Eligibility Requirements for Chapter 7 and Chapter 13 Bankruptcy

chapter 7 bankruptcy

Filing for bankruptcy is a great option for those who have a crushing amount of debt and don’t see a way out. However, due to the fact that bankruptcy discharges debt, or allows for a longer period of time for you to repay your creditors, not everyone can successfully file for bankruptcy. Regardless of the type of bankruptcy you are filing, there are eligibility requirements that you must first meet.

The two most common types of bankruptcy filed are Chapter 7 and Chapter 13, and they each have different eligibility requirements.

Chapter 7 Bankruptcy Eligibility Requirements

Chapter 7 bankruptcy is a liquidation bankruptcy. This means that the courts will discharge most of your unsecured debts, including credit card bills, personal loans, and medical expenses. In exchange, you will agree to sell some of your assets in order to help pay off your debt.

The first eligibility requirement for Chapter 7 bankruptcy depends on previous bankruptcies. You cannot file for Chapter 7 again if you have filed and been discharged of debts within the past eight years. If you have filed for Chapter 7 but were not successful, you can file for Chapter 7 again at any time. If you have filed and had your debts discharged under Chapter 13 bankruptcy, you must wait six years before filing for Chapter 7.

Due to the fact that Chapter 7 bankruptcy not only discharges your debt but also focuses on educating you about debt management, the second requirement is that you complete a credit counseling course. You must complete the course six months before filing for Chapter 7 and submit the certificate of completion with the courts.

The third, and perhaps most difficult, eligibility requirement for Chapter 7 bankruptcy is the means test. To pass this test you must show that you have little-to-no disposable income. This proves to the court that you cannot pay back your debt. The courts will compare your monthly income for the six months prior to filing for bankruptcy with that of a similar household in your state. If your income falls below the average, you automatically qualify for Chapter 7 bankruptcy.

As of April 1, 2019, the median income limits for Floridians filing for Chapter 7 are:

  • One-person household: $49,172
  • Two-person household: $60,400
  • Three-person household: $66,872
  • Four-person household: $78,833
  • Five-person household: $87,833

Households that are larger than this can add an additional $9,000 per individual to the income limit. These figures for Florida increased from the last time the limit was raised, meaning even more people in Florida are eligible for filing for Chapter 7 bankruptcy.

Chapter 13 Bankruptcy Eligibility Requirements

Chapter 13 bankruptcy is not a liquidation bankruptcy as Chapter 7 is. Instead, when you file for Chapter 13 bankruptcy, you’re asking to propose a repayment plan to your creditors. Typically this repayment plan takes about three to five years before your debt is paid off. Once you’ve repaid your debtors, some of your debt still may be discharged. You will also likely pay a smaller amount of debt than what you owed upon filing for Chapter 13 bankruptcy. This is intended to make it easier for you to repay your debts.

To file for Chapter 13 bankruptcy, you must be a Florida resident and have sufficient disposable income to repay most of your debt. Florida law sets certain requirements on debts, as well. For unsecured debt, such as credit card bills and medical expenses, this amount is $383,175. For unsecured debt, such as your home and any vehicles you own, the debt limit is $1,149,525. It’s important to note that these debt limits change often, so anyone wishing to file for bankruptcy should speak to a bankruptcy attorney.

There are also certain people who cannot file for Chapter 13 bankruptcy. These include stockbrokers and commodity brokers, even when the debts they incurred are personal and have nothing to do with their business. Businesses, even sole proprietorships, are also prohibited from filing for Chapter 13 bankruptcy. These individuals and organizations should also speak to an attorney who can advise them of their other options.

Due to the fact that you must show that you have sufficient disposable income, you will also need to submit information to the court as proof of that income. You will need to submit all sources of income including your pension, Social Security payments, unemployment benefits, and proceeds from the sale of a property.

Before filing for Chapter 13 bankruptcy, you must also submit your tax returns to the court. The eligibility requirements state that you must have up-to-date tax returns for the past four years when filing for Chapter 13. If you have not filed for the year or are behind in filing your taxes, you will have to wait until these forms are submitted before filing for bankruptcy. If you cannot produce transcripts of your past tax returns, the courts will likely dismiss the case.

As when filing for Chapter 7 bankruptcy, when filing for Chapter 13 bankruptcy you must also undergo a means test. This test will not only determine whether or not you have enough disposable income to repay your debts, but also whether your repayment plan will extend for 36 months, or 60 months.

Meet All Requirements with the Help of a Fort Lauderdale Bankruptcy Lawyer

Making the decision to file for any type of bankruptcy is often a difficult one. If you’re unsure of the process, the eligibility requirements, or how to do it properly, though, actually filing is also very challenging. A Fort Lauderdale bankruptcy lawyer can ensure the process goes smoothly.

If you want to file for bankruptcy or just learn more about whether it’s right for you, call Loan Lawyers at (954) 523-HELP (4357). We’ll review your case and determine whether or not you’re eligible, and advise you on which type of bankruptcy might be right for you. Don’t go through this process alone. Give yourself the best chance of success and call us today or fill out our online form for your free consultation.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.