Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is for debtors who are above the guidelines for liquidation bankruptcy, or Chapter 7, but still cannot meet their monthly obligations.
Financial hardship is a common experience over the last several years especially in Arizona. When a person has become “insolvent”, meaning you cannot pay your obligations to your creditors, a possible solution is to file for bankruptcy. There are other solutions available that may make more sense for you, and an experienced bankruptcy attorney can help you identify those solutions and make the best decision for you.
Chapter 13 is a way for a debtor (you, the person filing for bankruptcy) to control the payments they make to their creditors over a period of time and have the ability to potentially discharge your debts. Unlike liquidation bankruptcy where a debtor’s debts are deleted because they cannot pay their debts back, Chapter 13 contains a payment plan to creditors over either three or five years.
This payment plan is controlled and enforced by the Court and is based on the income of the debtor and what they can afford to pay for the duration of the payment plan. After the payment plan is completed, if there is any debt leftover, the remaining debts are forgiven and deleted, so long as they are dischargeable debts.
When you are successful in filing your case under Chapter 13, all of your dischargeable debt (debt that can be forgiven) will be wiped away providing you with a clean slate. The only time in which your debts may not be discharged is if the debt was obtained by fraud, the debtor commits fraud during their bankruptcy case or the debt is of a kind that cannot be discharged. Non-dischargeable debts are most commonly student loans from an accredited school AND the debtor cannot prove hardship, IRS tax debt incurred in the last three years, or debts that were obtained by fraud or misrepresentation.
Chapter 13 cases require a special understanding of the rules and processes of the bankruptcy code. These kinds of cases often require hearings in front of a judge more than other cases and they require a great deal of communication and cooperation with the trustee compared to other forms of bankruptcy. A competent attorney can substantially increase your chances to have your case handled quickly, avoiding costly mistakes and delays. Having filed over 400 bankruptcies, I can tell you that bankruptcy can be easy and low stress when done right, but it can be a nightmare if done wrong.