Arizona residents are probably not aware that sometimes it makes more financial sense to declare bankruptcy to wipe out debt rather than to constantly be overwhelmed with debt and struggle to make minimum payments on time. There are different categories of bankruptcy that one can declare, the most common personal bankruptcies being either under Chapter 7 or Chapter 13. The main difference between the two is that under Chapter 13 the debtor, who has a regular income, can create a plan to pay back all or some of their debt at a manageable pace. The plan is generally spread over three to five years, depending on the debtor's income.
The question that many Arizona debtors may have is what happens next? Once the plan is created and confirmed by the bankruptcy courts, what is the next step? The most important thing a debtor going through the Chapter 13 bankruptcy process must keep in mind is that they are now bound by this plan. It binds each creditor and it also binds the debtor. The debtor must now make this plan succeed, either by making regular payments to the bankruptcy trustee or through payroll deduction.
If you are in this position, as long as payments are being made according to the plan, you can retain possession over the assets you already own. However, you cannot incur new debt without consulting the bankruptcy trustee. A failure to make a payment may have unfavorable consequences, with the bankruptcy being converted to a liquidation bankruptcy or the case being dismissed altogether.
It is possible, however, to modify the plan. This may be necessary if you fail to list a creditor or there is any change in circumstances. An experienced professional can guide you through the process of not only creating a plan that works for all parties, but also through the duties that may arise out of the plan.
Source: US Courts, "Chapter 13 - Bankruptcy Basics," accessed June 1, 2015
