The Ultimate Guide to Chapter 13 Bankruptcy in Arizona

The desert sun cast long shadows across the vast expanse of Arizona as Sarah sat in her modest home, surrounded by stacks of unpaid bills and looming financial uncertainty. The weight of debt had become an unyielding burden, pressing down on her with each passing day. It was then that she began to consider Chapter 13 bankruptcy—a lifeline that promised a chance to regain control of her financial future.

The Journey Begins

Chapter 13 bankruptcy stands as a beacon of hope for individuals like Sarah, offering a structured pathway to reorganize and repay debts while retaining valuable assets. But what exactly is Chapter 13 bankruptcy, and how does it differ from other forms of bankruptcy?

At its core, Chapter 13 is a powerful tool within the legal framework that allows individuals with a steady income to develop a repayment plan, consolidating debts and making manageable payments over a specified period, typically three to five years. Unlike Chapter 7 bankruptcy, which involves liquidating assets to discharge debts, Chapter 13 focuses on restructuring and repayment.

The Essence of Chapter 13 Bankruptcy

In Arizona, Chapter 13 bankruptcy provides a structured means for individuals to address their financial obligations while maintaining ownership of their property. It’s often seen as a constructive solution for those who don’t qualify for Chapter 7 or wish to protect valuable assets from liquidation.

The cornerstone of Chapter 13 bankruptcy lies in the creation of a repayment plan crafted in collaboration with a court-appointed trustee. This plan outlines how debts will be repaid over the designated period, ensuring affordability and feasibility for the filer. The duration of the plan depends on various factors, including income, expenses, and the total amount of debt owed.

Protection and Preservation

One of the primary advantages of Chapter 13 bankruptcy is its ability to shield assets from liquidation. In Arizona, individuals can retain ownership of their homes, vehicles, and other essential possessions while adhering to the agreed-upon repayment plan. This protection provides a sense of security, allowing filers to retain crucial assets vital for their livelihood.

The Qualification Criteria

Not everyone is eligible for Chapter 13 bankruptcy. To qualify in Arizona, individuals must have a regular income source that enables them to make monthly payments outlined in the repayment plan. Additionally, there are limits to the amount of secured and unsecured debt allowable for Chapter 13 eligibility.

The Filing Process

Embarking on a Chapter 13 bankruptcy journey in Arizona initiates with filing a petition in the bankruptcy court. Alongside the petition, filers must submit a comprehensive overview of their financial situation, including income, expenses, assets, and liabilities. This detailed disclosure forms the foundation upon which the repayment plan will be constructed.

Upon filing, an automatic stay is issued, halting creditor actions such as foreclosure, repossession, or wage garnishment. This legal injunction provides a breathing space for individuals to regroup and proceed with the bankruptcy proceedings.

The Trustee’s Role

A pivotal figure in the Chapter 13 bankruptcy process is the trustee appointed by the court. The trustee’s responsibilities encompass reviewing the proposed repayment plan, ensuring its compliance with bankruptcy laws, and overseeing the distribution of payments to creditors. Their guidance and oversight are integral to the successful execution of the repayment plan.

Conclusion

Chapter 13 bankruptcy in Arizona isn’t merely a legal process; it’s a journey toward financial stability and a fresh start. For individuals burdened by overwhelming debt, it offers a structured pathway to regain control and work toward a brighter financial future. Understanding the nuances and procedures of Chapter 13 is the first step towards navigating this transformative process.

People who are preparing to file for Chapter 13 bankruptcy need to know that it can take some time to get the results they are seeking. While a Chapter 7 case only takes six or fewer months, a person will usually commit to paying a Chapter 13 repayment plan for three to five years.

Considerable work needs to be performed before a person can even file for Chapter 13 and they then have to endure repayment plan approval and confirmation hearings. When a person is able to present a repayment plan they know they can stick to and complete without any issue, they can usually achieve a discharge that frees them from authorized debts.

