Frequently Asked Questions About Personal Bankruptcy in Arizona
Experienced Phoenix consumer bankruptcy lawyer answers your pressing questions
Individuals and couples faced with crushing debt trust Bankruptcy and Estate Planning Pros to help them find the right solution. Filing for bankruptcy is a big step, so you want to make sure you get reliable legal advice throughout every stage of the process. To help get you started, we’ve answered some of the most frequently asked questions we encounter in our practice. However, there is no substitute for the personalized service you get when you visit us for a free consultation in our Phoenix office.
- What is the difference between Chapter 7 and Chapter 13 bankruptcy?
- Who can file for bankruptcy in Arizona and how?
- What does it cost to file for bankruptcy in Arizona?
- What happens to my property in bankruptcy?
- What is an avoidance action in bankruptcy?
- Can I own anything after bankruptcy?
- Will bankruptcy get rid of all my debt?
- How do I file bankruptcy if I haven’t lived in the same state or district?
- Can a student loan be discharged in bankruptcy in Arizona?
- Does bankruptcy affect my credit score?
- What is the purpose of the “means test”?
- How does bankruptcy affect joint accounts and cosigners?
Contact a skilled bankruptcy lawyer serving Phoenix, Scottsdale, and Maricopa County
If your future is threatened by an ever-increasing mountain of debt, Bankruptcy and Estate Planning Pros is here to help. We provide knowledgeable assistance for Chapter 7 bankruptcies in the greater Phoenix area and throughout Arizona. Call us at 602-529-6881 or contact us online to schedule your free consultation.
Both Chapter 7 and Chapter 13 are personal bankruptcies, but they have different filing requirements an take a different approach to debts. Chapter 7 is liquidation bankruptcy. Designed for filers with lower income, Chapter 7 requires debtors to sell certain assets to partially repay creditors before the court discharges the remaining eligible debt, though you may find that you can keep much of your property because it is exempt. With Chapter 13 bankruptcy, a person with a higher income can keep most of their assets, but must complete a repayment plan lasting three to five years before the court discharges the remaining eligible debt.
Chapter 7 and Chapter 13 are personal bankruptcies that individual consumers can file alone or jointly with a spouse. Owners of businesses can also file for bankruptcy on behalf of their companies. Bankruptcy filings can be complex, so it is always best to consult a qualified attorney before attempting to file on your own. Businesses filing Chapter 11 bankruptcy are required to have legal counsel. Working with an attorney may seem like just another added expense you cannot afford at this time, but precise knowledge of the law is important to get all the protection you can.
The cost to file a petition for Chapter 7 in Arizona is $335, and the cost to file Chapter 13 is $310. Other fees may also apply, like the fees for the two counseling classes that the court requires you to take.
The disposition of your property in bankruptcy depends upon how much property you have, what kind of property it is, and what type of bankruptcy you file. Bankruptcy law contains property exemptions, so some kinds of property in different categories, up to certain values, are withheld from the bankruptcy estate. In other words, you can keep a lot of your property because it is exempt from attachment by the bankruptcy trustee. In Chapter 7, the bankruptcy trustee sells nonexempt property to partially satisfy creditors. If you have assets secured as collateral for loans, like a house or a car or other property you borrowed money to buy, your case becomes significantly more complex, and you should strongly consider hiring an attorney to help you keep that property. In some cases, your only option with secured property would be to file a Chapter 13 bankruptcy instead.
An avoidance action is a claim a creditor brings in the bankruptcy court to nullify a transfer of assets the debtor has recently made. In other words, if you’ve given away or sold any property or money, or paid back some creditors but not others, the trustee or any creditor might try to set aside that transaction, even as much as two years or more after it happened! Avoidance actions include preference actions, where a creditor claims a transfer the debtor made to satisfy a debt should be void, because the debtor should have paid him first, as well as fraudulent transfer actions, where a creditor claims the debtor assigned an asset to someone else simply to place it out of the reach of creditors, as happens if you sell your car for less than it’s worth to a friend or family member.
If you file Chapter 7 bankruptcy, you can retain your exempt assets, which include some cash, some equity in your home, a vehicle up to a certain value, tools of your trade, clothes, books, household goods, food, and basic furnishings. You might be surprised at how much you can end up keeping. In Chapter 13, you are not required to liquidate any property, but you will have to enter into a payment plan to partially pay back your creditors, and you will be in that plan for at least three to five years.
Chapter 7 is the quickest way to discharge your eligible debt, but even Chapter 7 does not get rid of all debt. Certain categories of debt — fines, student loans, back child support and alimony, most unpaid taxes, personal injury judgments, and restitution owed for breaking the law — are not dischargeable in bankruptcy. If you have any of these kinds of debts, you should consult with an attorney to determine your best strategy.
The general rule is that you must have lived for most of the last six months (or 91 of the last 180 days) in the district where you file. If you recently moved, you will have to wait until you reach that 91-day threshold, or file in the state where you previously lived. The state where you file is important if you are going to use state exemptions to preserve your property, so you should discuss your options with a knowledgeable attorney.
Although it is difficult to discharge student loan debt through bankruptcy, it is not impossible. If you can show that repaying your student loans will reduce you to persistent poverty despite your good faith effort to repay the loans, you may succeed in getting the loan debt discharged. However, courts often require a showing of serious mental or physical disability, obligations to dependents, and other substantial factors.
Bankruptcy will lower your credit score in the short term. However, discharging your debt will have a positive impact, and you can slowly begin to rebuild your credit by taking a series of financially prudent steps. Many bankruptcy filers are able to get car loans within two years and mortgages within five. The attorneys at Bankruptcy Pros have some strategies you can use to dramatically speed up your rebuilding process.
States use the means test to determine whether a bankruptcy filer’s income is low enough – compared to individuals or heads of similar households throughout the state – to qualify for Chapter 7. Petitioners whose income exceeds the means test level must file Chapter 13. However, there are a number of exceptions and ways to avoid the means test.
Filing for bankruptcy protects the filer, but does not protect the holder of a joint credit card account or the cosigner of a loan. Therefore, when the bankruptcy court issues the automatic stay against the bankruptcy filer, the creditor does not have to sit back and wait for the debt to be discharged. Instead, the creditor can go after the cosigner for the whole amount. This is less of an issue in Chapter 13, where the debtor’s share of the obligation can be factored into the payment plan. However, it is a major issue in Chapter 7, where the bankruptcy filer can skip out on the debt, leaving the cosigner obligated for the entire amount. One way to avoid this unfair result is for the debtor to reaffirm the obligation so that debt does not become part of the bankruptcy estate and is not discharged.