such as credit cards.
On the other hand, with a Chapter 13 bankruptcy, filers work out a restructured payment plan and then repay their debts over a three to five year period, sometimes at a discount, to a trustee.
While this is more challenging, the good news is that with a Chapter 13 bankruptcy, you get to keep all of your property. With a Chapter 7 bankruptcy, you may be forced to sell part of your non-exempt possessions to satisfy your debts.
Chapter 13 bankruptcy requirements
You must meet several requirements to qualify to file a Chapter 13 bankruptcy:
- This type of bankruptcy is available only to individuals and couples.
- If you are a business owner, you can still file a Chapter 13 bankruptcy, but only your personal debts will be discharged. Any business debts you have will remain separate and intact.
- You must be able to show a regular stream of income so that you will be able to make regular payments to the trustee handling your bankruptcy. If you don't have a regular stream of income, your bankruptcy plan will probably not be approved.
- Secured debts, such as car payments and mortgage payments have a ceiling. When they are combined, they cannot exceed $1,149,525.
- Unsecured debts, such as credit card debt, loans, taxes and medical bills also have a cap on them which cannot exceed $383,175.
- Stock or commodity brokers are not allowed to file Chapter 13 bankruptcy under any circumstances.
- Paying taxes, alimony and child support are considered priority debts in a Chapter 13 filing and must be repaid in full as part of your plan.
The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.