Below is our fifth blog post in a series of blog posts regarding Arizona Chapter 7 Bankruptcy. Since almost every case is different, the best thing you can do to get your questions answered is meet with an attorney at Phoenix Fresh Start Bankruptcy Attorneys to determine the next logical steps.

What Happens to My Bank Account in Bankruptcy?

In Arizona, there are exemptions that can be used to protect the contents of your bank account at the time of filing. These exemptions are not terribly generous so some planning is almost always in order regarding timing the filing of your Chapter 7 Bankruptcy. Another issue with bank accounts is whether you have an account with a bank where you also have a credit card balance.

Many banks will shut down your account on the date of filing and apply the proceeds to the balance of your credit account with that institution. If you do owe money to your bank and you plan on including that debt in bankruptcy, it is probably time to start banking somewhere where you do not have a credit relationship. Doesn’t mean you have to go into your credit union and close the account, it just means it is probably time to have your paycheck deposited somewhere else.

What Happens To Co-Signers Of Debt In My Bankruptcy?

A Chapter 7 bankruptcy releases you from your debts, but it does not release your co-signers. Creditors will demand payment from your co-signers if you don’t pay. You can protect the co-signers by continuing to pay the debt after your discharge (even though you are not obligated to), or you can file a Chapter 13. In a Chapter 13 bankruptcy, a creditor can often be barred from collecting from you while you repay the debt through the Chapter 13 plan.

Do I Have To Go To Court?

You must attend the first meeting of creditors and we will represent you there. This meeting is held in a hearing room used by the bankruptcy trustees (not a courtroom). The trustee will normally ask you pretty simple questions regarding your bankruptcy filing. While creditors are welcome to attend and ask you questions, the reality is that they rarely appear. Your attendance at this hearing is mandatory and failure to show up can result in dismissal of your case.

We are always happy to provide our clients with lists of the potential questions that a trustee might ask at a hearing. Generally, we advise getting to the hearing a little early to watch a few of the hearings(they normally last about ten minutes) so that by the time your hearing rolls around you are anticipating all the questions.

Are there alternatives to bankruptcy?

While there are alternatives to filing bankruptcy include debt consolidation companies and entering into settlements with your creditors.

Debt consolidation services try to work with your creditors in an attempt to get you a better interest rate or a lower monthly payment. The problem is that they are rarely able to get them all on board. Out of ten creditors, five will agree, three will take a wait and see approach and two will never give in. All too often, we see debtors hire these companies only to get sued some months later by one ore more of their creditors. The other problem is that this option doesn’t do your credit score any favors. In most cases, the bankruptcy filer is going to have a better credit score a year from now than the person who entered into a consolidation.

You can negotiate with your creditors to settle your bill for less than you owe. This can raise a tax issue where the IRS may construe the amount that your debt was reduced as income. Frankly, these settlements are elusive. Generally, the discounts on principal really are available where you have the ability to make large lump sum payments. If you end up settling on a long monthly stream of payments, do keep in mind that you aren’t making any progress on building up your credit score.

Phoenix Fresh Start Bankruptcy Attorneys is always available to provide advice about your specific situation before you file. We look forward to meeting with you.