Eligibility Requirements for Chapter 13 Bankruptcy in Saint Cloud, MN

Chapter 13 bankruptcy is designed to help you pay back as much of your debts as possible within 60 months (5 years) before discharging the remainder. You have to meet specific requirements to be eligible to file for Chapter 13. Otherwise, you must file Chapter 7 or another type of bankruptcy under special conditions. Here are the requirements to qualify for Chapter 13 bankruptcy in Minnesota.

Source of Steady Income

The most basic requirement to be eligible for Chapter 13 bankruptcy is that you have a steady source of income. In Chapter 13, the court helps you set up a payment plan to pay off a large chunk of your debts over 60 months. While it is possible to have a stream of income from other sources, you must have at least one steady source of income.

Disposable Income

From that source of steady income, you must have disposable income. That’s extra money coming in that you don’t need to use to survive; it’s extra for you to spend on things you want rather than what you need. If you file Chapter 13 bankruptcy, your disposable income is diverted from things you want to pay for your debts.

This means that you must have disposable income to make a payment plan to repay your debts. Without disposable income, there is nothing left to pay the debt, and you will likely need to file for Chapter 7 bankruptcy instead.

The Means Test

Minnesota uses the means test to determine how much disposable income you have. The means test adds up all of your expenses and income, then subtracts your expenses from your income. What you have left is the difference between the two numbers, considered disposable income.

The means test also compares your income against the mean income for the state based on your household size. If you make more than that mean income for the state, you are eligible for Chapter 13 bankruptcy. If you are below the mean, you are likely eligible for Chapter 7 instead.

Time Limits

One final restriction is how often you can file for bankruptcy. If you filed for Chapter 13 bankruptcy before, you must wait two years to file again. If you previously filed for Chapter 7 bankruptcy, you must wait at least four years. These rules are in place to stop people from abusing the bankruptcy system and filing often to keep themselves out of debt.

Discuss Your Case with Bankruptcy Attorneys

Before you make any decisions about your case, discuss it with bankruptcy attorneys who know enough to guide you through the process. Kain + Henehan are bankruptcy attorneys practicing in Minnesota and helping people just like you get a fresh financial start in life. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form to find help with your bankruptcy case.