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What can disqualify you for Chapter 13 bankruptcy?

On Behalf of | Nov 13, 2020 | Bankruptcy |

Filing for Chapter 13 bankruptcy may be the answer to getting out from underneath burdensome debt. You may stop collection efforts from creditors, have a judge discharge some of your debt while you repay the rest, and come out of the process ready to start a new chapter in your life. However, not everyone who files for Chapter 13 will qualify to enter bankruptcy.

The law has certain requirements in order for a judge to approve your bankruptcy petition. The U.S. Courts website explains some of the more common disqualifiers that prevent people from entering Chapter 13 bankruptcy.

Failing to meet debt requirements

To qualify for Chapter 13, your secured and unsecured debts must meet certain thresholds. The U.S. Courts site specifies that a filer must have unsecured debts less than $394,725 and secured debts less than $1,184,200. Keep in mind that these amounts are subject to change because of fluctuations in the consumer price index.

Filing as a business entity

The different categories of bankruptcies have their own requirements for who can file. If you file as a corporation or a partnership, you cannot use Chapter 13. However, if you file as an individual even if you are self-employed or operating a self-incorporated business, you may still qualify for Chapter 13.

Problems with previous bankruptcy cases

A court might turn down your petition because of a failure to comply with court orders regarding previous bankruptcy cases. For instance, if you had filed for bankruptcy 180 days before your current filing and the judge dismissed the case on account of you not appearing in court or violating a court order, you cannot file for bankruptcy again until 180 days have passed.

A lack of credit counseling

To qualify for any bankruptcy process, you must first go through credit counseling from an approved credit counseling agency. You must receive counseling in a 180 day period before you file your bankruptcy petition. However, a bankruptcy trustee might make an exception if you are unable to access an approved agency or if an emergency requires your bankruptcy to proceed more quickly.

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