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Qualifying for Chapter 13 Bankruptcy in Indiana

You can file a Chapter 13 case if:

  • The amount of your debt does not exceed the legal debt limits set by the code and
  • You are “an individual with regular income”

What Are The Debt Limits For Filing Chapter 13 Bankruptcy?

Unlike Chapter 7 that has no limit as to how much debt you can have, Chapter 13 has set limits on how much secured and unsecured debt a person can try to file against.

As of April 1, 2013, the limit on secured debt is $1,149,525 and unsecured debt limit is $383,175. These limits apply whether the Chapter 13 case is filed by an individual or a married couple—they are NOT doubled or increased for a married couple. In most situations, reaching EITHER of the two limits disqualifies you from Chapter 13.  These debt limits will automatically increase by small increments over time pursuant to statute.

A serious medical emergency or medical condition that is either uninsured or exceeds insurance coverage can climb to several hundred thousand dollars of debt shockingly fast. Add that to your unpaid credit cards Sixteen years ago, I broke my femur in 4 places and the medical expenses topped $300,000.  Fortunately, I had great insurance and a major financial problem was avoided. These limits may sound high and they generally do not get in the way of the majority of clients that file a Chapter 13 case with my office. In those rare cases where the debt limits are reached, there are still solutions that can afford the debtor with a fresh start.

What is an “Individual with Regular Income”?

First, only “individuals”—human beings, not corporations or partnerships—can file a Chapter 13 case.  A business that is a sole proprietor is an individual due to the fact that the owner will file bankruptcy.

Second, an “individual with regular income” is defined in the Bankruptcy Code as one “whose income is sufficiently stable and regular to enable such individual to make payments under a plan under Chapter 13.”

If that doesn’t sound very helpful to you, you’re not alone. How “stable and regular” does a debtor’s income need to be before it is “sufficiently stable and regular” so that it enables the debtor to make plan payments?  How is a bankruptcy judge going to make that determination at the beginning of the Chapter 13 case?

Having such an ambiguous definition gives bankruptcy judges a great deal of leeway about how they read this qualification. Most are pretty flexible at least at the beginning of the case, giving debtors a chance to make the plan payments, thereby proving by action that their income is “stable and regular” enough. But if your income has been inconsistent, you may need to persuade the judge that your income is steady enough to qualify. A good attorney, especially one who has experience with your judge, can present your circumstances in the best light and get you over this hurdle.

 If you need more information, please contact the Law Offices of Brad A. Woolley at (765) 420-8900 or office@woolleylaw.com.