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Qualifying for Chapter 13 Bankruptcy: Eligibility and Requirements

By Derek Prosser

Chapter 13 bankruptcy can be an excellent option for qualifying debtors. This form of bankruptcy permits filers to repay certain creditors less than the total amount owed while keeping most of their assets. However, Chapter 13 has strict eligibility requirements. In this article, we discuss some of the key requirements for Chapter 13 eligibility. 

Up-to-Date Income Tax Filings 

Filing for Chapter 13 bankruptcy requires you to submit proof that you filed your tax returns for a period of four years prior to your bankruptcy filing date. If you require additional time to get current on your tax filings, the court has the option to postpone the bankruptcy proceedings, but it isn’t guaranteed that it will do so. Ultimately, if you fail to produce your tax information for the previous four years, your case will be dismissed. 

Sufficient Disposable Income

Qualifying for Chapter 13 also requires you to have enough income after subtracting required payments on your secured debts and certain other expenses to meet your bankruptcy repayment obligations. Chapter 13 requires you to pay back certain debts in full, and if you can’t do so, the court won’t permit you to proceed with your case.

Debt Under a Certain Amount

Chapter 13 also requires that your unsecured and secured debts be under a certain amount. For cases filed between now and March 31, 2025, the permissible debt amounts for filing for Chapter 13 bankruptcy are $1,395,875 for secured debts and $465,275 for unsecured debts. A secured debt is one for which you pledged property as collateral. With this kind of debt, you stand to lose your pledged property if you fail to make payments to the creditor. An unsecured debt, on the other hand, doesn’t give the creditor the right to any of your property if you fail to pay. 

Not a Business

A third important requirement of Chapter 13 bankruptcy is that it is not intended for businesses. In other words, if you own a business, you can’t file for this type of bankruptcy in the name of the business. There are exceptions to this, however. For example, although a sole proprietor can’t file in the name of his or her business, both business and personal debts in this situation are included in the Chapter 13 bankruptcy filing. In addition, a business owner isn’t precluded from filing for Chapter 13 bankruptcy in his or her own name. However, due to the intricacies of filing for Chapter 13 bankruptcy as a business owner, it is advisable to consult with an experienced attorney if you are in this situation. 

Contact a Dallas Bankruptcy Lawyer 

In addition to the above, there are many additional requirements that must be met to file for Chapter 13 bankruptcy. Therefore, if you are considering filing for chapter 13 bankruptcy in the state of Texas, you should contact the attorneys of Toronjo & Prosser Law for help. At our prestigious law firm, our bankruptcy lawyers will provide you with the tools you need to make an informed decision regarding your financial situation. And should you decide to proceed with chapter 13 bankruptcy, we will guide you through the process to ensure that you receive a fresh financial start. Contact us to schedule a consultation with an experienced Dallas bankruptcy lawyer

About the Author
Derek Prosser understands that clients need help and need answers and that in order to properly address those concerns, clients need to deal with an attorney first and always, not just an assistant or paralegal.  By effectively counseling from the outset of a case, Toronjo & Prosser Law can anticipate and address potential problems before they arise, as opposed to when they’ve already surfaced (the “Counsel Later” approach), and, in the end, strive for a seamless representation.