Chapter 13 Bankruptcy Eligibility Requirements (Part II)

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You Must Have Disposable Income
For you to qualify for Chapter 13 bankruptcy, you must have enough income in excess of your expenses, called your “disposable income”, to fund a repayment plan that meets Chapter 13 requirements. These requirements include full payment of your priority debts as well as payment of a percentage of your unsecured debts.

Your Proposed Payment Must Equal the Value of Your Non-Exempt Assets
The total amount of your payments proposed to be paid under your plan must be at least equal to what your creditors would have received had you filed for Chapter 7 bankruptcy, that is, the value of your nonexempt property. (“exempt” property is the property you would be allowed to keep if you file a Chapter 7 case.)

All Your Disposable Income Must Be Devoted To The Plan
Bankruptcy law requires that you pay al your disposable income into your Chapter 13 plan for a minimum of 36 months, unless you can pay off all of your debts in less time. On the other hand, if making 36 monthly payments will not be enough to repay the minimum amount required by the court, you will have to do one of the following:
a) Ask the court to approve a plan that lasts more than 36 months. The court can authorize a plan of up to 60 months (5 years)
b) Increase your monthly disposable income, usually be decreasing your expenses, so that more money is distributed to your creditors each month.
c) Before you file, sell property to pay down your debts so that your disposable income will be enough to fund the plan.

Your Plan Must Pay 100% of Certain Debts
High priority debts such as back taxes and child support must be paid in full over the life of your Chapter 13 plan. If you are in arrears on debts secured by collateral, such as a car note or a mortgage, you must also pay the in full under the plan if you want to hold on to the property. Unsecured debts do not need to be paid in full, but some courts are more liberal than others as to what percentage of repayment they require,

Your Proposed Budget Must Be Reasonable
To determine whether your disposable income is high enough to fund a Chapter 13 plan, you must create a reasonable monthly budget. If you are not proposing to repay 100% of your unsecured debts, the court, the trustee, or a creditor may challenge your budget if they think it’s too generous, that is, it includes expenses other than necessities.
On the flip side, if you aren’t realistic about what it costs to live, that is, you’ve understand your expenses so that you product enough income to fund a plan, your creditors or the trustee are likely to object on the ground that your plan isn’t feasible. And even if there is no objection, it may not be in your best interest to file Chapter 13 bankruptcy that is doomed to fail.

Bankruptcy Is it the right solution to your debt problems? Attorney Robin Leonard

Avoid Bankruptcy and Free Your Debt . Get Refinance Loans , Secured Debt Consolidation or Debt Settlement Advices.