My only income is Social Security payments. Can I still file for Chapter 13 bankruptcy?

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Question:

I want to file for Chapter 13 bankruptcy since I have a home with a lot of equity as well as three cars. However, my only income comes from social security. I am struggling with credit card debt, but I don't want to file for Chapter 7 bankruptcy because I have a lot of assets.

Answer:

You aren't prevented from filing for Chapter 13 bankruptcy just because your only income comes from social security. However, your income must be high enough to fund a repayment plan. In the plan, you repay all or a portion of your unsecured debts (like your credit card debt) over a period of three or five years. If you can't propose a realistic plan, the court won't approve your Chapter 13 bankruptcy. 

To learn what you'd have to pay through your repayment plan, see The Chapter 13 Bankruptcy Repayment Plan.

Before you discount Chapter 7 bankruptcy, check your state's exemptions. You might be able to keep your home if all of most of your equity is exempt. (To learn more, see Chapter 7 Homestead Exemption.) And you might be able to exempt one or more cars using your state's motor vehicle exemption and perhaps a wildcard exemption. Sometimes the bankruptcy trustee will let you trade other exempt property for nonexempt property, or allow you to pay the trustee the amount of the nonexempt property in order to keep it.

To learn more about exemptions, see Bankruptcy Exemptions -- What Do I Keep When I File for Bankruptcy?

updated by: , J.D.

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