Preparing to File for Chapter 13

Only individuals can file for Chapter 13, not businesses, and there cannot be a prior bankruptcy petition dismissal within the past 180 days. A person cannot have more than $465,275 in unsecured debts or $1,395,875 in secured debts, they must be current on their income taxes and have sufficient income to pay their debts.

All people who are filing for bankruptcy in Arizona must complete credit counseling from a United States Trustee-approved credit counseling agency and receive a credit counseling certificate. When a person fails to complete credit counseling before filing a petition or not meeting the requirements of an extension to complete counseling after filing, a case can be dismissed without refund of any filing fee paid, there will be no discharge of debts, and any refiling a year after dismissal means automatic stay protection will be limited to 30 days.

A bankruptcy court will only allow a person to complete a course after filing when they satisfy all of the necessary conditions, which include:

• They tried to get credit counseling from an approved agency before bankruptcy but were not able to obtain the counseling during the 7-day period after they made the request;
• Exigent (emergency) circumstances existed that made it necessary for them to file their case immediately; and
• They filed a certification stating the facts regarding the first two conditions with their petition.

The United States Department of Justice has a list of approved providers of personal financial management instructional courses. There are also certain things people should avoid doing after filing for Chapter 13.

Avoid going on shopping trips involving debt there is no intention to repay. Also avoid concealing any assets, as attempts to hide possessions can lead to seizure of assets and criminal charges.

Filing for Chapter 13

People filing for Chapter 13 bankruptcy create their own repayment plans, and the plans must be written and submitted to the bankruptcy court. Bankruptcy courts provide forms for creating plans, or people can obtain them from lower courts.

A bankruptcy court must approve a repayment plan for a person to enter into Chapter 13. A repayment plan will detail a person’s income, property, expenses, and debts with a proposed payment plan.

The Chapter 13 trustee reviews the plan, assesses its compliance with bankruptcy laws, collects payments, distributes payments to creditors, and ensures all terms of a bankruptcy repayment plan are followed. A repayment plan is usually divided into three categories:

• Priority Debts — Domestic support obligations, tax debts, and certain other debts may require 100 percent repayment as soon as possible.
• Secured Debts — Mortgage and car loan payments are two common kinds of secured debts for which people have property connected to the debts, and these also need to be repaid in full.
• Unsecured Debts — An unsecured debt has no collateral and includes credit card debt, utility bills, and personal loans. People may repay all of these debts or only a fraction, possibly even none of this debt.

Chapter 13 Meetings

When a person files for Chapter 13, they often have to begin making payments to their trustee even when their repayment plan has not yet been approved. It is usually within two months that a trustee will hold a meeting of the creditors, at which the trustee and the creditors can both ask questions of the debtor.

A debtor must attend this meeting to answer questions about their finances and proposed repayment plan. The next meeting after a meeting of the creditors will be a confirmation hearing, usually within 45 days.

The confirmation hearing decides whether a repayment plan will be acceptable and satisfies the terms of the Bankruptcy Code. A trustee begins distributing funds to creditors when a plan is approved, but failure to confirm a plan can lead to a person trying to convert their case to a Chapter 7.

The Chapter 13 Discharge

A person will be entitled to a discharge of all debts provided for by a repayment plan or disallowed when they complete all payments under their repayment plan. This means that a person can seek a discharge once they complete their repayment plan.

Debts that are not discharged under bankruptcy will usually include the priority debts and secured debts. It can take three to five years to reach the discharge, depending on the length of your repayment plan.

Many people who are in the midst of considering filing for bankruptcy are doing so because they do not have much money, so it can be hard for the same people to accept that it costs money to file for bankruptcy. Any bankruptcy case involves the basic filing fee for a petition as well as numerous other fees for other court motions or court services.

In Chapter 13 bankruptcy cases, people are generally not allowed to get filing fees waived or pay them in installments. Because Chapter 13 intends to keep a person current with payments, a filing fee being unaffordable can cause a court to question a person’s ability to succeed in a Chapter 13 case.

Credit Counseling Fee Waivers

A person who files for Chapter 13 must take two educational courses before they can receive a bankruptcy discharge wiping out qualifying debt. The United States Department of Justice Trustee Program website has a list of approved credit counseling agencies.

