John E. Pytte
Who Can Qualify for Chapter 13 Bankruptcy?
Filing bankruptcy is a very serious personal financial decision for everyone. However, not just anyone can file any type of bankruptcy they choose. All potential bankruptcy petitioners must be means tested with respect to how much debt they have compared to household income. Real estate is usually the central issue for those wanting Chapter 13 protection because it can forestall repossession of a home that may also provide considerable equity for the bankruptcy petitioner. Creditors are normally more interested in recovering outstanding accounts than they are in reacquiring collateral property, depending on the terms of a sales agreement. Those who cannot qualify for Chapter 13 protection are eligible for Chapter 7 in most instances. In addition, businesses cannot file Chapter 13, instead having to choose Chapter 11 if they qualify, so individuals who are filing along with their business will have two different chapters for each entity.
One of the first considerations by a bankruptcy court will be the amount of disposable income for the petitioner. There must ample income to provide for the submitted bankruptcy repayment plan other than necessary living expenses and personal budgetary concerns, such as a vehicle payment or a mortgage. Most individuals are interested in Chapter 13 because it does minimal damage to their credit rating while making all outstanding debts current at the time the repayment plan in completed, but many times it is a last resort effort to protect significant equity in a home or some other mortgaged property.
Many times it is the actual mortgage holder who forces the bankruptcy. Practically any type of reported and documented income can be included in income totals, including Social Security benefits and income generated from sources outside of regular salary or self-employment. Having your income evaluated by a bankruptcy professional can help immensely in this process when the attorney can craft a comprehensive income package in the repayment program.
There are also minimum and maximum levels of debt for those who can qualify for Chapter 13, along with restrictions within particular states. If the state of residence at the time of the filing has changed in the past six months, determining which state law controls the process can be complicated, which is why it is always a good idea to have the plan well-developed under the counsel of an experienced bankruptcy attorney before even submitting the plan to the bankruptcy court. When filing a Chapter 13 bankruptcy while owning a personal business that is a licensed limited liability company, the assets that are in holding by the company can be excluded as personal property, as can company debt. It is important for anyone seeking Chapter 13 bankruptcy protection to remember that it is not necessarily a discharge of unsecured debt, even though that can be an ultimate additional outcome. Chapter 13 is actually a restructuring of outstanding overwhelming debt that is intended to eventually repay creditors at least to the minimum of the amount of funds they would have received had the petition not be filed.
Unsecured debt can still be discharged, even though some personal assets may be forced sales to apply to those creditors, but all property that is collateral on an outstanding loan can be protected as long as the delinquent debt is repaid in full when the petitioner emerges from bankruptcy. This can be a complicated legal move that always requires the expertise of a bankruptcy attorney when the petition cannot be avoided by contract reconciliation of all personal debt.
John Pytte and his staff at Georgia Debt Relief can help with any bankruptcy process. We give our utmost attention to helping people resolve debt and get back in control of their financial life. Call us today at the number above or visit our Chapter 13 Bankruptcy page for more information and to find out what we can do for you.