Chapter 13 Bankruptcy Helps with Child and Spousal Support Debt

When filing for bankruptcy in Phoenix, Arizona, there are some types of debt that cannot be discharged in a Chapter 7 bankruptcy “fresh start.” Most commonly, these debts are spousal support, child support, and student loans. For those who owe large sums for back child support, back spousal support, or unpaid student loans, Chapter 13 bankruptcy process may be the best choice.

In a Chapter 13 bankruptcy filing, the debtor is allowed time to restructure the debts and repay them in full. For the debts that cannot be discharged in bankruptcy, such as spousal support, child support, and student loans, Chapter 13 bankruptcy protection will stop any harassment or garnishment and provide time to restructure the debt and complete a repayment plan.

Chapter 13 bankruptcy does not eliminate these debts. It provides a way to get caught up and stay current to repay the debts in full. An experienced bankruptcy law firm can help you determine if Chapter 13 bankruptcy is the right filing for your situation, and it is important to consult with a bankruptcy attorney before you make any bankruptcy filing decision.

Chapter 13 Bankruptcy and Disposable Income

When filing for Chapter 13 bankruptcy in Arizona, the court appointed trustee will determine how much money you have available to repay your debts. This amount is known as “disposable income,” and it is the amount left over after the court deducts the living standards which include payroll deductions and allowable expenses such rent, food, and clothes.

The trustee will use the amount of disposable income to determine the repayment period.

Non-employment types of income, such as social security benefits, money from family and friends, and payments for special circumstances (for example, restitution for crime), are generally not included in the calculation for repayment in a Chapter 13 bankruptcy filing. But, in order to have these amounts excluded from the calculation, they should be kept in a separate bank account from your regular wages. If all of the incomes are lumped together in one account, they are said to be “co-mingled,” and could be counted in the disposable income calculations for Chapter 13 bankruptcy.

To avoid having the non-employment incomes added into the calculations for Chapter 13 disposable income, it is important to consult with a qualified bankruptcy attorney. An experienced Phoenix bankruptcy attorney can help you identify which types of incomes you have, and can advise you how to proceed if the incomes are co-mingled. In all cases, it is wise to seek the advice of a bankruptcy lawyer that has lengthy experience with filing Chapter 13 bankruptcy in Arizona.

Chapter 13 Can Protect You from Creditor Harassment

Chapter 13 bankruptcy is meant to protect those who are still earning a viable wage while they repay their outstanding debts.  During the repayment period, usually 3 to 5 years, the bankruptcy laws forbid the creditors from starting or continuing any collection actions.  This means that you have some measure of protection from harassment while you get back on your feet financially.

A qualified bankruptcy attorney in Phoenix, Arizona, will help you decide if filing for Chapter 13 bankruptcy is the right decision for you.  Once you have a bankruptcy lawyer working for you, any attempt by a creditor to collect money or to harass you can be dealt with through the bankruptcy courts.  Your bankruptcy lawyers provide peace of mind against the onslaught that you are suffering.

Experienced bankruptcy law firms in AZ know how to handle unruly creditors, and you will be free from the phone calls and letters.

You will be free to pursue your repayment plan and to put the Chapter 13 bankruptcy behind you.

What is Chapter 13 Bankruptcy?

Of the two common types of bankruptcy used by individuals in Arizona, chapter 13 is broader and allows for some flexibility in retaining assets.  This bankruptcy filing may allow a debtor to keep certain assets, such as a home or other valuable, while completing a plan to make overdue payments.  These assets are considered by the court to be exemptions from the bankruptcy proceedings, and must be court-approved.  Chapter 13 bankruptcy filing also allows for a great range of debt to be included.

When filing for chapter 13 bankruptcy, the debtor submits a plan to repay some of the debts over 3-5 years.  The plan must be approved by the court at a confirmation hearing.  If approved, the debtor will retain the assets during the repayment period.  However, any debts that are not to be repaid are not immediately discharged; the discharge will not occur until the payment plan is complete.  During the repayment period, the debtor is protected from legal action by all creditors, whether included in the repayment plan or scheduled for discharge.

In Phoenix, AZ, the decision to file for chapter 13 bankruptcy should be made with legal counsel.  There are a number of details and factors that weigh on this decision, and it is wise to consult with an experienced bankruptcy attorney.