Reaffirming Debt in Chapter 13 Bankruptcy

While you can reaffirm debt with either a Chapter 7 bankruptcy filing or a Chapter 13 bankruptcy filing, it is most common with Chapter 13. Reaffirming debt signals that you intend to keep making payments and retain the asset, most often a home or an automobile.

Reaffirming debt when filing for bankruptcy is a serious matter, and one that should be discussed with a qualified bankruptcy attorney in Phoenix, Arizona. The bankruptcy court will require proof that continuing payments are feasible, and the total payments will be considered along with all of the details of your Chapter 13 bankruptcy filing. The reaffirmed debt itself, however, is not part of the bankruptcy filing and is not included in the bankruptcy discharge.

Reaffirmed debts are not protected from collection or repossession if future payments are missed, which is why an experienced bankruptcy lawyer should be consulted.

Debt Negotiation Could Eliminate a Chapter 13 Bankruptcy Filing

In Arizona, it is possible to have a trained bankruptcy attorney negotiate a debt reduction that allows you to avoid filing Chapter 13 bankruptcy. While you might be able to negotiate with the creditor yourself, these businesses often take an attorney more seriously, viewing them as an indication that the debtor is about to file for bankruptcy.

Many creditors in Arizona will work with your bankruptcy lawyer to reach a settlement out of court.



Since these creditors operate for-profit businesses, they might accept partial payment on fixed terms rather than risk losing any compensation in a bankruptcy. Especially in debt that is long term, receiving some repayment is preferable.

If you are considering a Chapter 13 debt repayment plan to reorganize and catch up on your outstanding debt, then debt negotiation might be a better solution for you. When considering Chapter 13 bankruptcy – unlike the “fresh start” of a Chapter 7 filing - if your debts are reduced to a manageable level, you might just be able to pay them off without having to file the bankruptcy at all.

Can Chapter 13 Bankruptcy Payments Change?

A Chapter 13 bankruptcy typically sets up a payment plan that is meant to last 3 to 5 years. The bankruptcy trustee will calculate the payments needed to repay all of the secured debts, such as house and car. The Chapter 13 bankruptcy payment calculation is based on the income level that you have during the bankruptcy process. If your income should change significantly, either increase or decrease, your Chapter 13 bankruptcy payments might go up or down.

The Chapter 13 bankruptcy trustee will review your case periodically to determine if your payment should increase. This review is based on your pay stubs, bank statements, and tax returns, which are available to the trustee for evaluation. If your income increases, your bankruptcy payment could increase.

If your income decreases or you lose your employment altogether, you will have to file a motion with the bankruptcy court to have your Chapter 13 payment plan modified downward. In this situation, it is best to have a knowledgeable bankruptcy lawyer available for consultation and assistance. In Phoenix, Arizona, the bankruptcy attorneys at The Frutkin Lawfirm, PLC, are experienced in all facets of Chapter 13 bankruptcy, including payment plan modification

Why File Chapter 13 if I Can Repay My Debts?

Filing for Chapter 13 bankruptcy in Arizona is chosen when an individual plans to repay some or all of the debts they have outstanding. So some debtors have wondered why Chapter 13 bankruptcy filing would be beneficial over just repaying their debts without court intervention. This is often the thinking of individuals who want to avoid the stigma of bankruptcy on their credit history.



The difference lies in the ability to qualify for filing a Chapter 13 bankruptcy, which should be determined by experienced bankruptcy lawyers in Phoenix, AZ. In short, if the individual qualifies for Chapter 13, then their credit standing is already damaged. Even when an individual has a steady income, if their debts are so overwhelming that they qualify for Chapter 13, it is unlikely that they would be able to successfully complete a repayment plan without support and protection from the court.

By filing for Chapter 13 and accepting court oversight, an individual receives at least 3 benefits. First, they are under court protection during the repayment period and therefore relieved of other prosecution or harassment attempts. Second, they may be required to repay only fractions of the outstanding debt as determined by the court and therefore repaying a lesser amount. And third, the individual can begin rebuilding credit when the court oversight is concluded, and therefore improve their credit more readily. Without the bankruptcy filing, damaged credit will continue for years without much chance for improvement.

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.