I have heard that filing for a Phoenix Chapter 13 bankruptcy is a good option for me, but I am unsure how it works—what debt will I have to pay off, and what will be forgiven?

Arizona Chapter 13 bankruptcies can be confusing to navigate. When most people think of bankruptcy, they typically picture a Chapter 7 bankruptcy where the majority of the filer’s debt is forgiven, but they must also give up a significant portion of his or her nonessential property. A Chapter 13 bankruptcy is known as a reorganization bankruptcy for a very good reason—rather than eliminating your debt, you will be reorganizing your debt into manageable payments.

When you are in the beginning stages of filing for a Chapter 13 bankruptcy, your debt will be divided into three different categories. The amount you pay on each debt will be dependent on what category it falls in:

These debts, as the name implies, are top priority in your repayment plan, and you will be required to pay in full. This includes alimony, child support, most tax debt, and—if you are a business owner—any wages or benefits you owe employees.

  • Priority: These debts, as the name implies, are top priority in your repayment plan, and you will be required to pay in full. This includes alimony, child support, most tax debt, and—if you are a business owner—any wages or benefits you owe employees.
  • Secured: Secured debts are debts that are associated with tangible collateral, such as the mortgage on your home. You will be required to pay the full amount that gets you back on-schedule with your original loan payments.
  • Unsecured: Unsecured debt, or debt with no collateral such as credit card debt, is a bit of a grey area. Your repayment plan will mandate that you put any remaining disposable income, after you make payments on your priority and secured debts each month, towards your unsecured debt. This may vary based on what you earn and what you owe.

It can be difficult to project how much you will end up repaying without the help of an experienced attorney. The Phoenix bankruptcy lawyers at Curry, Pearson, & Wooten can help you assess your situation and give you a solid picture of what your financial life in repayment will look like. Call us at 602-258-1000 or toll free at 888-929-5292 for a complimentary consultation with an attorney today.