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Chapter 13 Qualification in New Mexico

For many people who are in debt, filing for Chapter 13 bankruptcy is a good option.  However, not all debtors will be eligible to file for Chapter 13 bankruptcy. This article discusses who qualifies, and how, for Chapter 13 bankruptcy.

Businesses May Not File For Chapter 13 Bankruptcy

Even a business owned by only one person is disqualified from filing for Chapter 13 bankruptcy, or at least from filing in the name of the business. Chapter 11 bankruptcy is usually more appropriate for a business in financial trouble, as it is more tailored to the reorganization of business debt.

If you are the owner of a business, however, you may indeed file for Chapter 13 bankruptcy on behalf of yourself as an individual. You may also include business-related debts in your bankruptcy case, as long as they are debts for which you are personally liable- debts for which your business is liable do not qualify. Also, there is a single exception to this rule: A stockbroker or commodity broker may not file for Chapter 13 bankruptcy, even if they wish to do so in an attempt to discharge their personal debts only.

You Need to Have Sufficient Disposable Income

To be eligible to file for Chapter 13 bankruptcy, you will also need to be able to prove to the bankruptcy court that you are going to have adequate income, after you subtract specific allowed expenses and other required payments toward secured debts like a home mortgage or a car loan, so that you will be able to satisfy your repayment obligations. Your individual repayment plan must intend to fully repay certain debts, and if it does not, the bankruptcy judge is unlikely to approve it, which will mean you cannot proceed.

You are permitted to use income from these sources to fund your Chapter 13 bankruptcy plan:

  • regular salary or hourly wages
  • pension payments
  • income derived from any self-employment
  • sales commissions
  • royalties
  • Social Security benefits
  • wages received from seasonal work
  • unemployment benefits, and things like strike benefits
  • public benefits like welfare
  • disability or worker’s compensation benefits
  • any spousal support or child support you receive from an ex-spouse or co-parent
  • rents
  • proceeds from the sale of property, particularly if the sale property constitutes your primary business.

If you have a spouse, the income used for you bankruptcy plan need not necessarily be yours. A spouse who is not employed may file individually, and use the income of their working spouse to fund the bankruptcy plan. Also, a non-working spouse may file jointly with their employed spouse.

Your Cannot Have Too Much Debt

Chapter 13 in New MexicoYou will not be eligible to file for Chapter 13 bankruptcy if your secured debts (like car loans and home mortgages) are greater than $1,149,525. This number will change from time to time, to adjust for inflation. In April of 2016, it will be adjusted. A “secured debt” is one that puts you in a position to lose specific property if the debt is not paid, like your home or vehicle. As such, car loans and home mortgages are the most common types of secured loans. If a creditor like the IRS has attached a lien to your property though, this will also be considered a secured debt and will count toward to limit just mentioned.

Also, in order to qualify for Chapter 13 bankruptcy, the amount of your unsecured debts may not be higher than $383,175. Like the limit for secured debts, this amount too is periodically adjusted to account for inflation, and will be adjusted in April of 2016. An unsecured debt is one that does not confer on the creditor the authority to repossess or take a certain piece of your property.  The majority of debts are unsecured, and include things like credit card debts, medical bills, back utility bills, legal bills, and charge cards from retailers.

Your Income Tax Filings Must Be Current

Also to be eligible to file, you must be able to offer proof for the four previous tax years of filing both a state and federal income tax return. If you are behind on your filings and need to sort them out before filing for bankruptcy, the bankruptcy court is capable of postponing your bankruptcy proceedings. But in the end, if you are unable to prove that you are current on your tax filings, you will be disqualified from filing for Chapter 13 bankruptcy. Contact our Albuquerque bankruptcy lawyer for a free consultation on how a Chapter 13 bankruptcy would work in your situation.