Bankruptcy should be considered only as a last resort by a financially troubled person. Remedy under Chapter 13 is available to a financially unwell person who has regular monthly income. The debtor need not be a regular wage earner or a salaried; but should have sufficient income to make necessary repayments to pay off his/her creditors. In a Chapter 13 bankruptcy, the debtor does not have to surrender his/her real property, but has to pay the debts off in full or part within a specific time period. Chapter 13 bankruptcy is confirmed by the court only if the judge feels that the debtor can afford monthly payments to the extent of paying off the debts within a stipulated time.

A business entity is not eligible to file for Chapter 13 bankruptcy, although the owners of a business can file for Chapter 13 bankruptcy in their individual capacity. However, stock brokers and commodity brokers are not permitted to file for Chapter 13 bankruptcy to escape from personal debts.

In order to file for Chapter 13 bankruptcy, a debtor should have sufficient disposable income. All left over income after necessary expenses and secured debt payments should be used to pay off the debts. Regular wages, self-employment income, seasonal work wages, pension payments, social security benefits, child support or alimony or proceeds from sale of properties can be used to make regular payments over a Chapter 13 payment plan.

To file for Chapter 13 bankruptcy, an individual’s unsecured debts should be less than $360,475 and secured debts under $1,081,400. However, these amounts may be adjusted periodically to reflect changes in the consumer price index. An individual shall not be eligible to file for Chapter 13 plan if a prior bankruptcy petition was dismissed within 180 days before the second filing.

A person filing for Chapter 13 will have to submit proof of federal and state income tax returns filing for the four tax years prior to the bankruptcy filing date. Usually, in a Chapter 13 repayment plan, the debtor is supposed to pay his/her creditors in full or part within three years. In certain circumstances, the repayment period may be extended up to five years. A debtor who has petitioned for Chapter 7 bankruptcy can convert to Chapter 13 bankruptcy any time before closing of the case provided that the case was not previously converted to Chapter 7 bankruptcy from Chapter 13 bankruptcy.