Chapter 13 New York bankruptcy can be a more flexible way to get a fresh start than chapter 7 or chapter 11, but debtors might be concerned that it’s hard to meet the requirements to file. On the contrary, the requirements for filing in chapter 13 are light. They’re mostly confined to 11 U.S.C. § 109(e).
(1) The debtor must be an “individual with regular income.” In the text of the statute this sounds quite self-explanatory, but the definitions in the Bankruptcy Code identify an “individual with a regular income” as an “individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title, other than a stockbroker or a commodity broker.” Since it includes “individual” in its definition, it must be said that only people and not corporations or partnerships can file bankruptcy. Otherwise, it’s fairly broadly defined.
(2) Section 109(e) also sets debt limits on who may file in chapter 13. Debtors may not owe more than $419,275 in unsecured debts and $1,257,850 in secured debts. These aren’t the numbers that appear in the statute; they’ve been adjusted to inflation according to a statutory inflation index. These limits apply as of the date of the bankruptcy filing.
(3) Debtors may not have had a bankruptcy case dismissed in the previous 180 days for willful failure to abide by a court order or failure to prosecute the case. Also, debtors may not have voluntarily dismissed their cases after a creditor has filed a motion for relief from the automatic stay, a rule ostensibly designed to prevent serial bankruptcy, to prevent foreclosures, or similar actions. (This point comes from Section 109(g) of the Bankruptcy Code.)
(4) Finally, Section 109(h) requires debtors to meet the credit counseling requirements set out over in Section 111(a). This means taking a counseling course in the 180 days prior to filing bankruptcy.
Points (3) and (4) apply to debtors filing in other chapters as well. The most likely problem debtors are going to encounter for chapter 13 are meeting the debt limits raised in point (2). It’s unusual for individual debtors to have so much debt, so it’s rarely a problem. Generally, they are running unincorporated businesses and will have to file in either chapter 7 or chapter 11 to resolve their financial problems. Very clever (and lucky) debtors might be able to run out the clock before the next inflation adjustment to stay in chapter 13, but that’s a lot more work than it’s probably worth.
Qualifying for chapter 13 is easy, but arranging a plan that’s right for you requires the help of an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.