Chapter 13 bankruptcy provides the opportunity to keep most of your assets and repay your debts over time. The Chapter 13 process involves creating a repayment plan and negotiating all debt. To take advantage of Chapter 13, you must have sufficient income.

Ability to Repay

To file Chapter 13 bankruptcy, you must be able to repay a substantial portion of your debts. If, based on your monthly disposable income, you are unable to pay at least 25 percent of your total bankruptcy debts in five years (60 months), you will not qualify for discharge under Chapter 13.

Disposable Income

Disposable income in bankruptcy is calculated as your average income for the three months prior to filing less certain standard deductions. These deductions, based on national, local and regional standards, can be found at the U.S. Trustee's website (see Resources).

Median Family Income

The means test compares your income to that of similar families in your state. If you earn less than the median income for a family of the same size as your household, you can automatically file for Chapter 7 bankruptcy instead of Chapter 13.

Credit Counseling

You must receive credit counseling during the 180 days prior to filing Chapter 13. The U.S. Trustee maintains a list of approved counselors.

Debt Ceiling

You are not eligible for Chapter 13 if your debts exceed the debt ceiling for this chapter. As of 2009, the ceiling for secured debts is $1,010,650, and the ceiling for unsecured debt is $336,900.

Individuals Only

Businesses cannot file for Chapter 13 bankruptcy, not even sole proprietorships. As the owner of a business, however, you can file Chapter 13 as an individual.

Source:

US Courts: Chapter 13 Eligibility

Nolo: Chapter 13 Bankruptcy

More Information:

Approved Credit Counseling Agencies

Means Testing