Individual Chapter 13

There are two common types of individual bankruptcy in Arizona, Chapter 7 and Chapter 13. Of those two, Chapter 13 bankruptcy for individuals is broader and allows for more flexibility in retaining assets. Because the goal of individual chapter 13 bankruptcy is to repay debt rather than eliminate debt, this bankruptcy filing may allow debtors to keep all their assets because creditors are being repaid (often less than what they are owed).

While keeping more assets may sound appealing, remember that a successful Chapter 13 bankruptcy for individuals means a monthly payment plan lasting 3 to 5 years with a dollar amount sufficient to address all of the assets kept. There are a number of considerations when choosing to file an individual Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. It is best to discuss this option with an experienced bankruptcy attorney before you file for bankruptcy.

Chapter 13 is also the best choice for individuals that do not qualify for Chapter 7 bankruptcy under the means test, and a knowledgeable bankruptcy lawyer can help you determine which chapter best fits your circumstances.

To file for individual chapter 13 bankruptcy, the debtor submits a plan to repay debts over 3-5 years. The court will review and approve the repayment plan at a confirmation hearing. In Arizona, the confirmation is often done without an official “hearing”; your lawyer and the Chapter 13 Trustee will submit an agreed-upon order for the Court to approve. If approved, the debtor will retain his or her assets. The debtor is also protected from legal action by all creditors during the repayment period, whether included in the repayment plan or scheduled for discharge.

Any remaining debts are also NOT discharged until the payment plan is complete. That will mean a 3-5 year wait before the debt is discharged.

Chapter 13 bankruptcy has advantages for some individual bankruptcy filings. You will want to seek out legal advice to determine if this is the right strategy for your individual circumstances.