Eligibility to File Chapter 13 Bankruptcy

02/12/14

In order to be eligible to file for Chapter 13 Bankruptcy one must be an individual with "regular income." Corporations, partnerships, estates, and trusts are not eligible to file for Chapter 13.  But individual operating their own business as a sole proprietorship (unincorporated) are generally eligible to file chapter 13 to deal with their personal and business debt.

A husband and wife can file a joint Chapter 13 case. The filing of a joint petition does not automatically result in the substantive consolidation of the two debtors' estates.

"Regular income" means a source of money sufficient to fund a Chapter 13 plan. 11 U.S.C. Section 101(30). Income is not defined by the Bankruptcy Code, but the courts have held that Congress intended a broad definition of income for purposes of eligibility for Chapter 13.

Under Chapter 13, the debtor proposes a Chapter 13 plan that must meet certain requirements. Although the creditors are allowed to object to the confirmation of the Chapter 13 plan, there is no voting process as in Chapter 11.

After the completion of the debtor's payments under the Chapter 13 plan, which is normally of a duration of three to five years, the debtor is issued his Chapter 13 discharge.

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