After completing credit counseling, a person still needs to take debtor education coursework. Certificates of completion for both classes will be required.

Credit counseling course costs often vary by provider, and many courses are about $50. If you register with a credit counseling agency, you will likely be asked if you want a fee waiver, and you should answer yes to this question.

There may be a requirement to submit a formal application, proof of income, and a completed budget worksheet. A majority of the questions on an application relate to income and family size.

It usually takes around 72 hours for a response as to whether a person qualifies for a fee waiver. When the fee is waived, a person can take the class for free, but people who are not approved must reapply.

Bankruptcy Filing Fee Waivers

There is a $313 filing fee for a Chapter 13 petition. Fees cannot be waived in Chapter 13 cases.

You may be able to file an Official Form 103A, Application for Individuals to Pay the Filing Fee in Installments. The number of installments will be limited to four, and a person must make the final installment payment no later than 120 days after filing their petition.

A person must file a repayment plan with their petition or within 14 days after their petition is filed, and a plan must be submitted for court approval and provide for payments of fixed amounts to the trustee on a regular basis, usually biweekly or monthly.

A trustee distributes funds to creditors according to the terms of the plan. A debtor must begin making payments to a trustee within 30 days of filing a bankruptcy case, even if the plan is not yet approved by the court.

Many debtors agree to make plan payments through payroll deductions because such agreements usually guarantee payments will be made on time and debtors will complete their plans. A person becomes eligible for discharge upon completion of all of their payments under a plan.

Hiring a Lawyer for Your Chapter 13 Bankruptcy Case

Many people want to try and file for bankruptcy on their own without hiring an attorney, and this often proves to be a mistake. It is not until people are in court that they realize how much help they need, and irreparable damage to bankruptcy cases forces people to reverse course.

A lawyer handling Chapter 13 bankruptcy cases will charge more than a Chapter 7 attorney because there will be much more work to do in a Chapter 13 case. A bankruptcy lawyer will know which chapter you should file for, advise you on how the process will work, and determine the debts that can be discharged in your case.

The attorney also serves a valuable role by advocating for a person’s interests during the meeting of the creditors. While people can hire Chapter 7 bankruptcy attorneys for less than $1,000, a Chapter 13 lawyer will usually cost several thousands of dollars with $3,000 being the national average.

A lawyer is going to be able to help you by preparing all of the necessary paperwork for your case, multiple forms that can be incredibly confusing for the average person to fill out by themselves. The attorney can also represent a person at all hearings they need to attend, and it can be invaluable for most people to have legal representation in these circumstances.

Chapter 13 bankruptcy has an inherent edge over Chapter 7 in that certain debts can be discharged in a Chapter 13 case that cannot be in a Chapter 7 case. Discharging debts in Chapter 13 will be far more difficult because a person first needs to complete a three- to five-year repayment plan whereas a person filing Chapter 7 only needs to file and get their debts discharged.

A person filing Chapter 13 must pay the greater of their disposable income or the value of their nonexempt property. A person filing Chapter 13 may be able to pay less than they owe, but others will have to pay it all to close their cases.

Debts Commonly Discharged in Chapter 13

When a person files Chapter 13, there are three types of debt claims: priority, secured, and unsecured. Priority claims are granted special status, such as taxes and costs of bankruptcy proceedings.

Secured claims involve creditors having the right to take back property if a debtor does not pay the underlying debt. Unsecured claims involve creditors having no special rights to collect against particular property owned by a debtor.

The most common kinds of unsecured debt discharged in Chapter 13 cases include, but are not limited to:

• credit card debt
• medical bills
• phone bills
• personal loans from friends, family, and employers
• past-due rent or other money owed under lease agreements
• business debts
• collection agency accounts
• auto accident claims
• unpaid utility bills
• repossession or foreclosure deficiency balances
• civil court judgments
• judgments from unpaid credit card debt, medical bills, or other unsecured debt
• old tax penalties and unpaid taxes
• attorneys’ fees

Other debts that can be discharged in Chapter 13 but not Chapter 7 include willful and malicious damage to another person’s property, debts incurred to pay nondischargeable tax obligations, and child support, alimony, spousal maintenance, or spousal support obligations could be reduced through Chapter 13 repayment plans in some cases. A Chapter 13 case can also get rid of homeowners’ dues when a person surrenders their home and government fines, penalties, or liens.

