Your income doesn't necessarily have to be from the salary you earn on a job. Any other kind of income will help you qualify the only requirement being that the income is regular in nature and will continue for the term of the chapter 13 bankruptcy - either three or five years.

With this kind of bankruptcy all (or most) of your debts stand, you promise to pay all or most of them off during the term of your chapter 13 bankruptcy plan and you keep your goodies and get a much longer time to pay off your debts. Only the repayment period is changed in most cases.

Your income can include retirement benefits including social security income. Or it could flow from other payments including royalties from a work you authored. The source doesn't matter - as long as it's regular and dependable is all that matters.

As long as the bankruptcy court approves the plan you and your lawyer come up with and you continue to make monthly payments on time your creditors can't sue you or grab your belongings.

If you can no longer pay your bills and need relief AND you have possessions that you don't want to surrender such as a home and/or a car you should discuss the chapter 13 bankruptcy with a good attorney.

If you on the other hand have little or no assets and have no possessions you wish to protect, the chapter 7 bankruptcy may be more ideal.

Under chapter 7 you get your debts wiped out quickly without you having to pay them off. Under chapter 13 you pay off all or most of your debts in full before you're done.
 

Qualifying For Chapter 13 Bankruptcy

Add up ALL of your living expenses minus any amounts you need to pay to your creditors. This includes rent or mortgage, car payments, utility bills, clothing, insurance, transportation and of course food.

Add these amounts up and get a total living cost figure. Now subtract that monthly figure from your monthly take home pay. Is there enough left over to pay off MOST of your outstanding debts over a five year period?

If so you will probably qualify for a chapter 13 bankruptcy. But if there's isn't much left in the kitty after you pay all your regular monthly bills, you might want to discuss the chapter 7 bankruptcy with your lawyer.

Where does your lawyer's fee come into all this? Don't worry, very few bankruptcy lawyers require up front fees. They know you aren't floating in ready cash at the moment so the usual deal is that their fee is included into your chapter 13 bankruptcy plan which means they will get paid off over a longer period but they have the assurance of knowing the bankruptcy court will make sure they get their loot in the end.

Before you ask your bankruptcy lawyer which kind of bankruptcy you qualify for - be sure to tell them everything about your financial situation. Leave nothing out. Any secrets could come back to bite you later on down the road. If the bankruptcy court finds out you've been less than honest and have hid some asset - your bankruptcy could be dismissed which means your debtors will soon be back at your neck howling for blood and garnishing your wages.

When you attend your creditor meeting where your creditors will probably appear, you'll be placed under oath and your creditor's lawyers will have an opportunity to question you while you are under oath. If you have ever told the truth in your life - this is the time! Lie and not only could your bankruptcy be dismissed by the bankruptcy court, but you could land in a federal penitentiary for a long stay. So it's critically important that the details laid out on your financial forms be utterly and completely accurate and honest.

The Flow of Events Chapter 13 Bankruptcy

You and your lawyer come up with an extended payment plan. Your lawyer files your forms with the bankruptcy court. The court notifies your creditors that you have filed and sets a date for the creditor's meeting. You and your lawyer attend the creditor's meeting.

If all goes well the bankruptcy court will review your payment plan and approve it. The chapter 13 trustee will collect a sum (usually taken from your paycheck) which he will use to make the payments required under the payment plan each month. A missed payment could spell disaster so be sure everything proceeds according to plan.

How Often Can You File for Chapter 13 Bankruptcy?

After you file for a chapter 13 bankruptcy you can't file again for another two years. If you at any time file for a chapter 7 bankruptcy, you can't file for chapter 13 for four years. These periods are not written in stone so if you have a more urgent need, discuss the matter with an experienced bankruptcy lawyer.

Can You Keep Your House Using a Chapter 13 Bankruptcy?

In many cases yes. Be sure to tell your lawyer that you want your house payments included in your chapter 13 bankruptcy payment plan. In most cases you should also be able to include any back payments also but rules differ in different areas.

Many bankruptcy lawyers will automatically recommend a chapter 13 bankruptcy to anyone who tells them that their number one priority is keeping their home.

What About Being Behind in Your Rent?

In most cases a chapter 13 bankruptcy can be used to stop an eviction. This works best when you're living in a federal housing situation or under a Section 8 or public housing.

You can pay your rent payments and any back rents due in your chapter 13 bankruptcy payment plan. This can work even if you've broken your lease.

WARNING: If your landlord has already initiated an eviction be sure to tell your bankruptcy attorney immediately - during your first conversation on the phone or in person. Don't delay! If you wait too long your lawyer may not be able to help you and you'll be forced to move.

Back