According to the U.S. Bankruptcy Court’s Arizona District, bankruptcies in the Grand Canyon State rose from 2022 to 2023 by 7%. That means that 9,601 bankruptcies of all types were filed by Arizonians last year. 7,824 of those bankruptcies were Chapter 7s. Why is Chapter 7 so popular? What is Chapter 7 bankruptcy?
Read on for an overview of these bankruptcy cases. To discuss a possible case of your own, consult a Phoenix Chapter 7 bankruptcy lawyer directly.
Chapter 7 is what most people typically think of when the word “bankruptcy” comes to mind. Some chapters of bankruptcy are for businesses, and others are for individuals. Likewise, some chapters wipe your debts away, while others consolidate your debts for easier repayment. Chapter 7 is so popular because it allows individuals to wipe their debts clean.
In a nutshell, bankruptcy protection is the process of having the court intervene to sell your assets to repay your debts while stopping your creditors from pursuing you. However, because the vast majority of debtors have so few assets, the court has nothing to sell, and what essentially happens is that the debts are just erased.
The bankruptcy laws are federal. This means that the process of filing bankruptcy is the same in every state. What is unique and determined on the state level is what property you can keep or protect through the bankruptcy process. After taking a required credit counseling course, you will file your bankruptcy forms with the court.
At this point, your creditors are no longer allowed to contact you or collect on your debts. After a few weeks, you’ll have a final hearing at the bankruptcy courthouse. If there are no issues, your bankruptcy will then be officially finalized (“discharged”), and you can then start the process of rebuilding your credit.
To qualify to file for Chapter 7 protection in Arizona, you must meet the income standard (“median test”). This median test looks at the size of your household compared to the median family income in your area. You must earn less than the limit for your household size.
There are some exceptions to these limits, so be sure to speak to a qualified Phoenix bankruptcy attorney for further details and options.
Certain debts, such as student loans, can not be erased by filing Chapter 7. Unsecured debt, like credit cards, department store charge cards, payday loans, and medical bills, can be erased without concern. Things become more complicated when you have secured debt. Secured debt means that the creditor can take back the item you are making payments on, like an auto loan or home mortgage. Indeed, secured debt can be wiped out through bankruptcy, but it means surrendering your car or house.
Here is a list of debts that are not dischargeable under Chapter 7:
Some back taxes and IRS debts can be discharged under special circumstances, but it is best to assume that you will retain any tax debt until you speak to an experienced Arizona bankruptcy attorney.
When you file for Chapter 7 in Arizona, you can use bankruptcy exemptions to ensure your assets don’t get liquidated to pay off your creditors. A bankruptcy exemption is a legal value limit to certain types of property the court will not touch.
Each state has its own unique bankruptcy exemptions. Here are some of Arizona’s:
Another aspect of protecting your property in bankruptcy is the legal option to either reaffirm or redeem certain debts. Reaffirming a debt entails filing a reaffirmation agreement with the court and working with the secured creditor to keep making payments. Some creditors may be okay with you keeping any particular asset as long as the payments continue to be made on time (no reaffirmation agreement needed).
Likewise, the redemption option can wipe out any unsecured debt on your vehicle. Many people owe more on their auto loans than what the car is worth. Because, technically, only the value of the car is secured, any overage can be discharged. By redeeming an auto loan, you can generally reduce your monthly payments, even if your interest rate gets raised, as well. Again, payments must continue to be made on time. Redeeming and reaffirming debt in bankruptcy is better for your credit.
Before your bankruptcy can be finalized (“discharged”), the bankruptcy court will hold what is called a “341” or “Creditor’s Meeting.” The point of this meeting is for your creditors to ask questions or verify details about your case. The bankruptcy trustee, the person presiding over the meeting, may also ask you questions under oath. If there are any details of your case that the trustee wishes to clarify or investigate, that will happen during this 341 meeting of creditors. This hearing is also the final step before your discharge.
Filing Chapter 7 bankruptcy requires several steps. Our bankruptcy lawyers in Arizona will guide you through this process, and that will often mean several appointments with us. Here are a few steps to expect.
Our first step is to discuss your bankruptcy options with you. During this initial consultation, we will also complete a debt evaluation, which will have no cost to you. The process will examine all of the risks of filing Chapter 7, including:
During this process, we also complete the Means Test. If you agree with the terms, we will then begin to process your case. This often means that you will need to bring all of the information necessary to your appointment, including a list of your creditors and your income.
Once you agree to work with us and set up your payment requirements, you can begin to utilize our services. That includes telling your creditors that you have retained an attorney to help you with your debt. You do not need to tell them anything else. Simply provide our name and phone number. They are required to stop contacting you immediately.
Once you file bankruptcy with our legal team, the Automatic Stay goes into effect. This means that:
You should still continue to make payment on all debts you expect to keep including your mortgage, utilities, and car loans that you have. Then, follow our lead in terms of what occurs next including meeting with the bankruptcy court and pursuing the actual discharge.
You may need to go to at least one hearing. This is called the 341 Meeting of Creditors. Though most of the time, no creditors will show up, it is their legal right to confront you about the lack of payment. The creditors have the ability to object to their debt being discharged.
You may also need to attend another meeting depending on the situation. This includes a reaffirmation hearing. This occurs if you reaffirm any of your debts, meaning you agree to continue to make payments on them and keep them out of the bankruptcy filing.
Filing Chapter 7 bankruptcy is a big financial commitment. You need to ensure you are meeting all of the requirements the court sets and that you follow through with any requests for information. Our bankruptcy attorneys have years of experience helping people to move through this process effectively and efficiently. We can help you as well.
When you choose a Chapter 7 bankruptcy attorney, make sure they have time to dedicate to your case. They should be confident in being able to help you even if you are elderly, facing divorce, have mounds of tax debt, or are struggling with student loans. We do not shy away from complicated legal cases.
When you reach out to us, we provide a free debt evaluation—there is no risk to you to speak to us about what you are facing and no obligation to move forward if you decide not to do so. We offer the insight you need without the pressure
Want a Fresh Start is an experienced, knowledgeable Arizona Chapter 7 bankruptcy attorney service. We can help you protect your assets and remove the burden of overwhelming debt. Contact us today to get started.
Filing Chapter 7 bankruptcy is a public process. That means that anyone who wishes to obtain this information can do so. However, that does not mean they will know. Most people do not research public records about others on a random basis. Unless you tell people, they are likely not to know.
Many people work to reestablish their credit and build it up stronger than it was prior to filing bankruptcy. You may be able to apply for loans and obtain a mortgage in 2 years or less if you meet the requirements of the lender you select to work with – bankruptcy does not mean you cannot own a home in the future. It does mean your financial wellbeing may improve to make it possible for you to own a home down the road.
Child support and alimony payments are not a part of your bankruptcy, and therefore, you will need to continue to make those payments as ordered by the appropriate court. Not doing so could mean you are in violation of a court order, and that can lead to financial complications as well as legal action.
It should not be embarrassing to you. It is a legal right given to you under the U.S. Constitution. What many people need to realize is that this could help build a better financial future. It is always a good idea to speak to us about the benefits and concerns related to filing for bankruptcy. We are fully compassionate, professional attorneys.
You may need to go to at least one hearing. This is called the 341 Meeting of Creditors. Though most of the time, no creditors will show up, it is their legal right to confront you about the lack of payment. The creditors have the ability to object to their debt being discharged.
You may also need to attend another meeting depending on the situation. This includes a reaffirmation hearing. This occurs if you reaffirm any of your debts, meaning you agree to continue to make payments on them and keep them out of the bankruptcy filing.