While you want to understand what debts can be discharged in Chapter 13, it is also important to understand the debts that cannot be discharged in Chapter 13. Federal and private student loans are a good example of a debt that is not dischargeable in bankruptcy unless a person can prove that their loan payment imposes an “undue hardship” on them, their family, and their dependents.

When a person has secured debts, they can either pay as they agreed or surrender their collateral, and surrendering the collateral will mean the debt becomes a nonpriority unsecured debt. When a person is behind on a long-term debt, they can make up payments through their repayment plan.

A person cannot discharge any debt that was incurred under false pretenses, which means things people buy without intention to pay for it. Debt incurred under false pretenses is extremely common in many bankruptcy cases because people assume they can max out the credit cards before filing, but this is always a mistake because courts frequently uncover the expenses and hold people accountable.

You should also remember how many luxury purchases you made before you decide to file for bankruptcy because debts people incur within 90 days of their bankruptcy filings for luxury goods or services worth $800 or more owed to a single creditor are nondischargeable. This is also true for cash advances of $1,100 or more taken within 70 days of a bankruptcy filing.

Unpaid taxes, such as tax liens, can also survive a bankruptcy discharge, although taxes that are several years old could be discharged. A tax lien remains attached to your property, so you will still be responsible for that after Chapter 13.

Property taxes people incur before filing for Chapter 13 are also nondischargeable. Property taxes payable more than one year before filing could be discharged, however.

You also cannot discharge employment taxes, trust fund taxes, or nondischargeable taxes. You could also remain responsible for condominium dues and fees, pension plans, and personal injury or wrongful death damages from drunk driving cases.

When people are not satisfied with the types of debt that Chapter 13 can wipe out, then it may be advisable for them to seek the help of a debt relief organization. You need to exercise extreme caution in working with any debt relief company because there are several frauds and scam artists seeking to take advantage of people.

It may be possible for you to work with a reputable debt relief company that helps you negotiate more flexible repayment terms with your creditors and help you find some financial relief that you are seeking. You could also benefit from speaking to a financial advisor in some cases.

People who are preparing to file for Chapter 13 bankruptcy can still be facing a number of concerns about their case, but all people in this position should know that they are preparing to take a journey that will lead to a much cleaner financial picture. It takes three to five years to complete a Chapter 13 repayment plan, but the rewards are usually worth the effort.

The truth is that there are numerous benefits to filing for Chapter 13 bankruptcy in Arizona. Chapter 13 allows people to correct damaging missed payments and avoid repossessions that can be even worse for their credit records.

Common Advantages of Chapter 13

Chapter 13 is better known as the wage earner’s plan because it allows people with regular incomes to repay all or a portion of their debts. The Chapter 13 repayment plan can offer a number of advantages to people including:

