Declaring bankruptcy is a viable option for many people, not just businesses. However, not everyone who wishes to file for bankruptcy will be allowed to do so – you must meet certain eligibility requirements to file a Chapter 13 bankruptcy in Madison, NJ. To ensure you are able to take advantage of this option, please consult with one of our experienced Chapter 13 bankruptcy attorneys from Gillman Capone.
The first eligibility requirement for a Chapter 13 bankruptcy in Madison is that the debtor needs to have regular income. That seems self-explanatory, but in a lot of cases, there are people who may have all the debt but are out of work and run out of unemployment benefits, so they have no income. They may think they cannot file a Chapter 13 bankruptcy. However, if their spouse has an income, which allows them to pay rent, then that is considered having an income for bankruptcy purposes.
To be eligible as a Chapter 13 debtor, you must also qualify under the debt limits. Most people fall within the debt limits, but every so often there may be someone with an extraordinary amount of debt who is not eligible. Our experienced bankruptcy attorneys would advise the debtor of that and go through those calculations with them if needed.
Qualifying under the debt limit means owing less than $394,725 in liquidated, non-contingent, unsecured debt, and less than $1.184 million in liquidated, non-contingent, secured debts. As long as you are under those debt limits and have regular income, you can be a Chapter 13 debtor. If you are over the threshold on either the unsecured or the secured debt limit, you would only have eligibility for either Chapter 7 or Chapter 11 bankruptcy.
Secured debt means the creditor provides a loan to a person or business and takes collateral in some of their assets against that loan. There are two main documents a debtor will sign when they take out a mortgage—the mortgage itself and the note that will personally obligate them to pay back the debt. The mortgage is what secures the lender by using their house as collateral for the debt.
Secured debt can come in the form of a car loan where the person has a lien on their vehicle; or a mortgage where they have a lien on their house. A person might even buy some expensive merchandise at a store and sign an agreement with a clause that says creditors have a security interest in the furniture. If they do not pay it back in a timely manner, the creditor may have the right to take back the merchandise.
Unsecured debt means there is no collateral, and the creditors lent someone money or gave them a lot of credit, with the promise of paying it back. If someone is in arrears on unsecured debt, the creditor’s only recourse is to sue them personally and try to collect once they have a judgment.
Individuals without regular income or with an excessive amount of debt may not be able to create a plan of reorganization to discharge some of it. If you are unsure about whether you have regular income or an amount of debt that does not exceed the threshold level, please contact our team to set up a free case evaluation. Debtors in Madison, NJ will need to know their eligibility for a Chapter 13 bankruptcy before attempting to file.
Gillman Capone Law Group
N/a 