Once, the choice of whether to file Chapter 13 or Chapter 7 bankruptcy was the determination of the debtor and Detroit bankruptcy attorneys. But, with sweeping new reforms enacted in 2005, that choice became subject to a number of “tests” or qualifications debtors must meet and pass. Below are the specific criteria a debtor must currently meet before being allowed to declare Chapter 13 bankruptcy.
• You must receive mandatory counseling from an authorized agency before you can begin the process of filing for bankruptcy. Some of these agencies are allowed to charge you for this counseling, but they must also be willing to counsel you for free if you can’t pay. A list of these agencies is obtainable from the Department of Justice website and from Detroit bankruptcy lawyers. The certificate you get from this counseling must be presented to the court along with your filing documents.
• Income cannot exceed $922,975, and your unsecured debts cannot be more than $307,675. An unsecured debt is debt such as credit cards or consumer loans. Secured debt is your mortgage or car payment.
• Your income must be regular. You must have a full time job and be deemed able to repay debt.
• You must have no unpaid taxes and all of your tax forms must be filed.
• The length of your plan will be determined by how much you owe. This test is a comparison of your average monthly income over the last six months with your average state median income. If your income is higher than the state median income, you will have to have a five-year plan for debt repayment. If your income is lower, then you’ll have a three-year plan.
• Your first payment will be due within 30 days of the date you file your request with the court. The amount of your payments will be determined by the court. You may make these payments on your own to your assigned trustee or you may elect to have the amount taken out of your paycheck by payroll deduction.
• At the end of your plan, you will be expected to attend a budget counseling course with an agency approved by the United States Trustee’s Office and present evidence of successful completion. Detroit bankruptcy attorneys maintain a list of approved agencies. You must be up to date in all child support and alimony payments. Once all these criteria are met, any remaining debts that are eligible for discharge will be discharged.
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