• Consolidate All Your Debt Into a Single Payment — People who file for Chapter 13 rarely pay back all of their debts, and their creditors must accept the Chapter 13 plan that is approved by the court provided it complies with the Bankruptcy Code. The debtor only needs to make one payment a month to their trustee, who then distributes the funds to the creditors.
• Deal with a Trustee — A Chapter 13 trustee generally wants to see a person complete their repayment plan, so they may be willing to work with a person when any issues arise. The trustee can also deal with the creditors.
• Cheaper Than Chapter 7 — Many people filing bankruptcy cannot afford to spend more money, so it is important to note that the filing fees for Chapter 13 are less than Chapter 7.
• Keep Your Home — Unlike Chapter 7 cases in which most people must part with their houses, a person filing for Chapter 13 often has the opportunity to save their home even when it is in foreclosure.
• Cure the Default on Your Mortgage — People who are behind on mortgage payments can work their repayments into their plan to catch up on past due payments.
• Foreclosures Can Be Stopped — A foreclosure may be stopped at any time by filing a bankruptcy petition before the sheriff commences a sale of the property. It is important to take action before the sheriff sells the property.
• Discharge a Second Mortgage — People who more than their homes are worth on their first mortgages may be able to get their second mortgages thrown out.
• Keep Your Car — Even when you are behind on motor vehicle payments, Chapter 13 can allow you to keep your automobile. You will need to file for Chapter 13 before your car is repossessed and sold at auction.
• Pay Fair Market Value for a Car — If you are willing to part with a motor vehicle that you owe more than it is worth, you may be able to pay only for what the car is worth.
• Reduce the Interest Rate on the Car Loan — When you took out a car loan with a high interest rate, Chapter 13 may be able to get the rate reduced to something more reasonable.
• Keep Your Income Tax Refund — Chapter 13 may allow you to ask the court to incorporate your annual income tax refund into your chapter 13 bankruptcy plan, whereas chapter 7 involves people losing some or all of their income tax refund.
• No Penalty or Interest on Non-Dischargeable Tax Debts — A person who owes income taxes for tax years over three years before filing their bankruptcy petition can have those income taxes discharged. Chapter 13 lets people pay non-dischargeable taxes over a period of three to five years without further penalties or interest.
• Right to Convert — While you may file for Chapter 13, you have the right to convert your case to Chapter 7 later.
• Rebuild Your Credit — A Chapter 13 discharge is not as unfavorable as Chapter 7 because a person is generally making an effort to repay a portion of their debt. Many people in Chapter 13 repayment plans can take steps to improve their credit while they are in repayment plans, so credit scores can improve even while a person is still paying.
• Less Credit Report Impact — A Chapter 7 case stays on your credit report for 10 years but Chapter 13 only lasts seven years.

If you are still having doubts about what Chapter 13 could do for you, make sure to take the time to speak to a legal professional who can outline exactly how Chapter 13 could improve your future. Many people understandably have several concerns about filing for Chapter 13, but the truth is that most people find that taking the initial steps proves to be the best thing they could have done to reverse their situations.

People who are filing for Chapter 13 bankruptcy can easily become wrapped up in some of the many immediate benefits they are likely to see as soon as they file. Just as there are certain to be advantages to filing for Chapter 13, people are also sure to face more than a few drawbacks.

When you file for Chapter 13, you are telling a court you cannot manage your debts and need help repaying them, which is certainly better than just asking the court to cover all of the costs without contributing anything. Even though a person may be willing to repay a portion of their debts in Chapter 13, there is no getting around that any kind of bankruptcy filing generally carries some negative connotations.

Potential Disadvantages of Chapter 13

While Chapter 13 has a number of compelling reasons for people to use it to file for bankruptcy, not all people feel debt relief right away. Many individuals filing for Chapter 13 are still dealing with all kinds of bills that are difficult to catch up on, although Chapter 13 can provide some hope that they will catch up eventually.

Chapter 13 is typically beneficial because a bankruptcy trustee will work with people to help them complete repayment plans, but people can still face all kinds of potential disadvantages to a Chapter 13 case that may include:

• Length of Repayment Plans — You are going to be spending three to five years repaying your debts.
• Disposable Income — Your debt will be paid using your disposable income, meaning that pretty much all money you make over the next three to five years will be committed to your Chapter 13 repayment plan.
• Credit Report — Filing Chapter 13 will remain on a person’s credit report for 10 years.
• No More Credit Cards — A person who files for bankruptcy generally forfeits all their credit cards, although many new credit card offers will begin arriving as soon as a person files for bankruptcy.
• Mortgage Hopes — For people who do not own their own homes, filing for bankruptcy can eliminate all hopes of getting a mortgage.
• No Relief on Domestic Support Obligations — Chapter 13 or any chapter of bankruptcy will do nothing for a person’s requirement to pay child support, spousal support, etc.
• Student Loan Debt Remains — A person cannot discharge student loans in bankruptcy unless they can prove that loan payments impose an “undue hardship” on them, their family, and their dependents.
• Certain Debts Remain — Even after a person completes a Chapter 13 repayment plan, they can still be liable for mortgage liens or other debts.

