How Do I Know If I Qualify For A Chapter 13?
Well, the first thing youre going to ask yourself is are there things that you want to hold onto
? Meaning, are you considering keeping your house? Are you behind on your car? And the biggest issue is going to be, how much money do you make?
And so if you have a good reason to be in a 13, thats the first thing to look at and thats typically your house. Youll want to strip off that second like we talked about. Your cars may be more than three years old, so you want to strip them down to value. And you have the income to actually be able to pay a monthly amount.
So with those things in mind, then you take a look at your debt. How much debt do you have? Because thats another test in Chapter 13. So as of today, the bankruptcy court says you can have approximately a million dollars in secured debt.
So say for example, I have a house and it has a first mortgage on it for $700,000. And the house is also worth close to $700,000. Now I have a second piece of property, and that mortgage is $300,000. And my house is worth close to $300,000. So thats secured debt of the total of the million. So I would be fine there.
Now the next step is looking at your unsecured debt. And right now the bankruptcy court says you can have up to $336,000 in unsecured debt. So thats credit card debt, thats personal loans, that could be a mortgage that youre stripping off.
So going back to that first house I have. Its worth $700,000 but I have a second on it, and thats $100,000. So I could strip that off and that would be part of my $336,000 of unsecured debt.
So those are the two things you look at. You look at what you can afford to pay, and you look at the type of debt you have. And if you make a determination that you think you want to hold onto your home and youre in a position to be able to repay on your debt, youre an excellent candidate for a Chapter 13.
And thats really what youre most interested in.
Now the question I get a lot is, Whats the difference between unsecured and secured debt in a Chapter 13? And thats pretty simple to figure out.
Secured debt is anything thats attached to collateral. And I what I mean by that is think about your house being attached to a mortgage or your car being attached to a loan. Thats secured debt.
Unsecured debt is like a credit card where theyve given you a line of credit and you pay on it every month in order to purchase things.
And so thats really the distinction.
So when youre looking at Chapter 13, think about if youre going to be stripping off things. Those become unsecured debt. And remember your cap on unsecured debt is $336,000. So add up your credit card debt, any type of personal loans, and then look if youre going to strip off a second mortgage or bring your cars down to value to see what those are going to total.
If thats the case, then youre definitely going to qualify for a Chapter 13.
by: Christy Thompson
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