Am I Eligible for Chapter 13 Bankruptcy?

When debtors in Oak Park are thinking about filing for bankruptcy, they are most often considering either Chapter 7 bankruptcy or Chapter 13 bankruptcy. You may know that, in order to be eligible for Chapter 7 bankruptcy, you must pass what is known as a “means test.” The means test takes a look at your assets and income, along with other factors, to determine whether a liquidation bankruptcy is appropriate for your situation. Chapter 7 bankruptcy, unlike Chapter 13 bankruptcy, results in a discharge of most consumer debts once the bankruptcy has been completed.
Typically, when a consumer cannot pass the means test, he or she will rely on Chapter 13 bankruptcy to help get back on track with debts and finances. However, many consumers do not know that there are also eligibility requirements for Chapter 13 bankruptcy. What happens if you have too much debt to file for Chapter 13 bankruptcy protection?
Determining Eligibility for Chapter 13 Bankruptcy in Oak Park
If you cannot pass the means test for Chapter 7 bankruptcy, or if you want to use Chapter 13 bankruptcy to restructure your debts instead of liquidating your assets, what are some eligibility issues that might arise? First, debtors in Oak Park who file for Chapter 13 bankruptcy need to be able to prove that they have sufficient income in order to meet the terms of their repayment plan. Part of a Chapter 13 bankruptcy involves developing a repayment plan to repay creditors over a period of usually three to five years. Before a court will approve a repayment plan, it will need to see proof that the debtor can actually make those payments, as a fact sheet from the U.S. Courts explains.
More importantly, perhaps, your debts must be under a certain amount in order to qualify for Chapter 13 bankruptcy. If you have debts that total more than the following, you cannot file for Chapter 13 bankruptcy:
  • Unsecured debts of $394,725 or more; or
  • Secured debts of $1,184,200 or more.
Unsecured debts are those for which there is no collateral. For example, unsecured debts include credit card debt and medical debt. Differently, secured debt is that for which there is collateral property, which can be repossessed in the event that the debtor does not pay. In most cases, a mortgage or an automobile loan are the biggest sources of secured debt. What can you do if you have too much debt to file for Chapter 13 bankruptcy?
Chapter 11 Bankruptcy for Individuals
Most individuals do not consider Chapter 11 bankruptcy. In most situations, Chapter 11 is reserved for businesses with substantial assets and debt. However, an individual can file for Chapter 11 bankruptcy in certain cases. As an additional fact sheet from the U.S. Courts clarifies, like Chapter 13, Chapter 11 bankruptcy is also a type of “reorganization” bankruptcy. Similar to Chapter 13 bankruptcy, the debtor will come up with a repayment plan that can be approved by the court. The debtor’s assets will not be liquidated as in Chapter 7, and the debtor will have a certain period of time to complete the terms of the repayment plan. If the repayment plan is completed, then the debts will be discharged, just as in Chapter 13.
One major difference has to do with the filing cost. Chapter 13 bankruptcy comes with a case filing fee of $235 and a $75 miscellaneous fee, for a total of $310. Chapter 11 comes with a case filing fee of $1,167 and a $550 miscellaneous fee, for a total of $1,717.
Seek Advice from an Oak Park Bankruptcy Lawyer
If you have questions about which type of bankruptcy is right for you, an Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm today.
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