Chapter 13 Bankruptcy Information

Introduction to Arizona Chapter 13 Bankruptcy
Chapter 13 bankruptcy is not the typical chapter of bankruptcy that most people know about. Instead, chapter 13 involves the partial repayment of ones debt through a monthly repayment plan that lasts from 3-5 years. At the end of this plan your unsecured debts will be erased as in chapter 7 bankruptcy, regardless of whether you have completely paid them off.

You may be wondering who files chapter 13 bankruptcy. A payment plan bankruptcy is often used by debtors who do not qualify for chapter 7 bankruptcy under the means test. It such cases, it is determined that the debtors have significant disposable income every month that could be used to pay a portion of their debt. In order to be fair to the creditors, this disposable income is used to calculate a monthly payment.

Another reason to file for chapter 13 bankruptcy protection is if you are looking for a way to catch up on past due mortgage payments. Unlike chapter 7 bankruptcy where you must remain current on your mortgage to keep your home, chapter 13 bankruptcy allows a debtor to be deficient on the mortgage, so long as the past due balance is paid over the life of the plan. This means you have 3-5 years to pay off your missed mortgage payments.

Note that, unlike a chapter 7 bankruptcy, chapter 13 debtors are able to retain their non-exempt property. Unlike a liquidation bankruptcy, your trustee will not take your unsecured property and sell it at a trustee sale. This is an added benefit for people with assets such as boats, quads or second cars.

The preparation of a chapter 13 bankruptcy plan is similar to that of a chapter 7. However, it also includes calculations of a repayment plan. This makes the paperwork even more complex. For this reason, it is highly recommended that you consult with an experienced chapter 13 lawyer prior to filing for bankruptcy protection.

Once your chapter 13 bankruptcy petition is filed with your local district court, the automatic stay of bankruptcy goes into effect. Like in chapter 7 bankruptcy, this prevents creditors from collecting on debts. This means that upcoming foreclosures or repossession are prevented.

Just like chapter 7 bankruptcy, each chapter 13 cases is randomly assigned to a local bankruptcy trustee. The debtor is required to attend an informal hearing in front of this trustee, to discuss and problems with the submitted petition or plan. Note that creditors can show up at these hearing to voice any objections, but it rarely happens.

After your 341 hearing, the next step in a 341 hearing is plan confirmation. When a chapter 13 bankruptcy plan is submitted, it is reviewed by the assigned trustee to ensure that it was properly prepared and that all creditors are adequately protected. They will inform your attorney of any changes that need to be made.

Note that it is very common for changes to be made at the request of your trustee. Many times, these changes even affect the amount paid each month. It is important that you keep in touch with your attorney and stay on top of any changes in payment amount so that you do not fall behind.

Once the assigned bankruptcy trustee is satisfied by your chapter 13 repayment plan and any creditor objections have been addressed, your chapter 13 plan will be confirmed. This means that, so long as you continue paying your bankruptcy plan payments and your circumstances do not change, you will likely receive your discharge at the end of your plan duration. Chapter 13 repayment plans last from 3-5 years.