Learn whether Chapter 13 bankruptcy is an option for you.

Chapter 13 bankruptcy is a good option for some debtors, but not everyone is eligible to file for Chapter 13.

Businesses Can't File for Chapter 13 Bankruptcy

A business, even a sole proprietorship, cannot file for Chapter 13 bankruptcy in the name of that business. Businesses are steered toward Chapter 11 bankruptcy when they need help reorganizing their debts.

If you own a business, however, you can file for Chapter 13 bankruptcy as an individual. You can include in your Chapter 13 bankruptcy case business-related debts for which you are personally liable.

There is one exception: Stockbrokers and commodity brokers cannot file a Chapter 13 bankruptcy case, even if just to include personal (nonbusiness) debts.

You Must Have Sufficient Disposable Income

In order to qualify for Chapter 13, you will have to show the bankruptcy court that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts (such as a car loan or mortgage) to meet your repayment obligations. Your plan must pay back certain debts in full, or the judge will not confirm (approve) it and allow you to proceed.

You can use the following income to fund a Chapter 13 plan:

• regular wages or salary
• income from self-employment
• wages from seasonal work
• commissions from sales or other work
• pension payments
• Social Security benefits
• disability or workers' compensation benefits
• unemployment benefits, strike benefits, and the like
• public benefits (welfare payments)
• child support or alimony you receive
• royalties and rents, and
• proceeds from selling property, especially if selling property is your primary business.

If you are married, your income does not necessarily have to be "yours." A nonworking spouse can file alone and use money from a working spouse as a source of income. And an unemployed spouse can file jointly with a working spouse.