Who Files Chapter 13 Bankruptcy?

In October 2005, the laws which govern Chapter 13 bankruptcy changed. One of the more significant ways the law changed dealt with the eligibility requirements for filing for Chapter 7 and Chapter 13 bankruptcy.

Before the new law, consultations with an attorney would allow the client to choose what type of bankruptcy they felt suited them best. However, the new law is framed to reduce the number of Chapter 7 filings by only allowing people who fall under their median state income, adjusted for family size and inflation, and people who meet rigorous standards under the means test to file for it. The rest of the people who don’t meet these standards must be evaluated by a series of complex, mathematical formulas that change annually to match new median incomes and expense standards. Clients who do not qualify through the means test will be required to file for Chapter 13 bankruptcy. The new law also extended the Chapter 13 term from a three- to five-year term, to a mandatory five-year term. Throughout the mandatory five-year term, the client must be supervised and represented before they can receive their discharge.

Chapter 13 is eligible for people who are self-employed or operating an unincorporated business as long as the individual’s unsecured debts are less than $336,900 and secured debts are less than $1,010,650. There is no minimum debt requirement for Chapter 13. For income above median, Chapter 13 must run for five years with expenses determined by IRS collection standards. Below or at the median are eligible for a three-year-plan with payments determined by actual expenses versus IRS guidelines. Other eligibility issues in Chapter 13 bankruptcy deal with individuals who have a discharge in a prior case filed under Chapter 7, Chapter 11, or Chapter 12 within four years, or a Chapter 13 case filed within two years of the present case.

The effects of the new law make the process of filing for bankruptcy more complex, requiring attorneys to specialize in bankruptcy law. To completely understand how the new bankruptcy laws in your state can impact your debt and affect your life, speak with a local bankruptcy lawyer. If you live in New York City, you want a New York City bankruptcy lawyer who understands how the law effects you. The New York bankruptcy attorneys at Doyaga and Schaefer are here to help.

Unemployment, garnishments, and repossessions can happen to anyone. Stop the harassment, the worry, the financial stress. For a free same-day consultation with the New York bankruptcy lawyers at Doyaga and Schaefer, call 718-488-7500 or 516-656-7500, or visit our website at bigapplebankruptcy.com for more information.