Chapter 13 can be a very good option for many people, especially those who are struggling to keep up their assets intact even after filing bankruptcy. However, not all filers are eligible to apply for Chapter 13 bankruptcy code. There some basic requirements to be eligible for filing under Chapter 13. These can be listed as follows-
- No lag with respect to income tax filing whether federal or state
- The debt is within the predefined threshold
- Should be employed or should have some income source to fund the payment plan to be determined under Chapter 13
- Should be an individual and not a business. The sole proprietor is an exception as all business accounts are merged into the individual’s account for bankruptcy purposes
What has the income tax filing got to do with my eligibility?
The income tax filing is a very basic requirement as people evading state and federal tax liability are not regarded with great respect in the eyes of law. The income tax filing for state and federal has to be current. Also, there should be a clean history with respect tax filing for the last 4 years from the date of filing for bankruptcy. If you are not current with respect to the last 4 years, you can get current as soon as possible and present the same to the court in order to prevent your case from being dismissed. To know more about getting current and getting eligible for Chapter 13, log on to Recovery Law Group .
What does “Source to fund the Chapter 13 payment plan” mean and include?
Chapter 13 is a fixed payment every month for a specific time period up to 5 years to repay as much of debt possible. This fixed monthly payment needs to be sourced appropriately and has to be some income, which over and above, basic expenses. The additional income or disposable income can be sourced from multiple avenues as listed below-
- Salary or wages may be regular and/or seasonal
- Self-employment income
- Commissions / Incentives that are related to job/employment a more permanent or consistent in nature
- Social security and pension
- Disability/worker’s compensation benefits
- Welfare / Unemployment benefits
- Any child support or alimony received
- Rents and Royalties
- Proceeds from the sale of assets like real estate, particularly if your nature of business involves sale and purchase of assets
- The income of spouse, if married
The basic requirement for the income source to qualify is that it should be consistent and over and beyond the basic necessities. There should be some disposable income that could be diverted to Chapter 13 payment’s plan.
Benefits, flaws, and restrictions for Chapter 13
Benefits are very clear, if you are not eligible for Chapter 7 bankruptcy or if you wish to safeguard all or most of your assets, this is the best alternative available. Also, the credit score improvement can be slightly easier with respect to Chapter 13. The major flaw is with respect to the debt threshold. If your debt is beyond that threshold you won’t be eligible for Chapter 13. Also, with businesses not able to consider this Chapter, it holds no good even for stockbrokers and commodity traders. Stock and commodity traders are restricted from using Chapter 13 even if they want to release their personal debts.
Procedure for filing Chapter 13
The basic requisite as a procedure for Chapter 13 is to disclose all information, with respect to your current financial condition, in the most accurate form possible. Expenses, income, lenders, assets, recent transactions, etc., all have to make a detailed appearance in the bankruptcy documents. You need to take a counseling course that will teach you to manage finances better and pay a filing fee along with the documents package to begin the bankruptcy filing under Chapter 13. Under most circumstances, you get 2 weeks or 14 days to submit for a repayment plan unless and until the timeline is revised by the court. Documentation and procedure always require consultation and expert advice. When you have all that with just a phone call, why wait and waste time then. Dial in +1 888-297-6203 now.