§ 9.1 — Summary of Eligibility Requirements

Revised: April 20, 2016

[1]

To be eligible for Chapter 13, the debtor must be an “individual,”1 must have “regular income,”2 and must not have debts that exceed the limitations stated in § 109(e) of the Code.3 There are many terms of art in § 109(e) that have produced much litigation.

[2]

An individual otherwise eligible for Chapter 13 under § 109(e) may be rendered ineligible by § 109(g).4 Added to the Code in 1984, § 109(g) prohibits access to bankruptcy relief altogether if an individual was a debtor in a prior bankruptcy case that was dismissed within 180 days for “willful failure” to abide by court orders or to appear in proper prosecution of the prior case5 or if the prior case was voluntarily dismissed after the filing of a request for relief from the stay.6 The bar to bankruptcy relief in § 109(g) is broader than the limits on Chapter 13 eligibility in § 109(e) and may have greater consequences when an ineligible individual files a Chapter 13 case in violation of § 109(g).7

[3]

In cases filed after October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)8 erected an additional eligibility barrier: every consumer debtor must receive a prepetition briefing from an approved nonprofit budget and credit counseling agency that outlines the opportunities for available credit counseling and assists the debtor in a related budget analysis.9 There are circumstances that waive this briefing requirement for eligibility,10 and temporary exemption is available to some debtors upon a showing of “exigent circumstances” not defined by the statute.11

[4]

Taking §§ 109(e), 109(g) and 109(h) together, eligibility for Chapter 13 includes five considerations:

1.Is the debtor an individual?
2.Does the debtor have regular income?
3.Does the debtor satisfy the debt limitations in § 109(e)?
4.Did the debtor suffer a § 109(g) dismissal within 180 days?
5.Did the debtor receive a qualified prepetition briefing, is the briefing requirement waived or is the debtor eligible for temporary exemption from the briefing requirement?

 

 

[5]

Although not mentioned in the Code as a condition for eligibility for Chapter 13, many reported decisions have considered a debtor’s “good faith” at the threshold of a Chapter 13 case, typically in the context of a motion to dismiss.12 BAPCPA added as a condition for confirmation of a plan that the petition was filed in good faith.13 Also, bankruptcy courts, typically to deal with serial filings by the same or related debtors, have ordered restrictions on eligibility that are not found in the Code and, in fact, that occasionally conflict with the treatment of refiling in the Code.14

[6]

Although rarely seen in Chapter 13 practice, foreign nationals face an additional obstacle to eligibility for Chapter 13: under § 109(a), “only a person that resides or has a domicile, a place of business, or property in the United States . . . may be a debtor.”15 This condition for Chapter 13 eligibility was tested by Canadian residents who unsuccessfully sought relief from liability under insurance contracts to Lloyd’s of London by filing Chapter 13 petitions in New York.16


 

1  See § 10.1  Debtor Must Be an Individual; Spouses Allowed, § 10.2  Sole Proprietorships Are Eligible, § 10.3  Corporations Are Not Eligible, § 10.4  Partnerships Are Not Eligible. § 10.5  Partners and Corporate Owners May Be Eligible, § 10.6  Partnership and Corporate Debts and Assets May Impact Eligibility, § 10.7  Trust Is Not Eligible, but Trustee May Be Eligible, § 10.8  Eligibility of a Decedent’s Estate and § 10.9  Petitions on Behalf of Others: Incompetents, Next Friends, Powers of Attorney and the Like.

 

2  See § 11.1  What Is Regular Income?, § 11.2  When Must Debtor Have Regular Income?, § 12.1  Self-Employment, § 12.2  Multiple, Irregular and Seasonal Employment, § 12.3  Farming, Crop and Land Set-Aside or Payment in Kind, § 12.4  Retirement Income, § 12.5  Social Security, § 12.6  Disability Benefits; Workers’ Compensation, § 12.7  Family Assistance, Welfare and Other Entitlements, § 12.8  Unemployment Benefits, Strike Benefits and the Like, § 12.9  Alimony, Maintenance and Child Support, § 12.10  Contributions from Family, Friends, Nonfiling Spouses and Former Spouses; Grants and Awards, § 12.11  Income from Leasing, Selling or Liquidating Assets and § 13.1  Debtor Must Be Able to Make Payments under a Plan.

