People who are interested in filing chapter 13 New York bankruptcy will obviously want to know if they meet all the chapter’s requirements, which are stricter than chapter 7’s. For example, it has debt limits, above which debtors must file in chapter 7 or chapter 11, but Section 109(e) also restricts chapter 13 to “individuals with a regular income,” which came up recently but deserves more scrutiny. What does this mean?
The definitions section of the Bankruptcy Code, Section 101(30), defines such an individual as, “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.” Apparently there are some occupations that the Bankruptcy Code isn’t interested in extending chapter 13 plans to. Like many definitions, though, the one for “individual with a regular income” is quite broad. Here are some examples of what the law has in mind.
(1) Workers with wage or salary income are pretty much the people chapter 13 was designed for. (Older versions of the law called it a “wage-earner’s plan.”) It’s easy for such debtors to show the bankruptcy court that they can make the monthly payments on the repayment plan by submitting their pay stubs. Workers can also have an easier time demonstrating that they can complete the repayment plan based on their job security.
(2) People who run their business, whether general partners, unincorporated businesspeople, or contract workers, can also show that their income is regular. This sometimes requires certification of the debtor’s income information by an accountant.
(3) It’s also possible for married couples (or business partners) to file jointly. In that case, the income of one can be claimed by the other as a regular income. You can read more about married couples in bankruptcy here.
(4) Similarly, income received by family members can be claimed as regular income for the purposes of filing chapter 13. For married couples, this can allow one spouse to stay out of the bankruptcy and only join it if necessary.
(5) Passive income sources are acceptable too, such as Social Security payments, disability payments, worker’s compensation, welfare, pensions, retirement plans, spousal support, and even investment income.
(6) One example of what won’t work is trying to claim that asset sales are regular income, which is essentially trying to call a chapter 7 bankruptcy into a chapter 13.
Debtors usually don’t have difficulty meeting the chapter 13 “individual with a regular income” requirement. Setting up a successful repayment plan, though, requires 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 Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.