Chapter 13

Phoenix Chapter 13 Bankruptcy Lawyer

How Does Chapter 13 Bankruptcy Work?

Those facing insurmountable debt need to evaluate the options that are available to them. Chapter 13 bankruptcy allows debtors to restructure their debts into one reasonable payment plan. The payment plan will generally last either three or five years, and the debtor will pay a set monthly amount with a lower, fixed interest rate. When you have completed the payment plan, most remaining debts can be discharged.

Why Should I Consider Chapter 13?

Chapter 13 bankruptcy is not for everyone; however, it can be a viable solution for many people. If you are currently struggling with debt and thinking about bankruptcy, we encourage you to discuss your situation with a bankruptcy attorney in Phoenix.

Some reasons why Chapter 13 may be better for you than Chapter 7:

  • You are not eligible for Chapter 7. 
    To file for Chapter 7 bankruptcy, you must pass the means test, which will compare your personal income with the median state income in Arizona. If you are unable to pass this test, you will not be allowed to file for that chapter.
  • Stop foreclosure. 
    If you have fallen behind on your mortgage payments and are being threatened with foreclosure, filing for Chapter 13 may be your best option. This will put a halt on any foreclosure proceedings—giving you the breathing room you need.
  • Deal with debts that cannot be discharged by Chapter 7. 
    Not all debts can be discharged by filing for Chapter 7 (ex: child support / alimony). With Chapter 13, you can put a plan in place to repay them.

Who Is Eligible for Chapter 13 Bankruptcy?

If you are considering Chapter 13, there are a few factors that will determine eligibility. If your debt is directly correlated to your business, you will not be able to file for Chapter 13 unless you file under your own name. Business owners are typically guided toward Chapter 11 bankruptcy if they need help managing debts associated with their business. If you file as an individual, you may still include any debts that are related to your business. In order to file Chapter 13, you must be able to show the bankruptcy court that you have enough income available to start repaying your creditors. You must be able to present the judge with a plan to pay off your debts in full.

Your plan may include several different sources of income:

  • Routine wages or salary
  • Income from seasonal work
  • Wages from self-employment
  • Disability
  • Unemployment
  • Social Security

If your secured debts surpass $1,150,000, you will not be eligible for Chapter 13. A secured debt relates to a particular property you stand to lose if you don't uphold your financial obligations. Examples of secured debts would be mortgages or car loans. You would also be ineligible for Chapter 13 if your unsecured debts exceed $383,175. Unsecured debts are those that cannot be taken in the form of physical property.

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