 

3  In cases filed on or after April 1, 2016, 11 U.S.C. § 109(e) limits eligibility for Chapter 13 to individuals with noncontingent, liquidated, unsecured debts totaling less than $394,725 and noncontingent liquidated, secured debts of less than $1,184,200. Between April 1, 2013 and March 31, 2016, the debt limits were $383,175 unsecured and $1,149,525 secured. Between April 1, 2010, and March 31, 2013, the debt limits were $360,475 unsecured and $1,081,400 secured. Between April 1, 2007, and March 31, 2010, the debt limits were $336,900 unsecured and $1,010,650 secured. Between April 1, 2004, and March 31, 2007, the debt limits were $307,675 unsecured and $922,975 secured. Between April 1, 2001, and March 31, 2004, the limits were $290,525 unsecured and $871,550 secured. Between April 1, 1998, and March 31, 2001, the eligibility limits were $269,250 unsecured and $807,750 secured. Between October 22, 1994, and March 31, 1998, the eligibility limits were $250,000 unsecured and $750,000 secured. For cases filed before October 22, 1994, § 109(e) limited eligibility to unsecured debts of less than $100,000 and secured debts of less than $350,000. These debt limitations are discussed in § 14.1  Dollar Amounts, § 14.2  Time for Determining Debt, § 14.3  Use of Statements and Schedules in Eligibility Calculations, § 14.4  Are Claims Split under 11 U.S.C. § 506(a)?, § 15.1  What Is Noncontingent Debt?, § 15.2  Is Partnership Debt Contingent?, § 15.3  Are Guaranties Contingent?, § 15.4  Are Contract Debts Contingent?, § 15.5  Is Tort Liability Contingent?, § 15.6  Are Claims through and against Debtor’s Corporation Contingent?, § 15.7  Are Prebankruptcy Judgments Contingent?, § 16.1  What Is a Liquidated Debt?, § 16.2  Effect of Defenses and Counterclaims, § 17.1  Disputed Debts, § 17.2  Taxes and Other Priority Claims and § 17.3  Joint Obligations of Spouses and Codebtors; Collateral That Is Not Property of the Estate.

 

4  See § 25.1  180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General, § 25.2  11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution and § 25.3  11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay.

 

5  See § 25.2  11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution.

 

6  See § 25.3  11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay.

 

7  See § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse? and § 25.1  180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General.

 

8  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

9  See 11 U.S.C. § 109(h), discussed in § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?, § 18.1  In General, § 19.1  What is a Briefing?, § 19.2  Timing of Briefing, § 19.3  Certificate from NBCCA: 11 U.S.C. § 521(b), § 20.1  In General, § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances, § 20.3  Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?, § 20.4  Prepetition Request, § 20.5  Briefing after Temporary Exemption, § 21.1  In General, § 21.2  Timing, Procedure and Form, § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services and § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

10  See 11 U.S.C. § 109(h)(2), discussed in § 21.1  In General, § 21.2  Timing, Procedure and Form, § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services and § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

11  See 11 U.S.C. § 109(h)(3), discussed in § 20.1  In General, § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances, § 20.3  Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?, § 20.4  Prepetition Request and § 20.5  Briefing after Temporary Exemption.

 

12  See § 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.

 

13  See 11 U.S.C. § 1325(a)(7), discussed in § 110.1  Good-Faith Filing Requirement after BAPCPA.

 

14  See § 24.1  Court-Imposed Restrictions on Eligibility to Refile and § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.

 

15  11 U.S.C. § 109(a).

 

16  See In re Head, 223 B.R. 648, 651 (Bankr. W.D.N.Y. July 17, 1998) (Kaplan) (Canadian residents filing Chapter 13 cases in the United States to manage litigation with Lloyd’s of London concerning their liability as “names” were ineligible because they could not establish anything more than “a facade of eligibility by obtaining U.S. mailing addresses and opening small bank accounts in U.S. banks.” Doing business in the United States is not equivalent to “property” in the United States for purposes of § 109. Possible liability to Lloyd’s and inchoate interests in funds in the United States were not sufficient to establish eligibility.).