Chapter 7 bankruptcy for individuals

Chapter 7 bankruptcy provides a fresh start  by eliminating most or all of your unsecured debt.  Unsecured debt includes credit cards, medical bills, deficiency balances from a foreclosure or repossession, payday loans, some tax debt and more.  Unlike Chapter 13, Chapter 7 bankruptcy does not involve a repayment plan.  Chapter 7 of the bankruptcy is referred to as the liquidation chapter as the trustee’s role is to sell your non-exempt assets and  pay your creditors with the proceeds.  However, most assets or property is protected by the applicable state exemptions.  For example, in Arizona  there is a homestead exemption that allows up to $150,000 of equity in your home .  It’s important to consult an experienced Tucson bankruptcy lawyer to figure out whether your assets are protected in Chapter 7 and how to proceed if they are not.

Who can file Chapter 7 bankruptcy?

Both individuals and businesses may file for relief under Chapter 7 of the bankruptcy code.  In order to qualify for Chapter 7 bankruptcy you normally have to pass what is called the “Means Test.”  The Means Test does not take into account your debt or whether you are insolvent at the time of filing.  Rather, the Means Test determines whether you income is low enough to qualify you for Chapter 7.  If you fail the Means Test you may be able to use a Chapter 13 bankruptcy to repay some or all of your unsecured debt.  You may also be precluded from filing Chapter 7 bankruptcy filed a previous Chapter 7 or Chapter 13 bankruptcy within a designated amount of time.

In order to file Chapter 7 bankruptcy you will have to complete a credit counseling class within the 6 month period prior to filing.  This class is normally taken online or over the phone with an approved credit counseling agency.

What kind of debt can be wiped out in Chapter 7 bankruptcy?

Chapter 7 bankruptcy can help eliminate unsecured debt including credit card debt, medical debt, personal loans, some tax debt, balances from a repossession or foreclosure, payday loans and more. 

What happens when You File Chapter 7 bankruptcy?

When you file Chapter 7 bankruptcy the automatic stay protects you from creditors trying to collect upon the debt.  For example, if a creditor has garnished your wages or has put a hold on your bank account, these actions must cease once your case is filed.  However, creditors may “lift” the bankruptcy stay and remove the protection in certain situations.  You should consult an experienced bankruptcy lawyer to find whether the bankruptcy stay will provide the protection you are looking for. 

How long does Chapter 7 bankruptcy take?

Chapter 7 bankruptcy takes about 4 to 6 months depending upon which county in Arizona you reside in.  In Pima and Pinal counties discharge normally comes closer to 6 months.

What forms are required for Chapter 7 bankruptcy?

When you file Chapter 7 bankruptcy you are required to file with the court a number of forms called the Petition, Schedules and Statements.  These documents require you to disclose all your assets, debt, income and expenses and any transfers you made within the two years prior to filing.  In addition, your paperwork also lists the exemptions that protect your property.

What is a Chapter 7 bankruptcy trustee?

A Chapter 7 bankruptcy trustee is a person appointed by the court whose role is to ensure that your creditors are paid as much of the debt as possible.  A Chapter 7 trustee is compensated based upon the amount that is recovered for your creditors.  The trustee executes his or her role by examining the bankruptcy documents in order to verify their accuracy and determine whether there are any nonexempt assets to be sold for the benefit of your creditors.  The trustee also determines whether there were any financial transactions in the period prior to filing that should be reversed.  With most Chapter 7 cases the trustee does not sell your assets because they are either protected under the bankruptcy exemptions or they are of little value.

What is the Meeting of Creditors?

The 341 Meeting of Creditors is a hearing before the bankruptcy trustee where you are sworn in and asked a series of questions about the bankruptcy papers that were  filed with the court.  Although your creditors are able to attend and question you at the hearing, creditors normally do not show up.  With most Chapter 7 bankruptcies the Meeting of Creditors is the only appearance you will have to make.

What is a Chapter 7 Bankruptcy Discharge?

The Chapter 7 bankruptcy discharge occurs at the end of your bankruptcy case and is when all the debt that could be eliminated in your bankruptcy has been wiped out.  Not all debt is dischargeable in bankruptcy such as child support or alimony, some tax debt and student loans.

Contact the experienced Tucson bankruptcy attorneys of Ariano & Associates to find out whether Chapter 7 is the best solution to your financial troubles.