Chapter 7 Bankruptcy Attorney in Phoenix, Arizona
- Completely Eliminates Most Debts – Gives You a “Fresh Start.”
- Quicker and Less Expensive than Other Bankruptcy Chapters.
- You Get to Keep All of Your Exempt Property and Assets.
- The “Automatic Stay” Stops Collection Activity and Creditor Harassment.
What Makes Us Different?
- We Offer Bankruptcy Services AND Alternatives to Avoid Bankruptcy.
- You’ll be Represented by an Attorney During the Entire Process.
- Low & Reasonable Flat Fee Services.
Free Consultation with an Attorney >> (602)-761-5900
What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy refers to the chapter of the bankruptcy code you are filing under. A Chapter 7 bankruptcy is often referred to as a “straight-bankruptcy”. It is what most people think of when they think of bankruptcy and usually results in a full discharge of most of the debtor’s debts.
Here’s How Chapter 7 Bankruptcy Works
Technically speaking, a Chapter 7 bankruptcy requires the liquidation of the debtor’s estate through the bankruptcy court. In theory, this would mean that the debtor’s property is sold or liquidated to pay off the creditors and any remaining balances are discharged or forgiven.
At first, this seems scary. But Arizona law provides for numerous exemptions for your property. The law is designed to give you a fresh start and allow you to keep an adequate amount of property so that you aren’t left destitute. So while a Chapter 7 bankruptcy is technically a liquidation, for most Chapter 7 debtors, they will get to keep most, if not all, of their property. Of course, there are exceptions such as when the property is secured like a home or car. Check out our pages on those: Can I Keep My Car? Can I Keep my House?
Arizona Property Exemptions in a Chapter 7 Bankruptcy
Here are a few of the “big” exemptions that people frequently ask about.
In Arizona, you are allowed to exempt up to $150,000 in equity in your personal residence. Of course, with what the real estate market has done, many people do not have anywhere near that much equity in their home. Nevertheless, this is a powerful exemption that can protect a lot of equity.
Practically speaking, this means that the bankruptcy trustee won’t try to sell your home if you have $150,000 or less in equity, since there would be nothing left (after paying you) to satisfy creditors. However, you will need to keep making your mortgage payments if you want to keep the house. For more on what happens to your home in bankruptcy, click here.
Arizona allows you to exempt up to $5,000 in equity in your car. This is for one car. If you are married, you can double the exemption to $10,000 in equity in one car. Or you can split the exemption and protect up to $5,000 in equity in two cars, if you’re married.
Again, practically speaking, this means that if you have at or near those equity amounts in your automobile, the bankruptcy trustee would not seek to liquidate it since there would be nothing left to pay the creditors. If you have a car loan, you will usually have to keep paying the payment if you want to keep the car. But there are other options too. For more on what happens to your car, click here.
The wedding ring exemption is $1,000 in Arizona. But if you’re married, you can double the exemption to $2,000. Since it is usually the bride’s ring that is more expensive, most of the exemption is usually used to protect the wife’s ring. Also, the value of the ring is typically the current resale value, not what you paid for it. This is important because the replacement/sale value is usually less, allowing many rings of modest value to fit within the exemption.
Even if your ring doesn’t fit within the exemption limits, you may still be able to keep it. Talk to a bankruptcy attorney for specific strategic advice on this and other issues.
Retirement Accounts & Your 401(k)
In Arizona, most retirement accounts are exempt. This includes 401(k) accounts, IRA’s and many other common retirement accounts. There are some exceptions, but for the most part, retirement accounts are exempt from bankruptcy liquidation.
This is a very powerful exemption. Think about it. You could actually get a fresh start from your current debt, and still have a realistic chance of a comfortable retirement, assuming you have retirement funds. For this reason, it rarely makes sense to tap your 401(k) prematurely. For more on retirement accounts, click here.
Many people fear that if they file bankruptcy someone is going to come to their house and take their TV and couch. Nothing could be further from the truth. Most household items will be exempt in a Chapter 7 bankruptcy. The exemption amount is $4,000 for individuals, $8,000 for a couple. While you may like your TV, kitchen table, and bed, the reality is that they likely have a low resale value. Many people find that their typical household items fit within the exemption. For more on household item exemptions, click here.
There are many other exemptions that apply in a Chapter 7 bankruptcy filing. To better understand how your assets will be affected, you should talk to a bankruptcy attorney. Call today for a free consultation.
How Long Does a Chapter 7 Bankruptcy Take?
Assuming there are no complications or unusual circumstances, a typical Chapter 7 bankruptcy can be completed in about 4 months after filing the petition. There is a meeting of your creditors that is usually scheduled about 30 days after you file the bankruptcy petition. And the discharge order is usually issued about 3 months after that. Of course, a smooth bankruptcy process requires that you and your attorney perform the necessary steps. In particular, you will be required to complete a credit counseling class after filing and your case cannot be completed until you do that.
What Happens After Your Chapter 7 Bankruptcy is Done?
If everything goes smoothly and you receive the discharge order from the bankruptcy court, you will have your dischargeable debts wiped out and you can begin your fresh start on life. Certain types of debts such as student loans and child support are almost never dischargeable, but most consumer and business debts are discharged in a Chapter 7.
Your discharge order will allow you to move forward with peace of mind and protect you from rogue creditors and others. While it is true that a bankruptcy filing will negatively impact your credit score, many people will be surprised to find that they qualify for credit relatively soon after a bankruptcy. The reason is that you have now eliminated most, if not all, of your debt and you cannot file bankruptcy again for awhile, so you are a decent credit risk for many lenders.
A Chapter 7 bankruptcy is a very powerful proceeding. Our bankruptcy laws protect consumers and allow for a fresh start.
To find out if you qualify for a Chapter 7 bankruptcy, contact our office for a free consultation with an attorney. (602) 761-5900.