Chapter 13 Frequently Asked Questions

The following information deals with Chapter 13 bankruptcy and debt restructuring. The information referenced in this section is provided for general discussion purposes only and should neither be construed as legal advice nor as a complete discussion of all the issues related to the area of Chapter 13 bankruptcy and consumer debt restructuring bankruptcy. Every individual, family, and business is different and we urge readers to contact Arboleda Brechner regarding specific information about their case.

When Do I Get My Discharge From Bankruptcy?

A discharge is granted after the completion of the payments under the Chapter 13 Plan that has been confirmed by the Bankruptcy Court. In most situations, this takes anywhere between three to five years.

What Does A Chapter 13 Bankruptcy Trustee Do?

The Chapter 13 Bankruptcy Trustee performs many functions. The Bankruptcy Trustee serves as a disbursing agent for payments under the plan. The Bankruptcy Trustee can object to confirmation of the Chapter 13 plan and determine whether the debtor has satisfied the "disposable income test" as well as the "best interest of creditors test." The Bankruptcy Trustee can also file a motion to dismiss the Chapter 13 case for a "bad faith filing" or for failure to make payments called for by the plan.

What Happens At The Meeting Of Creditors?

The meeting of creditors is actually a sworn examination of the party filing for bankruptcy - the debtor.  It is a scheduled meeting conducted by the Chapter 13 Trustee at which time the debtor is examined under oath concerning his or her assets and debts.

Creditors who choose to attend the meeting of creditors are allowed to ask questions concerning anything relevant to the case. As a practical matter, creditors typically do not  attend the meeting of creditors. All debtors must attend the meeting of creditors.

What Is The "Disposable Income Test" In Chapter 13?

The debtor must commit all of his projected income to the Chapter 13 plan for, at a minimum, 36 months of the plan. In plain English, this means that the plan payment plus reasonable and necessary living expenses must account for all of a debtor’s net income. If the unsecured creditors are paid in full, the "disposable income test" does not come into play in most cases.

What Is The "Best Interest Of Creditors Test" In Chapter 13?

This test requires the debtor to make sure that under the Chapter 13 plan, the unsecured creditors receive at least as much under Chapter 13 as they would have received if the matter had been handled under Chapter 7. This test requires a liquidation analysis to determine what the unsecured creditors would have received under Chapter 7.

Can I Obtain Credit While On A Chapter 13 Plan?

In order to obtain credit, you may need to get permission from the Chapter 13 Trustee or the Bankruptcy Court to incur additional debt while you are involved in a Chapter 13 bankruptcy plan.

Do I Have To List All Of My Creditors?

Yes. Bankruptcy law requires debtors to make a full and complete disclosure of anybody whom the debtor owes money. Bankruptcy schedules are signed under penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all debts have been disclosed.

Can I Transfer Ownership Of An Asset To Avoid Bankruptcy?

No. Transfers within one year of filing Chapter 13 bankruptcy almost always violate Arizona’s fraudulent transfer statute as well as the federal Bankruptcy Code. A debtor who has been found to have made such a transfer may lose his or her entire discharge, and be subject to criminal prosecution as well.

Are Some Debts Dischargeable In Chapter 13 That Are Not In Chapter 7?

Yes. Credit card fraud, embezzlement, larceny, and certain IRS debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Spousal support or alimony, child support, most student loans, and certain IRS debt are also not dischargeable in Chapter 13.

Can The Trustee Or A Creditor Object To Confirmation Of A Chapter 13 Plan?

Yes. It is the Trustee's responsibility to object to Chapter 13 Plans that are deficient. A creditor may also object, but generally most objections will come from the Chapter 13 Trustee. Please contact the AB Firm today with additional questions about objections to Chapter 13 Plans.

How Does Bankruptcy Affect My Credit?

While bankruptcy often provides debtors with a fresh start, there will be some initial difficulties encountered in terms of rebuilding credit. 

Can My Employer Fire Me For Filing Bankruptcy?

No. The Bankruptcy Code prohibits public and private employer from discriminating against any employee who files bankruptcy.

Can I Convert A Chapter 13 Bankruptcy To Chapter 7?

Yes. If the Chapter 13 Plan cannot be amended to handle changes in your financial situation, you may find it necessary to convert to a Chapter 7.