Understanding Chapter 13

Chapter 13 is one form of bankruptcy in which a person may obtain relief from creditors and submit a plan to pay some, most, or all of your debts. Bankruptcy law prohibits most creditors from trying to collect from you during the time you are paying your creditors according to your Plan. You must make regular payments to the Chapter 13 trustee for a specified period of time. The Chapter 13 trustee collects your money and disburses it to your creditors in the proportions and manner determined in your confirmed plan and the Local Rules of Bankruptcy Procedure.

You would file your Chapter 13 petition with the Clerk of the Bankruptcy Court in the (federal) District where you have lived, owned property, or operated a business for the last 180 days. Original papers may only be filed with the Clerk of the Bankruptcy Court (www.azb.uscourts.gov).

Phoenix Division: 230 N. First Ave., Ste 101, Phoenix, AZ 85003 — (602) 682-4000
Tucson Division: 38 S. Scott Ave., Ste 100, Tucson, AZ 85701 — (520) 202-7500
Yuma Division: 98 W. First St., Ste 101, Yuma, AZ 85364 — (928) 261-4500

There is a $313.00 filing fee when a case is filed (current through June 2022). The Bankruptcy Court does not accept cash. The Chapter 13 Trustee also receives a fee of up to 10% of the amount paid under the Plan. See azb.uscourts.gov/filing-fees for current amounts.

Any natural person who resides in, owns property in, or does business in the United States, who has regular income, is eligible to file under Chapter 13 except stockbrokers and commodity brokers. On June 21, 2022, the Bankruptcy Threshold Adjustment Act increased the debt limit to $2,750,000 of total secured and unsecured, liquidated and noncontingent debt. This increase is effective for two years unless extended by new law.

Yes. A self-employed individual is eligible to file under Chapter 13 if the person has regular income and meets the other requirements. Corporations, trusts, limited liability companies, and partnerships are NOT eligible to file Chapter 13.

A married couple may file a joint petition under Chapter 13 if both reside in, own property in, or do business in the United States, and if neither is a stockbroker or commodity broker, provided their total debts are within the required limits and at least one of them has regular income.

Generally yes, but the Court should enter your Chapter 7 discharge before filing another case. A person who files Chapter 13 but received a Chapter 7 discharge within the prior four years is not eligible for a Chapter 13 discharge. 11 U.S.C. § 1328(f).

Under Chapter 7, a debtor must turn over all nonexempt property to a bankruptcy trustee, who pays unsecured creditors from the proceeds. Under Chapter 13, you are usually permitted to keep all of your property (exempt or not); both secured and unsecured creditors are paid out of the periodic payments you make to the Chapter 13 Trustee.

Chapter 13 may be preferable when you: (a) wish to repay debts within three to five years; (b) have valuable nonexempt property or exempt property pledged as security you would lose under Chapter 7; (c) are not eligible for a Chapter 7 discharge; (d) have substantial debts not dischargeable under Chapter 7; or (e) have sufficient assets to repay debts but need temporary creditor relief.

Your credit rating during and after Chapter 13 will ultimately be based on the personal opinion of any credit grantor who reviews your record. Lawsuits, collections, and bankruptcies are indications of credit problems. Any blemished credit record must be gradually rebuilt. The trustee cannot predict or guarantee future creditworthiness.