Chapter 13 Bankruptcy Law: Eligibility

Under the chapter 13 bankruptcy law, people are required to meet income and counseling requirements. Chapter 13, a personal bankruptcy option, is a legal process which provides people with a way to repay creditors while retaining their secured property such as homes. Individuals may payments through a bankruptcy trustee until back debts are paid—which is usually in 3 to 5 years.

In the chapter 13 bankruptcy law, there is an automatic stay provision. This provision requires creditors to stop any and all debt collections actions available to them which include foreclosure, wage garnishments and lawsuits. However, before people receive the automatic stay, they must be eligible to file for chapter 13 bankruptcy.   

Chapter 13 Eligibility Requirements Include Enough Disposable Income to Pay Creditors

Disposable income in chapter 13 bankruptcy law means that individuals have money left over after all monthly bills are paid. The U.S. Bankruptcy Court has a means test which determines if their income is high enough to be eligible for chapter 13. The means test is a formula individuals can use to determine if they have enough money. All people have to do is subtract their income from their state’s monthly income for their household size. If there is money left over, then people are eligible. Therefore, instead of keeping or spending the disposable cash, they can repay their debts.

Chapter 13 Eligibility Requirements Include Credit Counseling

Credit counseling is required before and after filing for chapter 13. In fact, the U.S. Bankruptcy Court makes it mandatory for people to enroll in pre-bankruptcy credit counseling within 180 days. The credit counseling session cost approximately $50 and can be taken over the phone, online and in-person. During the one-time session, people meet with credit counselors discuss their financial situation and any alternatives to bankruptcy.

Before the bankruptcy cases can be discharged, or successfully completed, people must attend another credit counseling session. The post-filing debtor education course is a one time session that can be taken in-person, over the phone or online. The session cost $50 to 100 depending on the credit counseling organization. During to session people learn new debt management skills. The U.S. Bankruptcy Court requires a certificate as proof that they’ve attended the sessions.  

Seek Legal Help When Considering Bankruptcy

Bankruptcy attorneys are experts in determining eligibility requirements. Thus, seek legal help from attorneys who know bankruptcy law.