The eligibility qualifications for Chapter 7 and Chapter 13 bankruptcy are quite different from each other, and in some ways, contradictory. If you qualify for bankruptcy, it is most likely that you will qualify under one form of bankruptcy but not the other. Accordingly, the following is an explanation of the qualification rules for Chapter 7 and Chapter 13. To learn more about which bankruptcy option may be right for you, contact attorney Nancy Neal Joyce today.
Chapter 7
Chapter 7 bankruptcy requires you to liquidate your non-exempt assets to pay your creditors. You probably qualify for Chapter 7 bankruptcy if:
- Your average gross household income over the six months prior to filing did not exceed the Michigan state average. This standard applies only to individuals, not LLCs or corporations.
- Your disposable income is insufficient to pay off your debts in three to five years. If your income is high enough, the bankruptcy court may convert your Chapter 7 petition into a Chapter 13 petition.
- Your debts are not barred from discharge. Some types of debts such as federal student loans, domestic support and tax penalties cannot be discharged in bankruptcy. Even if some of your debts are not dischargeable, you might want to file for Chapter 7 for your remaining debts.
- The time elapsed since any previous bankruptcy proceeding meets the statutory minimums. If you have gone bankrupt before, you are ineligible for a Chapter 7 debt discharge for a certain period after the filing date of your previous bankruptcy – six years if your previous bankruptcy was under Chapter 13 and eight years if it was under Chapter 7. You might also be barred if a previous bankruptcy proceeding was dismissed within 180 days before your Chapter 7 filing date.
- You complete the required credit counseling program through a court-approved credit counseling agency.
Chapter 13
Chapter 13 bankruptcy requires you to pay off most or all of your debts over three to five years. There are several hurdles you need to jump in order to qualify:
- You must file on your own behalf, not on behalf of an LLC or a corporation.
- Your debts cannot exceed the statutory debt ceilings for Chapter 13 debtors. As of 2016 these limits are $394,725 in unsecured debt and $1,184,200 in secured debt.
- The time elapsed since any previous bankruptcy proceeding meets the statutory minimums. If you have gone bankrupt before, you are ineligible for a Chapter 13 debt discharge for a certain period after the filing date of your previous bankruptcy – two years if your previous bankruptcy was under Chapter 13 and four years if it was under Chapter 7. You might also be barred if a previous bankruptcy proceeding was dismissed within 180 days before your Chapter 13 filing date.
- You must complete a credit counseling program with a court-approved credit counseling agency.
- You must have filed your state and federal tax returns for each of the past four years. You can file back tax returns to qualify under this requirement.
- You must have a regular income that is enough to pay your creditors under a three-to-five year repayment plan.
- Your debts must be eligible for a bankruptcy discharge. As with Chapter 7 bankruptcy, certain debts cannot be included in your bankruptcy.
To Learn More About Your Legal Options, Contact Attorney Nancy Neal Joyce Today
Eligibility for bankruptcy proceedings is a complex matter than can require significant preparation. Nancy Neal Joyce is a seasoned bankruptcy attorney who has helped numerous clients leap the hurdles involved in filing Chapter 7 or Chapter 13 bankruptcy petitions. You don’t have to keep struggling under backbreaking debt burdens. Call Ms. Joyce’s Livonia, Michigan office at (734) 427-7772 for a free consultation with her.
