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The rules for filing for Chapter 13 bankruptcy

To be eligible to file for Chapter 13 bankruptcy, a Minnesota consumer must have less than $1,184,200 in secured debt and less than $394,725 in unsecured debt. A debtor must also establish that he or she has filed his or her state and federal tax returns for the past four years. Failure to do so could result in a person having a case delayed or dismissed. However, there is no income limit for those who are looking to file for Chapter 13 protection.

In a Chapter 13 bankruptcy, debts are repaid over a period of three or five years. The length of the period is determined by the debtor's ability to pay, and this is based on how much disposable income that individual has and how his or her income level compares to the state median.

Payments are made based on a plan that a debtor creates that is approved by creditors and the court. Many remaining balances are discharged at the end of the repayment period. Individuals who are seeking a reorganization bankruptcy must take an approved credit counseling course as part of the bankruptcy process. While a case is ongoing, it may be possible to keep assets and even take on additional debt if the trustee and bankruptcy judge approve.

Individuals who have no other way to pay off their debts in a timely manner may benefit by filing for bankruptcy. Although there may be credit consequences to doing so, it may also allow a person to eliminate credit card, medical and other debt balances in full. During a bankruptcy case, creditors are generally unable to contact debtors directly. An attorney may describe other benefits of filing for Chapter 13 bankruptcy or how to do so properly.

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