When you file for Chapter 13, it will lengthen the amount of time you must wait before you can declare bankruptcy again. You will have to wait two years to file for Chapter 13 again after completing a Chapter 13 case, and you have to wait six years before you can file Chapter 7 after filing for Chapter 13.

There also remains the fact that many people who enter Chapter 13 repayment plans simply are not able to complete them. Many of these same individuals did not knowingly refuse to make payments but instead had some kind of unfortunate event arise, such as unemployment, that made it impossible for them to continue making payments.

The problem with not completing your Chapter 13 repayment plan is that failure to complete a plan can mean that a person loses some of their assets. People who have concerns about Chapter 13 plans may be better served by examining their debt management program, debt consolidation, debt settlement, and credit counseling options.

According to the most recent Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) report, 38 percent of the 733,000 bankruptcy petitions filed were Chapter 13 and 37 percent of the 764,000 consumer cases closed that year were Chapter 13. A total of 280,990 chapter 13 consumer cases filed were closed by dismissal or plan completion, and 159,558 of these cases were dismissed with the 43 percent of cases closed being a decrease from the previous year.

The other downside of Chapter 13 for most people is that Chapter 13 will be more expensive to hire an attorney for than Chapter 7. A Chapter 7 case only lasts a couple of months and does not involve as much work, but a lawyer in Chapter 13 cases has a lot more to do.

Concerns about the ability to keep a motor vehicle are one of the most common reasons many people choose not to file bankruptcy, but people need to understand that Chapter 13 is much different than Chapter 7 in this respect. Whereas most people filing Chapter 7 are seeking a liquidation of their assets to discharge their debts, people entering Chapter 13 are agreeing to repayment plans.

In turn, people who have already paid for their vehicles can keep the cars so long as creditors are getting enough non-exempt assets that would have been liquidated in a Chapter 7 case. When a person still owes money on their car, they can work the payments on the vehicle into their repayment plan.

Understanding Exemptions in Arizona

Federal bankruptcy laws allow debtors to exempt some of their property under either federal law or the laws of their home state. Motor vehicles are assets listed on Schedule A/B of bankruptcy forms, and the list of exemptions from the United States Bankruptcy Court for the District of Arizona establishes that an exemption of equity in one car not greater than $6,000.

If a debtor or their dependent is physically disabled, the fair market value of a motor vehicle cannot be more than $12,000. Equity is the fair market value of a motor vehicle minus debt to any secured creditor.

A person without an automobile loan who owns their car outright has the same amount of equity as a car’s value. A person who still has a loan determines their equity by subtracting the remaining loan amount from the actual value of the vehicle, so a person who owes $10,000 on an $30,000 car has $20,000 in equity.

A motor vehicle in Arizona is exempt from bankruptcy proceedings if the equity is less than $6,000, and a person is filing on their own. In other words, driving a car that currently has a value of $10,000 but you still owe $5,000 on means that you have $5,000 in equity and you can keep the car.

When a car has more equity than the exemption, a trustee can seize the vehicle and sell it to satisfy a person’s debts. A trustee does not automatically decide to seize all vehicles with more equity than the exemption though, as some cases may require more effort to sell and not be worth the trustee’s time.

Any car can be considered to be a secured debt, meaning a person cannot discharge their car loan in bankruptcy. The only option people have when they are filing bankruptcy and cannot afford to continue to make car payments is to allow the lender to repossess the vehicle.

Some people may also be leasing their motor vehicles, and a car lease is a contract that will not be considered a debt when you file for Chapter 13. A person can continue to lease their car in a Chapter 13 case so long as they remain current on their payments.

If the value of your vehicle is too low, a person can increase their number by using a wildcard exemption. Arizona does not have a wildcard exemption, but federal law allows an exemption of $1,475 plus up to $13,950 of any unused amount of the homestead exemption (or a total of $15,425).

