A chapter 13 bankruptcy differs from a chapter 7 bankruptcy because you pay back some of the debt you owe to your creditors over a three to five year period. People usually file a chapter 13 because their income is too high for a chapter 7 bankruptcy. Another reason people may file a chapter 13 is to catch up on arrearages from a mortgage or car loan. There are certain requirements you must meet to be eligible for a chapter 13 bankruptcy.

How much Debt you Have

The first thing to consider when filing a chapter 13 bankruptcy is how much debt you have. If your secured debt exceeds about $1.1 million, or if your unsecured debt (credit cards, medical bills, payday loans) is over $383,175 you may not qualify for a chapter 13 bankruptcy.

Your Income Tax Filings must be Current

You have to show evidence that you filed taxes for the four consecutive years preceding your bankruptcy. You must swear under penalty of perjury that these returns have been filed. If the trustee needs proof, you can either submit the returns themselves or get a copy of your account transcripts from the IRS.

If you did not file for one of these years it is a good idea to file these taxes before you start the bankruptcy process. If you have an emergency (foreclosure, repossession, bank levy) and need to file a bankruptcy right away you have until the first meeting of creditors to take care of your taxes.

Prior Bankruptcies

You may not qualify for a chapter 13 if you have had a chapter 13 discharge in the prior two years or a chapter 7 discharge in the past four years. It is possible to file a chapter 13 immediately after a chapter 7, but you will not get a discharge of your debt when the chapter 13 is over. This is sometimes done to take care of liens that were not discharged in your chapter 7 plan. This also provides a structured way for you to handle your debt. Filing a 13 after a chapter 7 is commonly referred to as a chapter 20 bankruptcy.

Propose a Plan the Courts will Approve

When proposing a chapter 13 plan, the first step is calculating your current monthly income. This is your average income determined by taking the average of the last six months prior to the filing date of your bankruptcy. You then compare this income with your states median income for your family size. If it is above the states median income for your family size and you meet the other requirements for a chapter 13 you will have to be in a five year plan. If your income is lower than the median income for your state then you can propose a three year plan.

Your plan payments must be enough to cover all the mandatory debts that you are required to pay back in a Chapter 13 plan. For example, if you owe priority taxes, your plan payment must be able to pay all of the taxes in full over the course of the plan. If you have any money left over after paying your mandatory debts that money must be used to pay back a portion or all of your unsecured debts. If you successfully make it to the end of your payment plan any unsecured debt remaining is discharged.

You Must Take a Financial Management Course

Not to be confused with the credit counseling you must get before you file bankruptcy, the financial management course is another financial course you must take after you file bankruptcy. This course is basically designed to help you better manage your money, use credit wisely, and avoid having to file another bankruptcy in the future.

Get a Free Consultation with a Bankruptcy Lawyer

Filing a chapter 13 bankruptcy is complicated. If you live in the San Francisco Bay Area you can call our office for a free consultation and we can tell you if a chapter 13 bankruptcy will work for you.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy under the bankruptcy code.