Chapter 7 bankruptcy permits you to extinguish most forms of unsecured debt including health care expenses, unpaid credit card obligations, personal loans, lawsuit judgements and unpaid utility bills. This bankruptcy chapter has various names but the most common are “liquidation” or “consumer bankruptcy”. While most unsecured debt can be eliminated by filing a Chapter 7 Bankruptcy, there are some unsecured debts that are either not dischargeable in a Chapter 7 Bankruptcy or may only be discharged under specific circumstances including:
During the time that your Chapter 7 Bankruptcy is pending, the Trustee may exercise jurisdiction over your assets and debts to protect you as the debtor and prevent one creditor from being treated preferentially over another. While it is possible for the Trustee to liquidate assets so that creditors can be paid, this is uncommon. Most well planned Chapter 7 bankruptcies in Tempe will have all or virtually all property covered by exemptions (i.e. categories of items not subject to liquidation). Even if an item is not expressly covered by an existing exemption, we generally will advise you on how to convert the asset into something that is covered by an exemption or on how to use a “wildcard” exemption. If you have large assets that cannot be protected by an exemption, we may recommend a Chapter 13 Bankruptcy where you are allowed to keep your assets.
In most cases, you will have a choice between the state and federal exemption systems. Each state has its own unique set of exemptions so it is important to make the best choice between the Arizona exemption system and the federal option. Our experienced Tempe bankruptcy attorneys will carefully evaluate your assets so that we can recommend the option that will provide you with the greatest value and most protection of your particular assets.
In 2005, the Bankruptcy Code was changed drastically under pressure from finance and credit card companies. Prior to that time, virtually anyone could file for Chapter 7 bankruptcy relief without needing to financially qualify. The 2005 changes in federal bankruptcy law resulted in the implementation of a “means test” to force those seeking Chapter 7 bankruptcy relief to qualify for a Chapter 7 Bankruptcy. While the change in the law has forced many who previously would have been eligible for Chapter 7 bankruptcy relief to file a Chapter 13, many people still qualify for a Chapter 7 Bankruptcy.
There are really two levels of analysis involved in the Chapter 7 means test. The first issue is whether a Tempe resident seeking Chapter 7 has average earnings during the last six months that exceed the median income for those in Arizona. If a Tempe resident’s income does not exceed this threshold, then the person meets the income qualifying criteria for obtaining Chapter 7 bankruptcy relief. A person’s income that exceeds this level must have his or her income and debts subject to a second level of analysis. The question becomes whether after paying your household expenses and secured or non-dischargeable debt you have sufficient disposable income to pay some portion each month toward your unsecured debt. If it is determined you have sufficient remaining disposable income to pay toward unsecured debt, then you may be required to file a Chapter 13 Bankruptcy.
Sometimes the financial analysis of your eligibility under the means test can be complex and confusing. The failure to conduct this analysis correctly can lead to you filing for a Chapter 7 bankruptcy when you do not qualify so that your Chapter 7 Bankruptcy is dismissed. If an error is made in the other direction, you may end up paying unsecured creditors tens of thousands of dollars that you did not have to pay because you filed under Chapter 13 when you were eligible for a Chapter 7 Bankruptcy. At Stone Rose Law, our experienced Chapter 7 bankruptcy attorneys may be able to help you qualify for a Chapter 7 Bankruptcy if you are close to the eligibility threshold.
Another change related to the 2005 Bankruptcy Code revisions was the implementation of a requirement that a person participate in an approved consumer credit counseling program. The whole bankruptcy process is often surprisingly smooth and easy if you work with an experienced Chapter 7 Bankruptcy attorney. Typically, the process takes between 3-5 months from the time you initially file until final discharge.
The process frequently does not go quite as smoothly when people try to handle their own bankruptcy. A typical Chapter 7 Bankruptcy filing is difficult and time consumer for non-attorneys. A Chapter 7 bankruptcy filing can easily be 30-50 pages in length. The forms are filled with legalese and the volume of information and detail required to accurately complete the schedules and petitions can be overwhelming. The consequences of not completing the bankruptcy documents accurately can be devastating. Depending on the they type of mistake or inaccurate information, you may suffer any of the following adverse impacts:
While most people in Tempe who file a Chapter 7 Bankruptcy never see the inside of a bankruptcy courtroom, a single appearance at an informal hearing called a 341 Meeting of Creditors (alternatively “341 meeting”) is required. This meeting is typically scheduled to take place approximately 30 days after you have filed your Chapter 7 Bankruptcy. Despite the name of the meeting, it is unlikely that any of your creditors will appear except maybe a representative from your mortgage lender and/or someone from your vehicle finance company. The meeting provides an opportunity for the Trustee to ask you questions about the information in your schedules. Generally, these hearings are brief and uneventful.
The sense of relief that one experiences when a Chapter 7 Bankruptcy discharge is granted is hard to put into words. No more harassing phone calls, wage garnishments or levies against your bank account, you will start fresh relieved of staggering financial debt and placed well on the road to financial recovery. Once you receive a Chapter 7 Bankruptcy discharge, you will have virtually all of you unsecured debts extinguished, which may mean tens of thousands of dollars that you are not obligated to repay. Stone Rose Law provides personalized attention that often results in long-term relationships with our clients that continue long after our clients’ bankruptcy discharge has been received. We are proud of our many former clients who have gone on to obtain prosperity and success following their Chapter 7 discharge.