In a Chapter 7 bankruptcy, also known as liquidation, individuals or businesses give up nonexempt assets and are then able to walk away from most debts.
Although bankruptcy is never desirable, there are certain other benefits in a Chapter 7 case. For example, you will no longer suffer endless harassment from creditors and collection agencies. Repossession and foreclosure actions cease. Your post-petition wages and earnings will not be seized for repayment of debts. These are just a few of the advantages (as far as advantages go within bankruptcy) to a Chapter 7 case. Come talk with us at The Peterson Law Firm to learn more about the best option for you.
This type of bankruptcy is considered the closest thing to a “fresh start” for the debtor. It provides for immediate debt relief because the debtor is discharged from paying most of his or her debts, with the exception of certain payments such as alimony, child support, student loans, fraudulent debts, and some taxes (to see other types of non-dischargeable debts, click here). Beyond that, even if the debtor has large amounts of credit card debt and other unsecured bills, there are not any limits to obstruct a complete discharge of debt, so long as the debt is not among those non-dischargeable debts.
An exemption is the protection of your property in a bankruptcy filing. Many of Arizona’s exemptions are found in Arizona Revised Statutes Title 33 which can be found here. After selling the assets, the trustee gives you any money subject to exemption. From there, the proceeds of the liquidation are used to pay your creditors. The trustee also takes a commission for overseeing the collection and sale of assets and the distribution to both you and your creditors.
In order to qualify for Chapter 7 bankruptcy, Arizona debtors must meet certain requirements. The bankruptcy code requires that you must be domiciled in Arizona for at least 90 days. You must also undergo credit counseling from an approved agency within 180 days of filing. There is also a test, known as the means test to determine financial eligibility.
The means test applies to above-median income debtors. If your income is below the median for your household size in Arizona, the test does not apply to you and you are able to file a Chapter 7 bankruptcy. However, if your income is higher than the median, there are certain calculations that need to be performed. The formula is is as follows: you take your expenses and subtract them from your income to determine the available income you have to repay your unsecured creditors. If your total monthly income over 5 years is less than $7,475, then you qualify for Chapter 7 bankruptcy. If it is between $7,475 and $12,475, then you must do further calculations to determine your eligibility. If you make more than $12,475, you do not pass the means test and therefore do not have the option to file under Chapter 7.
However, there may be other options to file a Chapter 7 that may be available to you due to the type of debts you have or the circumstances surrounding your incurred debt. Therefore, contact The Peterson Law Firm even if you do not believe you qualify to file a Chapter 7 as there may be options available to you and your family.
Even if you do qualify for a Chapter 7 bankruptcy, there is a lot that goes into deciding what the best option is for you and your family. At The Peterson Law Firm, we will help you to determine the most efficient way to navigate a possible declaration of bankruptcy. By making ourselves accessible to you, we can help grant you a little more peace of mind in an otherwise confusing and unstable time.