Though bankruptcy exists as a means to provide debt relief to people in Arizona and across the country who are overwhelmed with debt, it is important to understand that there are various categories of bankruptcy and that not everyone is eligible for all types. Chapter 7 and Chapter 13 are the most common forms of personal bankruptcy and the next few posts in the upcoming weeks will examine eligibility, procedure and debt discharge through Chapter 13 bankruptcy.
Chapter 13 bankruptcy, also known as a wage earner's plan, is a bankruptcy option for debtors who earn a regular income. In Chapter 13 bankruptcy, they develop a plan to repay some or all of their debts over a period of time, depending on their debts and their income. So, who is eligible for this option? Pretty much any individual, even if the person if self-employed or running an unincorporated business -- as long as their unsecured debts are less than $383,175 and secured debts are less than $1,149,525. These numbers are adjusted periodically depending on changes in the consumer price index. Corporations and partnerships cannot file for Chapter 13 bankruptcy.
But, income is not the only factor that is considered. If someone falls within the income requirement, but a previous bankruptcy petition was dismissed in the last 180 days due to willful failure to appear in court, they cannot file for this procedure. In addition to this, if they did not comply with a court order or their petition was voluntarily dismissed after some conditions were met, they are not eligible for filing Chapter 13 bankruptcy. It is also important to note that no one can file for bankruptcy unless they have received mandatory credit counseling from an approved agency.
Determining eligibility may seem straightforward to some people, but it is the crux of a bankruptcy petition and it is often difficult to determine what counts as debts and what doesn't. An experienced bankruptcy attorney may be able to guide Arizona residents through the paperwork so they can take a step towards attaining debt relief.
Source: US Courts, "Chapter 13- Bankruptcy Basics," Accessed on Oct. 12, 2015
