First of all, Chapter 13 is intended for individual consumer debtors, even if debtors are self-employed or operating an unincorporated business, with unsecured debts less than $383,175 and secured debts less than $1,149,525 (these amounts are adjusted periodically). Thus, corporations and partnerships are ineligible for Chapter 13 relief.

Second, since the crux of the Chapter 13 bankruptcy case is the re-payment plan, Chapter 13 debtors must have regular income to be able to make payments under the plan.

Third, an individual debtor must receive credit counseling from an approved credit counseling agency within 180 days before filing of the bankruptcy petition.  In fact, this pre-bankruptcy counseling requirement applies to debtors filing under any chapter. The debtor may request a waiver prior to filing bankruptcy in limited circumstances, such as when there are meritorious exigent circumstances.

The final limitation on debtor eligibility for Chapter 13 is time restrictions on when the debtor can receive a discharge after a previous bankruptcy case:

  • The debtor is ineligible for Chapter 13 if the debtor received a discharge in a prior Chapter 13 case filed within two years of a subsequent Chapter 13. However, because it usually takes 3-5 years to complete a plan, the practical effect of this limitation is that the debtor typically is eligible for another Chapter 13 immediately after receiving a discharge in the previous Chapter 13
  • The debtor is ineligible for Chapter 13 if the debtor received a discharge in a previous Chapter 7 case within 4 years of the Chapter 7 filing.
  • The debtor is ineligible for Chapter 13 (or any other chapter), if within 180 days before filing bankruptcy a prior bankruptcy petition was involuntarily dismissed due to the debtor’s willful failure to appear before the court or comply with court orders or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

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