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Personal Bankruptcy under Chapter 13
Chapter 13 is a bankruptcy for an individual, including one who is engaged in a business, who has a regular source of income and who desires to repay all or a percentage of her debts pursuant to a plan, which she has the exclusive right to propose.
A case under Chapter 13 is very different from Chapter 7 liquidation, inasmuch as someone filing under Chapter 13 usually remains in possession of her property, and makes certain interim payments to creditors, through the Chapter 13 trustee, prior to receiving a bankruptcy court discharge.
To file for bankruptcy under Chapter 13, you must meet certain eligibility requirements. First, you must be able to maintain regular monthly payments over the life of your plan in an amount determined by your lawyer, subject to your agreement and the approval of the court. Second, your unsecured and secured debts must meet the specific dollar limitations. Finally, only voluntary cases are permitted. No one can force you to file for chapter 13 bankruptcy relief.
Specific Dollar Limitations under Chapter 13
Chapter 13 relief is available to an individual: 1. who has regular income, 2. whose unsecured debts total less than $307,675, and 3. whose secured debts total less than $922,975.
For unsecured debts, the amounts set forth above must be non-contingent and liquidated liabilities. For secured debts, most courts apply the general rule that a claim is secured only up to the value of the collateral, with the balance constituting an unsecured claim.
Income sources for chapter 13 plans
In most cases, a Chapter 13 debtor's regular income is generated from her wages or salary, but it may be derived from almost any legitimate source, such as interest income, rental income, a business, a pension, a trust, social security, or even welfare, if it is regular enough to fund the debtor's plan of repayment
Voluntary petition only
A Chapter 13 case may be commenced only by the filing of a voluntary petition.
Individuals not eligible for Chapter 13 Relief:
Stockbrokers and commodity brokers are not eligible for relief under Chapter 13. Also, an individual debtor in a case that was dismissed in the preceding 180 days is not eligible if the dismissal was due to the debtor's intentional failure to obey court orders or appear before the court, or was a result of the debtor's request for a voluntary dismissal of the case following a party's request for relief from the automatic stay.
One of the unique features of a Chapter 13 case is that the automatic stay applies not just to the debtor but also to creditors of non-filing co-debtors of the debtor.
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