When you are struggling with an intense level of personal debt, it can be easy to fantasize about quick fixes. Although there is no “magic bullet” that will eliminate your debt load, you do have options other than simply allowing the debt to compound and your creditors to continue calling and writing in an effort to collect money you cannot afford to pay back. One such option is bankruptcy.
Through bankruptcy, you can work with the court to have your debts discharged. Bankruptcy does have short-term repercussions, such as a negative impact on your credit score, but it can also be your key to a fresh financial start.
Determining the Right Chapter for your Bankruptcy Case
Individuals facing substantial personal debt have two options: Chapter 7 bankruptcy and Chapter 13 bankruptcy. You could qualify for both, or you might qualify for only one. If you qualify for both, your lawyer can help you determine which is the better choice for your case.
Chapter 13 bankruptcy is meant for individuals who have regular earnings and can commit to a repayment plan for some of the debt. A Chapter 13 bankruptcy payment plan can last from three to five years, during which time a bankruptcy trustee facilitates the repayment of a portion the filer’s creditors. Individuals who have more than $1,184,200 in secured debt or more than $394,725 in unsecured debt or who do not have sufficient disposable income to repay their debts through repayment plans do not qualify for Chapter 13 bankruptcy.
Chapter 7 bankruptcy, sometimes known as liquidation bankruptcy, does not require a repayment plan. The filer’s non-exempt assets—such as his or her collectible items, recreational items, and real estate other than his or her primary residence—are sold, and the profits are used to repay his or her creditors. Most debtors do not have non-exempt assets to sell and are able to keep all their property. To qualify for Chapter 7 bankruptcy, an individual must pass the “means test.” Individuals who earn less than their state’s median income automatically pass the means test. In Arizona, the mean income for a household of two people is about $55,000. Individuals who earn more than this amount can also qualify for Chapter 7 bankruptcy if they can demonstrate that they do not have the disposable income necessary to qualify for Chapter 13 bankruptcy.
Before filing for either type of bankruptcy, you must complete a financial counseling session. This can be done online and through your bankruptcy lawyer. Both chapters also have filing fees: $335 for Chapter 7 and $310 for Chapter 13.
Work with an Experienced Maricopa County Bankruptcy Attorney
Before you file for bankruptcy, you should speak with an experienced bankruptcy lawyer. It is in your best interest to work with a lawyer to complete the bankruptcy process because he or she will act as an advocate for you. As such, your lawyer can help you prepare your documents, guide you through each stage of the bankruptcy process, and help you avoid pitfalls that can cause your case to be rejected or cost you more money than necessary. A lawyer can also help you weigh your bankruptcy options to determine if bankruptcy is the right choice for you and if so, which chapter to file.