This is the second installment in our three-part series of blog articles discussing key facts about the Chapter 13 process. While we have tried to address many of the most common issues that debtors should know, the best way to obtain specific information about your individual situation is to schedule a free consultation with one of our New Mexico Bankruptcy Lawyers. If you have not read Part I of this series of articles, you might benefit from doing so before reading Part II. Click Here for Part I
Chapter 13 Bankruptcy can provide relief even if you have a substantial income.
If you cannot qualify for Chapter 7 because your disposable income is too high, Chapter 13 may provide an attractive alternative. Chapter 13 eligibility criteria approaches income from the opposite direction because the issue is not whether you make too much money but rather you make enough to make your projected plan payments. In other words, the probability that the Bankruptcy Trustee will approve your repayment plan is better if your income is higher in relationship to the debts that must be repaid.
Are there any financial qualifying factors that are relevant when seeking Chapter 13 relief?
Eligibility requirements for Chapter 13 focus on the amount of secured and unsecured indebtedness of a filer. A debtor can only qualify for Chapter 13 if his or her unsecured debts amount to $360,475 or less, and his or her secured debts total $1,081,400 or less. While these thresholds were accurate at the time of publishing of this blog post, they are revised periodically based on inflation so you should seek legal advice to confirm whether you qualify for Chapter 13 in New Mexico.
“Plan feasibility” is one of the most important factors in determining whether a Chapter 13 plan is confirmed by the Bankruptcy Trustee.
The Bankruptcy Code requires that a monthly trustee payment include the following:
• Payment of arrearages owed on secured debts (like mortgages) in an amount determined by dividing the total arrearage amount over the number of months of the plan, which will either by 3 or 5 years
• Payment of arrearages on priority unsecured debts calculated the same way as secured debts
• Portion of remaining “disposable income” after allowance for certain living expenses to unsecured debtors
In addition to the requirement that a debtor continue to make these payments to the U.S. Bankruptcy Trustee, the debtor must also continue to remain current on secured debts like one’s mortgage and priority unsecured debts (e.g. child support, alimony, divorce property settlements, some taxes, student loans in most situations, government fines, penalties and assessments, etc.). Plan feasibility involves a financial analysis of a debtor’s income in relations to these obligations and certain amounts permitted for living expenses to determine if the debtor has adequate income to afford to meet all of these financial obligations.
The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.
The New Mexico bankruptcy law firm of Lightning Legal Group offers a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your options.