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  • What is the Maximum Income to Qualify For Chapter 13?

    The court’s means examiner compares your income to the state median for households of your size in your state. If it falls below this median amount, part one of the test has been completed. The means examiner also analyzes your expenses to assess if you have enough disposable income for repayment through Chapter 13 repayment plans. The answer to the question of what the maximum income is to qualify for Chapter 13 bankruptcy depends on different factors.

    Understanding Chapter 13 Eligibility Criteria

    Chapter 13 bankruptcy law allows individuals and married couples to reorganize their debts by making periodic payments over a longer period. Individuals must meet several requirements to be eligible for this form of bankruptcy protection, including having enough “disposable income” available to repay some portion of their debts.

    How much income is too much for Chapter 13?

    What is Disposable Income?

    To determine disposable income, the bankruptcy court will compare your annual gross income with similar-sized households in your state. Tax returns for four years before filing must also be submitted, along with proof of completing a credit counseling course before bankruptcy filing.

    Your regular income consists of wages, salaries, and tips; interest from savings accounts and investments; rent from the property you own or manage; government benefits such as pensions or social security payments; and child or spousal support payments.

    Income earned from businesses or rental properties that you use personally must also be excluded, along with lottery winnings or gambling winnings tax-payable lottery winnings or gambling income. Finally, proof of having enough regular income to repay creditors some debt over three to five-year repayment plans must be shown.

    How To Calculate Disposable Income?

    One key component to determine is disposable income, or funds available after necessary living expenses have been met. These expenses include rent/mortgage payments, food, utilities, phone service contracts, and transportation expenses.

    Accurate documentation of expenses and all sources of income is vital. This may present unique challenges for individuals in part-time living situations with complex tax claims or child support arrangements.

    Many individuals also face mandatory deductions from paychecks, such as federal and state income taxes, employer-match retirement contributions, and union dues. These expenses do not appear on pay stubs and can create a significant discrepancy between what appears on a net paycheck figure and the true disposable income figure.

    If your monthly disposable income falls below the median income for your state and household size, you will easily pass the Chapter 7 means test and can skip to Part 2. However, if it exceeds this amount, a more intensive calculation must be performed to ascertain eligibility. A knowledgeable attorney could be invaluable in providing guidance.

    What would disqualify me from Chapter 13?

    Additional Calculations

    However, additional calculations must be performed if your disposable income exceeds the threshold amount. These calculations include examining your priority debts (like bankruptcy filing fees and support obligations), secured debts that will survive repayment plans such as mortgages and car loans, and nonpriority unsecured claims that remain after three or five years – such as secured claims such as mortgages. Eventually, the court will assess if your repayment plan can cover these amounts over that time.

    Evaluating Secured & Unsecured Debt Limits

    As previously discussed, unsecured debts, such as credit cards and medical bills, are those without collateral backing them up. On the other hand, secured debts such as mortgage or car loans typically feature repayment plans to secure payment of these debts.

    Like Chapter 7 debtors, Chapter 13 debtors must subtract allowable expenses from income to determine disposable income and compare this number against each state’s median household income for households of your size. If your disposable income falls within or below this range, you have passed the means test and can file Chapter 7.

    What makes you ineligible for Chapter 13?

    Determining Feasibility of Repayment Plan

    Chapter 13 bankruptcy differs from Chapter 7 in that filers can propose a repayment plan over three to five years that the court must approve before going into effect.

    The court evaluates your proposed repayment plan by reviewing your income and expenses. They then assess whether you can meet all priority debt obligations, such as child support or alimony, as well as secured debt obligations, such as mortgage arrears.

    Debtors in Chapter 13 bankruptcy plans must pay nonpriority unsecured creditors an amount equal to the value of their nonexempt property, typically household appliances and furniture, inexpensive jewelry, and certain equity in homes or cars.

    Role of Family Size & Household Income

    Chapter 13 bankruptcy allows debtors to pay off some of their debt through an approved court-supervised payment plan over three to five years. Individuals and sole proprietorships (one-person businesses) can file this type of bankruptcy petition.

    To qualify for a Chapter 13 discharge, you must make all payments as required under your repayment plan for your bankruptcy case. Failing to do so could force your trustee to liquidate all your property, including your home, car, and other personal assets.

    Do you have to make a certain amount of money to file Chapter 13?

    Conclusion

    Understanding the eligibility criteria for Chapter 13 bankruptcy is crucial for anyone considering this debt relief option. Consulting with a knowledgeable bankruptcy attorney can provide invaluable guidance, ensuring you understand your eligibility and can create a feasible repayment plan that meets court approval.

    If you need assistance with personal or business bankruptcy and filing in Tennessee, reach out to The Pope Firm and Charles Pope, Attorney At Law.

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    Frequently Asked Questions

    Here are some commonly asked questions about bankruptcy and eviction:

    When you file for bankruptcy, an automatic stay is usually put in place. This can temporarily stop the removal process. This stay means that your owner can only proceed with the eviction case once the bankruptcy court reviews it again.

    The automatic stay might continue the eviction if your owner got a court order to take back the property before you file for bankruptcy. Even though the tenant filed for bankruptcy, the owner can still take eviction measures.

    Most of the time, if you file for Chapter 7 bankruptcy, you won’t have to pay back rent to stay temporarily. If you want to stay for a long time, though, you would have to work out a deal with your owner or find another way to pay the rent that is past due. This is because Chapter 7 is mostly about getting rid of bills, not changing payment plans.

    You can make a payment plan to pay off your past due rent over time with Chapter 13 bankruptcy. This can help you stay in your home for a long time and avoid being evicted. It gives you an organized way to catch up on your rent payments while stopping the eviction process.

    The owner can file a declaration with the court if they say you are putting the property in danger or doing illegal things like drug use. The automatic stay can be lifted if the court agrees with the landlord’s claims. This means the eviction process can continue even though the debtor has filed for bankruptcy.

    Buried in Debt? Contact The Pope Firm Now!

    Are you overwhelmed by debt and considering bankruptcy? The Pope Firm is here to help you regain control of your financial future. We offer comprehensive bankruptcy solutions tailored to your needs, including Chapter 7, Chapter 11, and Chapter 13 bankruptcy services. Whether you’re looking to declare bankruptcy in Tennessee or determine if you qualify, our team will guide you every step of the way.

    Don’t let financial stress control your life. Contact The Pope Firm today for a free consultation and take the first step towards a brighter, debt-free future. Let us help you navigate the complexities of bankruptcy with confidence and ease.

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