For Tyler residents who earn some form of income but struggle with debt, there is good news. Chapter 13 allows individuals to file for bankruptcy and obtain a fresh financial start while protecting their assets, as long as they can keep current on a court-ordered payment plan that typically lasts up to five years.
There are, however, some important Chapter 13 bankruptcy basics to understand. Notably, these include strict eligibility requirements that must be met before one can file for Chapter 13. We'll take a look this week at these requirements, with the understanding that the information is general in nature only and not to be taken as legal advice for any debtor's specific situation.
First, let's take a look at the two big numbers. These are adjusted from time to time, but as it currently stands, an individual seeking to file for Chapter 13 bankruptcy must have under $394,725 in unsecured debts (e.g., credit cards, medical bills) and under $1,184,200 in secured debts (e.g., mortgage, car loan).
If one's debts exceed either or both of those thresholds, Chapter 13 will not be an option, although other forms of bankruptcy may be.
Another requirement is participating in counseling (individual or group) by a recognized credit counseling provider. The counseling must have taken place within the six months prior to the Chapter 13 filing date. Finally, a filer may be disqualified if he or she previously filed for Chapter 13 and failed to follow the court's orders or make mandatory appearances in court.
Chapter 13 bankruptcy has a number of advantages for debtors. It is, in some ways, it is similar to a consolidation loan, with payments made to one source (the trustee) who then distributes payments to other creditors. Upon completion of the repayment plan, many remaining debts will be discharged. Debtors interested in determining whether they are eligible for Chapter 13 along with any other rights and options they may have under the bankruptcy laws will want to take the steps necessary to have their questions answered.