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Eligibility requirements for a Chapter 13 bankruptcy

In November of last year, a total of 623 bankruptcy filings were entered with the U.S. Bankruptcy Court for the District of Columbia. While 485 people filed for chapter 7, only 121 filed for a chapter 13 bankruptcy and just 17 for a chapter 11.

One of the reasons that fewer people file for chapter 13 could be due to the fact that there are certain eligibility requirements for the proceeding. The United States Courts points out that in order for someone to initiate the process, he or she must have unsecured debts of less than $383,175. Further, the person’s secured debts must be less than $1,149,525. A secured debt, like a mortgage loan, requires some time of collateral. An unsecured debt includes items such as medical bills or credit card bills.

Simply meeting the debt threshold – which is adjusted periodically for inflation – is not enough to qualify for a chapter 13 bankruptcy filing. The following must also be true: 

  •        The person cannot have had a bankruptcy dismissal due to specified circumstances within the past 180 days.
  •        The person must have undergone credit counseling within 180 days prior to filing.
  •        The person must have sufficient income to be able to repay a portion of debts.

Lastly, anyone who plans on filing for chapter 13 bankruptcy will have to prove to the court that he or she is up to date on income tax filings. The court will take a look at the previous four years of tax income information. Fortunately, anyone behind on taxes may be able to postpone a bankruptcy proceeding in order to get current. 

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