Features of Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is the most common bankruptcy chapter for individuals.
If you qualify for a filing Chapter 7 Bankruptcy in Arizona, most or all of your debts will be discharged, which means that you no longer owe the debt. As a general rule, most debts are dischargeable. Debts that can be discharged only under certain conditions include student loans, taxes, unpaid child support, and unpaid spousal maintenance. Criminal fines and civil penalties are also generally not discharged.
Upon filing any bankruptcy case, the Debtors are protected by the “automatic stay”. While the automatic stay is in place, all collection attempts by creditors are halted. This includes pending lawsuits against the Debtor, which are put on hold, until the debt can be addressed in the bankruptcy court.
In filing Chapter 7 Bankruptcy in Arizona, you must surrender any property you own that is not “exempt” under Arizona law. However, when you have property secured by a loan (like a car, furniture, or a home) and the amount of the loan is more than the value of the property, this property can be kept as long as you stay current on the loan payments or if you choose “redeem” the property by paying off the creditor in full after the bankruptcy filing. The main advantage of a liquidation bankruptcy is that you can receive a discharge of your debts within a few months and without any additional payment. However, you may not be able to keep all the assets that you want in a Chapter 7 bankruptcy.
Qualifying for Chapter 7 Bankruptcy
In a Chapter 7 case, Form 22A (The Means Test) is used to determine whether you qualify for Chapter 7. The test first compares the debtor’s “Current Monthly Income” (actually an average of the last six months, excluding Social Security benefits), with the state median for the debtor’s household size. If the debtor’s income is lower than the median, the full means test does not apply, and the debtor will qualify for filing Chapter 7 Bankruptcy in Arizona.
If the debtor’s income is higher than the median, the debtor must complete the full Means Test to determine “Disposable Monthly Income”, which is the debtor’s income after necessary expenses have been subtracted. In many instances you will qualify for a filing Chapter 7 Bankruptcy in Arizona even if your initial monthly income exceeds the state median amounts for your household size.
If you filed a Chapter 7 bankruptcy before and you received a discharge of your debts, you must wait 8 years from your previous filing date before you can file another Chapter 7 Bankruptcy. You may, however, be eligible to file a Chapter 13 bankruptcy.
Is a Chapter 7 Bankruptcy Right for you?
It is not advisable for everyone to file a Chapter 7, even if you qualify under The Means Test. We generally do not recommend filing Chapter 7 Bankruptcy in Arizona to debtors who own their own business, or who have significant non-exempt assets which they wish to retain. If you do not qualify for a Chapter 7 bankruptcy, or if a Chapter 7 would result in a loss of your assets, a Chapter 13 bankruptcy is often a good alternative.
The Butler Law Office has over thirty three years of experience and can assist you in making a determination as to whether you qualify for filing Chapter 7 Bankruptcy in Arizona, and if you should file a Chapter 7.
The Arizona bankruptcy court website also has information for individuals who are filing Chapter 7 Bankruptcy in Arizona.