In our last post, we discussed how many people are unfamiliar with Chapter 13 bankruptcy, an unfortunate reality given the measure of debt relief it can bestow upon those who earn a regular income.
In today's post, we'll continue this examination of how Chapter 13 works, focusing on some of its eligibility requirements as set forth under the U.S. Bankruptcy Code.
Are there any monetary thresholds that a person cannot cross in order to file for Chapter 13?
The law dictates that a person may file for Chapter 13 if 1) their secured debts are less than $1,149,525 and 2) their unsecured debts are less than $383,175. It's worth noting that these amounts are adjusted on a somewhat regular basis to account for fluctuations in the consumer price index.
What is a secured debt?
In general, a secured debt is one in which the money being loaned is secured by some sort of collateral that the lender could theoretically seize and sell in the event of a default. Classic examples of secured debts include mortgages and auto loans.
What is an unsecured debt?
In general, an unsecured debt is one in which the money being loaned is not secured by some sort of collateral, meaning the lender typically charges higher interest rates and/or will seek redress for default via the courts. Classic examples of unsecured debts include credit cards and medical bills.
Are there any other eligibility requirements of which people should be aware?
The U.S. Bankruptcy Code dictates that people cannot file for Chapter 13 in the event that either of the following occurred in the preceding 180 days:
- The bankruptcy petition was voluntarily dismissed after those creditors who held liens on certain property requested relief from the bankruptcy court.
- The bankruptcy petition was dismissed by the bankruptcy court after the individual debtor was found to have willfully failed to comply with court orders or appear at scheduled hearings.
We will continue this discussion in future posts, delving into the credit counseling requirement and the actual process associated with a Chapter 13 filing.
Consider speaking with an experienced legal professional if you have questions about whether Chapter 13 may be a viable option for you.