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Understanding Chapter 13 bankruptcy requirements

Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy allows Florida consumers to keep their property while repaying a portion of their debts over a three- to five-year repayment plan period. To be able to file under Chapter 13, people must first meet the eligibility requirements.

Corporations or limited liability companies are ineligible to file for Chapter 13 bankruptcy, but if they want to reorganize their obligations they can file under Chapter 11. People cannot file under the chapter if they had a discharge in Chapter 7 within the last four years or in a Chapter 13 bankruptcy within the last two years. Those who had a previous bankruptcy dismissed within the last 180 days for failing to appear in court or for a willful violation of the court's orders also are ineligible.

Chapter 13 also has debt limits. A person whose unsecured debts exceed $383,175 or whose secured debts exceed $1,149,525 is ineligible. Eligible debtors must have filed their state and federal income taxes for the prior four years and have completed the required credit counseling course. People must also have regular incomes sufficient to repay their debts, and their plans must repay certain priority debts in full.

The advantages of Chapter 13 bankruptcy includes the ability to keep property that would otherwise be sold to pay creditors, the ability to stop a foreclosure action and have time to catch up on delinquent mortgage payments and the potential ability to reduce interest payments on some unsecured debts that are owed. As it can only be used by people who have a regular source of income, not everyone will qualify, and a bankruptcy attorney might assist in exploring other forms of debt relief for those who do not.

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