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Looking at the filing requirements for bankruptcy

Last time, we commented briefly on one of the most common myths regarding bankruptcy: that it is the easy way out or lazy way to deal with burdensome debt. As we noted last time, though, the vast majority of those who file for bankruptcy do not do so as anything other than a last resort. In addition, the bankruptcy requirements are such that those who meet them are generally in a position where they cannot handle their debts on their own.

We say "generally" because the filing requirements for Chapter 7 and Chapter 13 bankruptcy are different. The financial requirements for Chapter 13 are not as strict as they are in Chapter 7 bankruptcy, in the sense that it is easier for the average debtor to qualify for Chapter 13 bankruptcy. 

The non-financial eligibility requirements for Chapter 13 bankruptcy are that, in the preceding 180 days, no bankruptcy petitions have been dismissed for failure to appear in court or failure to abide by any court order, nor may a petition have been voluntarily dismissed after creditors sought property recovery based on liens. In addition, the debtor must have completed credit counseling from an approved credit counseling agency.

In Chapter 13 bankruptcy, the financial requirements pertain to limits on the amount of debt one can claim, whereas the financial requirements in Chapter 7 bankruptcy pertain to income limits. Specifically, a Chapter 13 debtor must not have more than a certain amount of secured and unsecured debts. The specific amounts change from time to time to reflect changes in the consumer price index, but the current limits are less than $383,175 for unsecured debts and less than $1,149,525 for secured debts.

Next time, we'll look at the eligibility requirements for Chapter 7 bankruptcy, and how an experienced attorney can provide about which form of bankruptcy is appropriate for a debtor's situation. 

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