Is There an Income Requirement for Chapter 13 Bankruptcy?
Filing for Chapter 13 bankruptcy can be a viable solution for individuals seeking to reorganize their debts while maintaining ownership of their assets. However, one of the most critical factors to consider before filing is whether you meet the income requirements. Understanding these criteria can help you determine if Chapter 13 is the right path for your financial situation.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as a wage earner’s plan, allows individuals with a regular income to develop a structured repayment plan for their debts. The process typically lasts between three to five years, depending on the petitioner’s income and debt level.
Unlike Chapter 7 bankruptcy, which involves liquidating assets to pay off creditors, Chapter 13 enables debtors to make manageable payments over time. This makes it an attractive option for those who want to avoid foreclosure and keep valuable property.
Income Requirements for Chapter 13 Bankruptcy
While Chapter 13 does not have a strict income requirement, you must have a reliable source of income to qualify. Here’s what you need to know:
1. Regular and Sufficient Income
To qualify for Chapter 13, you must demonstrate that you have a steady income stream sufficient to cover both your regular living expenses and your proposed repayment plan. Acceptable income sources include:
- Wages or salary
- Self-employment income
- Rental property income
- Social Security benefits
- Pension or retirement funds
- Child support or alimony
2. Disposable Income Calculation
The court will assess your disposable income after deducting necessary expenses such as rent, utilities, food, and transportation. This remaining income must be enough to meet the proposed repayment obligations under Chapter 13.
3. Debt Limitations
While there’s no specific income threshold, your total secured and unsecured debts must not exceed a certain amount. As of April 2025, the limits are:
- Secured debt (e.g., mortgages, car loans): Must be under $1,580,125*.
- Unsecured debt (e.g., credit cards, medical bills): Must also be under $526,700*.
*These figures are periodically adjusted for inflation, so it’s essential to check the latest limits before filing or during your consultation with our staff.
What Happens If Your Income Is Too Low?
If your income is too low to sustain a Chapter 13 repayment plan, the court may dismiss your case. In such situations, alternatives include:
- Filing for Chapter 7 bankruptcy, which requires passing a means test.
- Negotiating directly with creditors for debt settlements.
- Seeking credit counseling to explore other debt relief strategies.
How to Determine If Chapter 13 Is Right for You
Before filing, consider scheduling a free consultation to evaluate your eligibility based on your income, expenses, and debt levels. We can help you navigate the complexities of bankruptcy laws and develop a feasible repayment strategy.
While there’s no fixed income requirement for Chapter 13 bankruptcy, having a stable and sufficient income is crucial for qualification. If you’re considering filing, assessing your financial situation and understanding the legal criteria can help you make an informed decision.