Filing for bankruptcy in Arizona can be a difficult decision, but sometimes it is a necessary step toward eliminating debt and reclaiming your financial freedom. At Want A Fresh Start, our knowledgeable Phoenix Chapter 7 bankruptcy attorneys handle all types of bankruptcy filings and will help you determine the best option for your particular financial situation.
What Is It?
Also known as “liquidation” or “straight” bankruptcy, Chapter 7 is one of the most straightforward ways to file. It is designed to give those who file a clean, debt-free slate. Most types of debt can be wiped out by this, as the method for removing debt is fairly direct. Your assets are liquidated to provide creditors a portion or the entire sum of their owed payments, leaving you safe from creditor harassment.
How Does It Repay My Debt?
Under Chapter 7, a trustee is appointed and is likely to cancel some, many or all of your debts. It is also customary for the trustee to sell, or liquidate, some of your non-exempt assets. Non-exempt assets are commonly referred to as items you own that are NOT considered as necessities to reasonably live or work. It should be noted that there will be no payment plans enacted and no additional payments made to your creditors after the filing of your Chapter 7 bankruptcy petition. The debt will be settled through the cancelling of specific debts, called discharge, liquidation of identified non-exempt assets, or a combination of the two. The goal of a Chapter 7 bankruptcy proceeding is to get out from under overwhelming debt so you can get back on your feet and enjoy a fresh start financially without further worry.
Who Is Eligible?
There are several criteria that must be met before you are declared eligible to file for Chapter 7 bankruptcy. For example, your income cannot generally exceed a certain amount. Bankruptcy courts tend to favor repayment plans over straight liquidation proceedings, so if you are financially able to repay your debts in a reasonable amount of time, this might be one option. However, if you have a relatively high income but your debts far exceed it, you may still qualify for filing under Chapter 7 in Arizona.
Your claim may also be dismissed if you have successfully filed for bankruptcy within the past eight years or have been denied in the past 180 days due to a court order violation, a fraudulent claim ruling, or a request for dismissal following a creditor petition for relief from an automatic stay. It is also likely that your claim could fall under dismissal if you have previously defrauded creditors in another case.
Disabled veterans who have accrued their debts during their deployment, however, are highly eligible for Chapter 7 bankruptcy, as are those with no past filings or record of fraud. Speaking with a Phoenix Chapter 7 bankruptcy lawyer will help you better understand whether or not you are eligible to file for bankruptcy.
What Debts Will It Cover?
Chapter 7 bankruptcy is often used to cover unsecured debts, though secured debts are eligible, as well. Unsecured debts, which are those that exist without collateral backing, generally come in the form of credit card or medical charges. Chapter 7 is especially well-suited to these types of claims because it relies on the straight payment of debt through liquidation, eliminating future owing entirely. Utilizing Chapter 7 to reconcile secured debts, such as car or home loans, is a good way to make up the back payments and bring yourself current on your existing loans without losing your property.
What Property Is Exempt From Liquidation?
Though the term “liquidation of assets” may sound ominous, there are fortunately many important items that can be exempted from sale during a Chapter 7 proceeding. Arizona has opted out of federal exemptions and sets its own laws for what property and assets will be exempt. Among these are:
- Homes up to $150,000
- Motor vehicles up to $6,000, or $12,000 for the elderly
- Retirement benefits
- Certain personal property
If a cash value is exempted, it means a portion of your investment is guaranteed to remain in your possession. A $200,000 home, then, would only be worth $50,000 to the creditor under Arizona law, which would allow ample room for you to exempt your property entirely.
Chapter 7 bankruptcy in Arizona can be a helpful step, but it is important that you understand exactly what filing can accomplish before beginning your bankruptcy proceedings. Contact us today to speak with a skilled Phoenix Chapter 7 bankruptcy attorney. We understand the difficulty of bankruptcy, personally, and can help you through this difficult time.