Dealing with Post Bankruptcy Debt in Arizona

post bankruptcy debtWhen dealing with an Arizona bankruptcy filing, you have to make the difference between pre-petition and post-petition debt.

For many people, debt may still be incurred after the bankruptcy documents are filed. This type of debt is called post-petition debt and it’s not included in the bankruptcy estate. Dealing with post-petition debt depends on the type of filing you’re doing and on the specifics of your financial situation.

Post-Petition Debt in a Chapter 7 Bankruptcy

A Chapter 7 bankruptcy liquidates property and assets for the purpose of giving the debtor a discharge.

The Chapter 7 bankruptcy deals with pre-petition debt that has been listed in the filing documents and that has been included in the bankruptcy estate.

Thus, people who complete a Chapter 7 bankruptcy and get a discharge will still be responsible for the debt accumulated after the bankruptcy filing has occurred.

There are a few exceptions to this rule, however. Certain types of post-petition debt could eventually be included in the bankruptcy estate and dismissed.

Taking a car loan or having a mortgage will quality as a pre-petition debt. This type of loan is characterized by monthly instalments. Usually, the period for making payments will extend beyond the term of the bankruptcy filing. The loan itself, however, has been taken before the Chapter 7 bankruptcy. This means that even future payments on it will be included in the bankruptcy estate.

The same applies to reaffirmed debts, leases and homeowner association fees.

Post-Petition Debt in a Chapter 13 Bankruptcy

Once again, the date you do the bankruptcy filing is the cutoff period. Debt accumulated before that date will be included in the bankruptcy estate and used to calculate the Chapter 13 payments. Debt accumulated after that date will be your responsibility and you’ll have to handle it in full (unless another arrangement can be made with the creditor).

Since Chapter 13 payment plans are valid for a period ranging from three to five years, it will be difficult to go through the entire period without incurring new debt. You have two options for addressing such financial challenges.

The first option is to handle the debt (loan) on your own and make a full payment in a timely manner.

Alternatively, you can petition the court and get its approval before taking out a new loan. This second option comes with certain benefits. If you have prior court approval, the specific post-petition debt could be included in your Chapter 13 repayment plan. After you complete the required payments, the remainder of the debt will get discharged.

Keep in mind, however, that your Arizona bankruptcy trustee or the court could refuse the inclusion of new debt in your Chapter 13 plan. Even if a creditor agrees to the procedure, the court may be reluctant whenever the loan is a significant one.

Even if the debt isn’t included in your payment plan after you seek court approval, the automatic stay will be in full effect. This means that a creditor will be incapable of seeking payments from you until the end of the Chapter 13 bankruptcy.

Other Options

There are many types of post-petition debt that will not be includable in your bankruptcy estate.

If you are doing a Chapter 13 bankruptcy and you incur a lot of additional debt, you may want to consider a conversion to a Chapter 7 bankruptcy. To do so, you will also have to pass the Arizona means test.

When you convert the Chapter 13 to a Chapter 7 filing, you’ll get an opportunity to include all of the new debt in the bankruptcy estate. If your income doesn’t fall under the state median , however, switching from one kind of bankruptcy to the other isn’t going to be possible.

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