• Chapter 7 Bankruptcy in Arizona

    Chapter 7 bankruptcy is a process of debt relief available to those experiencing financial hardship.

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Chapter 7 Bankruptcy Process in Arizona

Chapter 7 bankruptcy is a process of debt relief available in Arizona and throughout the United States. A bankruptcy is controlled by federal laws and rules. The process starts with document gathering, then the filing of a Petition. The Petition contains a summary of assets, incomes, creditors, and liabilities. Once filed the “automatic stay” is put in place to stop collection actions.

Often this can provide immediate relief. Shortly after filing, a 341 Meeting of the Creditors is set. During this brief hearing the filing party is sworn in, questions are asked, and additional information may be requested. Once the file is complete, the filing party will wait for their discharge.

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“Bankruptcy, divorce, these are feathers in my cap, I suppose.
I have a wisdom which has been born from these things.”

Does a bankruptcy wipe out all my debts?

The Chapter 7 bankruptcy process allows you get a “fresh start,” to keep essential items, most likely a home and a vehicle, and liquidates the rest of your assets to satisfy creditors. The balance of your consumer debts, such as credit card debt, medical debt, and other personal loans is discharged. The discharge does “wipe out” your consumer debts, which makes it the most attractive form of bankruptcy for the average person.

But some debts are not usually dischargeable, like child support and student loans. Currently, student loans are only dischargeable in Chapter 7 in the case of “undue hardship,” which is very hard to prove.

Along with student loans, there are a number of pitfalls for Chapter 7. Some pitfalls include using old data and improperly measuring what expenses can allow you to “pass” the Means Test.

To measure your eligibility for Chapter 7, you must pass the “Means Test,” which essentially measures your ability to pay off your creditors. Or, you will need to have an exemption. Finally, you must not have completed a Chapter 7 bankruptcy in the previous eight years.

To get started, talk to a Lewis Labadie attorney to assist you in evaluating your eligibility for Chapter 7 bankruptcy.

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Frequently Asked Questions

  • What do I need to do to start a Chapter 7 bankruptcy?

    The first thing you need to do, and the best way to help yourself, is to put all of your financial information and documents in one place. We cannot emphasize enough how important it is that you get all of your documentation in one place, whether that is a file folder, a USB drive, or storage in the cloud. No bankruptcy attorney can file without having the proper documentation. This is one of the major reasons why a bankruptcy will fail: because the client failed to do their homework for the bankruptcy. Your attorney is very unlikely to be able to do all of this leg work for you. While an attorney can gather a lot of financial information about you, it is not possible to easily gather all of your financial information from an attorney’s desk. We recommend that you gather, at the very least, your last three years of tax returns, your bills, bank account statements, mortgage statements, vehicle information, credit card statements, loan statements, and a copy of a credit report if you have one. After that, it’s time to talk to an attorney about your Chapter 7 bankruptcy.

  • Will a Chapter 7 bankruptcy be reported on my credit report? How will it affect my credit?

    Yes. A Chapter 7 bankruptcy will appear on a credit report for 10 years, and your credit is unlikely to be affected in a major way if you already have low credit. In addition, your credit should begin to improve fairly quickly after your bankruptcy is finished, so long as you make good credit decisions. We can help you plan and rebuild. For example, an easy way to improve credit is to obtain a secured credit card. Most clients see a drastic improvement within the first year after completing their bankruptcy.

  • Can I give my house or vehicle to a friend or family member before I file Chapter 7 bankruptcy to protect it from creditors?

    No, we recommend against doing this. This is likely considered a “fraudulent transfer,” and includes selling an asset to a third party for below market value. This can lead to complications in bankruptcy, including the Trustee requiring you to pay back the value of the asset at fair market value. The bankruptcy petition includes questions about transfers to family members in the last year before filing. Also, since these assets can often be retained, there is no reason to transfer the asset.

  • Will everyone find out that I filed for Chapter 7 bankruptcy?

    Not from us. You lawyers are required to keep all information about your case confidential, except if a disclosure is legally required. The court and your creditors will receive notice about your Chapter 7 bankruptcy, as required by law. In addition, your bankruptcy is a matter of public record, just like the vast majority of court cases.

  • Can I max out my credit cards prior to my Chapter 7 bankruptcy?

    No, we recommend that you have 90 days of non-use on your credit accounts prior to filing for bankruptcy. Generally, we do not recommend that you make expenditures or pay-offs on your credit cards prior to filing for bankruptcy. It is important that the court does not think you are committing fraud or somehow attempting to harm your creditors.

  • How long should I live here before filing Chapter 7 bankruptcy in Arizona?

    Although you can file in Arizona after living here for approximately 90 days, we recommend that you wait until you have lived here for two years. This is because, if you are under those two years, you may have to use the laws from your prior state of residency in a Chapter 7 bankruptcy.

  • Do I have to appear in court if I file Chapter 7 bankruptcy?

    Yes, you have to make an appearance and answer questions under oath. This is not before a judge or jury, however. The “341” meeting is held before a Bankruptcy Trustee who is mainly concerned with making sure the Chapter 7 process is executed legally and faithfully. We prepare you for this and have a call prior to the 341 meeting to go over what to expect, how to answer, and common issues that arise.

  • Should I stop paying my bills if I plan I filing Chapter 7 bankruptcy?

    The answer is, generally, no. If you stop paying bills, creditors might sue you, utilities might shut off service, and a bank may foreclose on your home. If you receive a judgment against you or a wage garnishment, that can complicate the bankruptcy situation. For example, Arizona recently passed a law that allows judgments to become automatic liens on your real property. Plus, you may be allowed to retain some property, like your vehicle. If you stopped paying on the property, the creditor is unlikely to allow you to retain it post-bankruptcy. All of this should be discussed with your bankruptcy attorney before you simply decide to stop paying any of your bills.

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