Another possible option in some cases can be redemption, under which a person keeps their vehicle by paying the fair market value of the vehicle in full. It is most useful for people who are upside down on vehicles, and some companies offer redemption loans that can be repaid like ordinary car loans.

The obvious drawback to a redemption agreement for a person filing Chapter 13 is needing to accumulate enough money to pay for the car in one fell swoop, but redemption funding providers are common, and people need to exercise severe caution in dealing with these companies. Many providers charge very high interest rates.

In the end, the three options with a car in bankruptcy will be to reaffirm, in which a person and their lender sign a reaffirmation agreement stating they will continue to make car payments, surrender, in which a person gives up the vehicle, or redemption, in which a person pays based on the car’s value.

The good news for most people filing Chapter 13 bankruptcy is that Chapter 13 will actually do less damage to a person’s credit than Chapter 7 because Chapter 7 cases stay on people’s records for 10 years while Chapter 13 only lasts seven. When the seven years are up, a person does not need to take any action to get the bankruptcy removed from their credit report as the information will be removed automatically.

People need to develop a plan to rebuild their credit immediately after filing for bankruptcy and stick with the plan to improve their credit scores. You will want to be working with an Arizona bankruptcy lawyer who can walk you through the entire process of filing for Chapter 13 and help you determine the steps to take afterward.

How Bankruptcy Appears on Credit Reports

When you file for Chapter 13 bankruptcy, your debts will no longer be unpaid or past due, as they should be reported as discharged. People will have to stay up to date on their credit reports to know what information is being reported.

People will generally begin getting new offers for credit as soon as they file for Chapter 13, and you should be skeptical of many credit card offers that involve high interest rates. There can be good secured credit cards that can be advantageous to sign up for, however.

Some of the best steps a person can take to rebuild their credit rating will include:

• Reviewing Credit Reports — Any person who has filed for Chapter 13 bankruptcy should review all of their credit reports from all three major credit bureaus, Experian, Equifax, and Transunion. Credit reports will allow you to verify that your debts have actually been discharged and are carrying a zero balance. You also want to know every account listed actually belongs to you and is displaying the correct current payment status or open and closed dates. Know what to do if you need to dispute an error by any credit bureau, possibly sending a dispute letter by mail, filing an online dispute, or contacting the agency by phone.
• Make Every Payment — No factor will be as important to a credit rating as payment history, as it accounts for 35 percent of a person’s FICO credit score (30 percent is amount owed, 15 percent is the length of the credit history, 10 percent is credit mix, and 10 percent is new credit). Paying outstanding debts on time improves a credit score but making late payments or defaulting on a loan can hurt a credit score.
• Maintain Low Credit Utilization Ratio — The credit utilization ratio is the sum of all a person’s balances divided by the sum of the cards’ credit limits. A person with $100,000 in credit who uses $25,000 of it has a credit utilization ratio of 25 percent. People should try to keep their credit utilization ratios at less than 30 percent, and they can rebuild their credit faster by keeping as close to 0 percent as possible.
• Apply for a Secured Credit Card — People will get many credit card offers after filing for Chapter 13 bankruptcy. While they are not likely to get traditional credit cards, they could qualify for a secured credit card that is a credit card requiring a security deposit and establishes a credit limit. A person can use a secured credit card just like a traditional credit card in most cases, and people will want to pay their balances immediately at the end of every month to help improve their credit because the secured credit card company will report their payments to the three credit bureaus.
• Seek Authorized User Status — If a person is simply not comfortable with the idea of taking out their own credit cards after filing for Chapter 13, they could have the option of asking a friend or family member if they are willing to add them as an authorized user on one of their cards. So long as the person they are asking has a responsible payment history, being an authorized user can also lead to an increase in credit ratings.

CNBC reported that a Debt.org article showed people with average scores of 680 lose between 130 and 150 points in bankruptcy while above-average scores of 780 can lose between 200 and 240 points. That said, people with scores in the 400s or 500s could actually experience a boost from a bankruptcy filing of as much as 50 points after filing for bankruptcy.