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Chapter 13 bankruptcy: Who all are eligible to file?

Individual bankruptcies are usually filed under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. As many readers in South Florida would know, a Chapter 7 bankruptcy filing requires the debtor to liquidate assets in order to repay the debts. This is a bankruptcy option for those individuals who do not have a steady source of income. The liquidation of assets allows them to repay debtors and make a fresh financial start.

A Chapter 13 bankruptcy filing, on the other hand, is suitable for those individuals who have a steady source of income and a relatively lesser debt to repay. It must be mentioned here that Chapter 13 does not involve the liquidation of any of the filer's assets. In this mode of bankruptcy, all the debts are consolidated and the filer needs to repay that amount through monthly payments over a period of three or five years, as may be determined suitable by the bankruptcy court based in the debtor's circumstances.

There are, however, certain conditions that a debtor must fulfill in order to be eligible for Chapter 13 bankruptcy. First, that debtor must not be a business entity. Next, the debtor must not have received a bankruptcy discharge under Chapter 13 in the last two years or under Chapter 7 in the last four years. A debtor must also not have been denied a Chapter 13 or Chapter 7 discharge in the last 180 days. The debtor also needs to prove he or she has received debt counseling at least 180 days prior to the filing.

In addition, the debtor must have a relatively lesser debt to repay; he or she should have filed income tax returns regularly; and the proposed repayment plan should take all debtors, including unsecured debtors, into consideration. Finally, the debtor should have sufficient funds and income to make the repayments. After a successful Chapter 13 bankruptcy filing and the subsequent discharge, the only debts that remain are some statutory obligations such as alimony, child support and certain non-dischargeable taxes.

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