Who Can File chapter 13 bankruptcy?

While both persons and corporations can file chapter 7 bankruptcy, only persons can file chapter 13 bankruptcy. Often sole proprietors or small-business owners file chapter 13 bankruptcy to discharge their personal obligations while maintaining their businesses.

If married, you can file chapter 13 bankruptcy with your spouse (as a joint filing) or without your spouse (as an individual filing). 

If you previously filed a chapter 7 bankruptcy and received a discharge, you can file chapter 13 four (4) years later. If it’s been less than four years, you can still file chapter 13, but you won’t get a discharge (cancellation of debts). You don’t need a discharge, for example if you’re only filing chapter 13 to catch up on late mortgage payments. 

Unlike chapter 7, which has no debt limits, in order to qualify for chapter 13 bankruptcy, your total secured debt (like mortgages and car loans) must be less than $1,257,850. Your unsecured debt (like credit card debt and medical bills), must be lower than $419,275 (those numbers are current as of April 2019; they update every three years).

You need to be able to show that you can afford to make monthly payments. However, the amount typically follows a sliding scale and can come from any source: wages, business profits, pensions, or some sort of support, as long as it’s legally obtained. For example, because bankruptcy is governed by federal law, you would not want to fund your chapter 13 from a cannabis business, even if it’s legal in your state.