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Chapter 13 bankruptcy and income requirements

There are a couple of choices that people in Washington, D.C., have when it comes to filing for bankruptcy protection. One of these choices is to file Chapter 13, which is also referred to as reorganization, according to NerdWallet, but it does have some restrictions, especially concerning income.

It is reported that 29 percent of all bankruptcy filings are for Chapter 13. This bankruptcy process is more difficult than Chapter 7 because the debtor must prove to the court that he or she makes enough money to make payments on their debts and that the debt must not exceed certain amounts. For example, the debtor cannot have more than $1,149,525 in secured debt and $383,175 in unsecured debt. Secured debt would be something like a car loan or the mortgage on a property, while unsecured debt would be medical bills or credit cards.

The United States Courts points out that if people filing for bankruptcy protection are married, they must include not only information pertaining to their income but also that of their spouse. When submitting this information, debtors must list how often they are paid an income, whether it is monthly, biweekly or weekly. They must also provide the amount of their income and where the money is coming from. This may include investment payouts, a job salary, payment from a trust or revenue from a business venture.

To make sure that the income is sufficient for a repayment plan, the court will also require debtors to provide a complete list of all expenses, including those of any spouse. Assets and other items of monetary worth will also need to be submitted. Once the court receives this information, it will hold an evaluation to determine whether the person’s income meets the requirements for this bankruptcy plan. 

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