Bankruptcy: Are You Eligible for Chapter 13?

Category: Bankruptcy

Filing for bankruptcy can be a hard decision and feel daunting as there are many complexities and circumstances to consider. Bankruptcy can offer a fresh start by discharging or canceling a majority of your debts (which are likely unsecured debts) such as credit card bills, doctor or hospital bills.

When facing financial crisis, your payments end up more than 30 days behind on several bills, and collection agencies are calling you at home and/or at work. Maybe you even have high medical bills that are not covered by insurance. When your total debt (not including your car or house loan) is more than you could pay over five or more years, you may want to consider filing for bankruptcy because it might provide creditors some payment on their debts.

As the situation escalates, it is quite possible you owe income taxes that you are currently unable to pay, have wages that have been garnished, or have lawsuits pending against you. At this point, you find yourself in a position of having few assets, little or no savings, or have had property repossessed (such as a vehicle).

If you have been considering bankruptcy, you may have already heard of the “means test,” which compares your excess monthly income to the amount of unsecured debt to determine how much you could potentially repay to creditors if you were to file chapter 13. This calculation is hypothetical and often not a reflection of your true circumstances.

In an effort to standardize the means test, debtors calculate this “ability to pay” based on charts provided by the I.R.S. In some cases, these charts work to your advantage because your expenses end up overestimated compared to your actual expenses. On the flip side, the debtor’s calculation can work against you, such is the case when your actual vehicle expenses exceed those indicated on the I.R.S. chart. The means test is quite complicated and is not as clear cut as it may seem. During your initial consultation, we take your unique circumstances into consideration.

To be eligible for filing a chapter 13 case, there are two principal requirements. First of all, it is essential to have regular income, although it does not have to come from a job. In fact, benefit payments or rental income would qualify as regular income. Secondly, your debts must not exceed the legal limits. These numbers go up periodically.

If one or more of the above scenarios apply to your situation and you meet the eligibility requirements, then consulting an Arizona bankruptcy attorney is a must. Schedule a meeting to discuss the facts of your individual situation and explore your options.