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Chapter 13 Bankruptcy Eligibility Requirements
Cannot Be A Business Entity - Only people, not businesses, can file for this type of bankruptcy. That makes limited liability companies and corporations ineligible for chapter 13 bankruptcy. Business owners cannot file in the name of their businesses, but if they are a sole proprietor or partner then they can file for debt to which they are personally responsible. Commodity brokers and stock brokers are indeed ineligible for chapter 13 bankruptcy.
Credit Counseling Requirement - An approved credit counseling agency must have provided debt counseling within the past 180 days. In addition, in most cases the counseling results in the formulation of a sound repayment plan which must be provided to the courts.
Previous Bankruptcy Cases - Previously dismissed bankruptcy cases (within 180 days) could result in a automatic dismissal. Especially if the reasons were for willfully failing to appear in court or if the debtor requested the case be closed do to creditors seeking to lift an automatic stay.
Barred by Prior Bankruptcy - If someone has filed chapter 13 bankruptcy within the past 2 years, the debtor is ineligible.
Debts Not Too High - Debtors with less than approximately $330,000 in unsecured debt are still eligible for chapter 13 bankruptcy. Secured debt must be lower than $1,010,650 in order to be eligible.
Income Tax Returns - Debtor must provide proof that they filed their income taxes for the previous 4 years. This must be provided at least 7 days before the meeting of the creditors.
Complete Repayment Plan - Some debts must be paid back in full. Three classifications of these outstanding debts: Priority Debts, Secured Debts, and Other Secured Debts. Sufficient Income - After accounting for expenses, the debtor's income must be high enough to pay off debts in a reasonable amount of time. The debtor must also be able to afford to pay their trustee a commission based on a percentage of all payments made in the plan.
Ch. 7 Bankruptcy Petition and Filing Requirements
In order to begin the process of declaring chapter 7 bankruptcy, the debtor must file a petition with the bankruptcy court. These courts are geographically based, so look locally for this information. In addition to filing a petition, the debtor must also file the following:
- Current liabilities and assets
- Current expenditures and income
- Statement of financial affairs
- Executory contracts and/or unexpired leases
- Copy of tax return or transcripts for most recent tax year
- Tax returns filed during the case
If you are an individual with mostly consumer debts, you may also have to file the following documents:
- Certificate of credit counseling
- Debt repayment plan from credit counseling
- Evidence of payment from employers (60 days before filing)
- Monthly net income statement
- Statement of any anticipated increase in expenses or income after filing
- Record of interest that the debtor has in state or federal education or tuition accounts
In order to complete the required eligibility paperwork, the debtor must provide this information:
- List of all creditors, amounts owed and nature of the claim
- Documented proof of the debtor's source, amount and frequency of income
- List of debtor's property
- List of the debtor's living expenses
Married people are obligated to obtain this information about their spouse regardless of whether they are filing for a joint petition or individual petitions. Failure to do so will result in a prolonging of the case until the household's financial position can be established.