Frequently Asked Questions about Chapter 7 Bankruptcy in Arizona

Though Chapter 7 is the most common form of consumer bankruptcy, many considering this financial tool lack a complete understanding of the process.  With this in mind, we have compiled a list of the most frequently asked questions (FAQs) concerning Chapter 7 bankruptcy in Arizona to help you determine whether such an action is right for you.  While this list will not replace the individualized advice of a licensed bankruptcy attorney, it can provide a starting point for those considering filing under Chapter 7.  As such, keep in mind the following FAQs:

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is commonly referred to as liquidation because it requires the sale of non-exempt assists to pay back creditors.  Through Chapter 7, individuals and businesses can be absolved from most if not all of their unsecured debts.  Certain property is exempt under Chapter 7, and in some instances a debtor can go through the entire process without losing any assets.

Who qualifies for Chapter 7 bankruptcy?

Chapter 7 is available for individuals or businesses, but is generally better suited for individuals as liquidation can be problematic for businesses.  Chapter 7 requires all debtors meet a means test, which examines your household income.  To be eligible for Chapter 7, individuals must make under the median income for a household of their size in the state of Arizona.  Even if you make over the median income, you may still be eligible if your expenses and secured debt obligation forces you below the median.

All Chapter 7 filers must additionally complete a credit counseling course within six months of filing, available either online or on the phone.

Is Chapter 7 the right choice for me?

This is a question only you can answer, and one that should be explored with the assistance of a knowledgeable Arizona bankruptcy attorney.  Certain factors, however, can help you make an initial assessment.  The following frequently asked questions can help you determine whether Chapter 7 is a viable option for you.

What debts are dischargeable?

You should first consider whether your debts are dischargeable under Chapter 7.  In most instances, Chapter 7 discharges unsecured debts of the following types:

  • Credit card debt
  • Unsecured bank and private loans
  • Civil judgments
  • Medical bills

What debts cannot be discharged?

You should also have an understanding of what debts will not be dischargeable under Chapter 7, including:

  • Student loans
  • Child support
  • Most unpaid tax debt (there are exceptions to this depending upon how old the tax debt is and other factors)
  • Alimony
  • Secured loans, such as a mortgage or car payment

What assets are exempt?

Your evaluation should then turn to an examination of your assets.  Some assets are exempt under Chapter 7, meaning they cannot be seized for sale.  The following assets are generally exempt from liquidation:

  • Your homestead and up to $150,000 of equity in it
  • One automobile
  • Life insurance policies
  • Personal effects, such as clothing and household items
  • 401K plans

All non-exempt assets will be subject to liquidation.  Any potential Chapter 7 filer should meet with a bankruptcy attorney early on to discuss concerns about surrendering assets during bankruptcy.

What happens when you file for Chapter 7 bankruptcy?

One great immediate benefit of filing for Chapter 7 bankruptcy is it will cease all collection attempts.  Upon filing, an automatic stay issues that will stop creditors from taking any action to collect your debts, including harassing phone calls and harmful garnishments.  The creditor must take action to have the stay lifted.

How long does Chapter 7 bankruptcy take?

In Arizona, the process usually takes about four to six months, depending upon the county you reside in.

Do I need an attorney to file for Chapter 7 bankruptcy?

It is always in your best interest to secure the representation of a knowledgeable bankruptcy attorney.  An experienced bankruptcy attorney will navigate you through the complex Chapter 7 process and ensure your compliance with the law.

Contact Ariano & Associates, PLLC Now to Start on the Path to Financial Freedom!

At Ariano & Associates, PLLC, we have helped hundreds of clients regain their financial freedom though Chapter 7 bankruptcy.  Call us today to schedule a free consultation with one of our qualified Mesa bankruptcy attorneys.