I don’t make a lot of money, but I’d like to take advantage of the benefits that an Arizona Chapter 13 bankruptcy offers—can I still qualify with a lower income?

Filing for Chapter 13 bankruptcy in Arizona does offer many benefits, especially for filers who are interested in keeping their property while getting their debt reorganized into manageable payments. Because of the rigorous payment schedule that lasts for years, however, many potential filers shy away from a Chapter 13 bankruptcy, fearing that their income is not sufficient to sustain both a payment plan and standard costs of living.


What the bankruptcy court will look at to determine whether or not you qualify is your required debt to income ratio. Chapter 13 bankruptcy demands that you pay off certain debt during the repayment plan, such as child support, alimony, and back payments on secured debt like your mortgage. If you do not earn enough to cover payments on these debts over a three to five year span, odds are that you will not qualify.


Another factor that is considered is your disposable income to unsecured debt to disposable income and nonexempt property ratio. In a Chapter 13 bankruptcy repayment plan, your nonexempt property (things such as second homes and cars) will be used to pay off part of your unsecured debt, while your disposable income gets put toward the remaining debt until the repayment schedule is complete.


This makes your situation a tricky one to determine, but the general rule is that if you can afford the payments on your priority debt, you will be approved. If you have very little disposable income and nonexempt property, your payments may end up being “doable,” even on your modest income.


Before committing to an Arizona Chapter 13 bankruptcy, however, it is very important to sit down and take a solid, honest look at your finances to ensure that your financial reorganization will be successful. At Curry, Pearson & Wooten, our experienced Phoenix bankruptcy lawyers can help you determine which path is right for you—call us now at 602-258-1000 to schedule a consultation and get started today!