What is Chapter 7 Bankruptcy?
In Phoenix Chapter 7 bankruptcy, commonly referred to as a “liquidation” bankruptcy, the debtor will surrender their nonexempt assets to the Bankruptcy Trustee. The Trustee will sell those assets and pay the proceeds to the debtor’s unsecured creditors. At the end of this process, the debtor’s remaining unsecured debt will be discharged. The entire process takes 3 to 4 months. Phoenix Chapter 7 bankruptcy focuses mostly on unsecured debts. Credit card debt and medical debt are common examples of unsecured debts.
Secured debts, such as mortgage loans and auto loans, are not fully discharged in bankruptcy unless you are surrendering the collateral. Secured creditors will still be able to repossess or foreclose on the property used as security if ongoing payments are not made. However, the debtor’s personal liability for secured debts will be discharged. This means that creditors won’t be able to sue the debtor if they repossess or foreclose on the property and sell it for less than the amount of the debt.
Will I lose my home or my car?
The Trustee can only sell nonexempt property. In the vast majority of cases all of your property will be exempt, including your car. A few people will exceed the allowed exception amount but even in those cases there are often options to avoid surrendering your property. Your retirement accounts and state and federal benefits are always exempt. Phoenix Chapter 7 debtors can generally use exemptions to protect most, if not all, of their important assets. The overwhelming majority of Phoenix Chapter 7 cases are “no-asset” cases, meaning the debtors keep all of their property through the exemptions.
Who can file for Phoenix Chapter 7 bankruptcy?
Not everyone qualifies for Phoenix Chapter 7 bankruptcy. The first test that determines if you can file for Phoenix Chapter 7 relief is called the Means Test. You automatically pass the Means Test if you earn less than the state median income. If you earn more than the state median income, you may still pass the Means Test but it gets more complicated. The Means Test takes into account your income and your expenses and compares them to standards in your state. The test is meant to objectively determine whether you’re capable of maintaining a Chapter 13 repayment plan. If you are, you’ll be required to file under Chapter 13. If you pass the Means Test you must also show the court that your monthly income is being completely used to pay your reasonable and necessary expenses. In other words, after you pay for all of your living expenses there is not any money left over to pay your creditors. If there is, you may be required to file a Chapter 13 plan of reorganization. Most people, however, will be able to qualify for a Phoenix Chapter 7.
What debts aren’t discharged in Phoenix Chapter 7 bankruptcy?
Phoenix Chapter 7 bankruptcy wipes out most unsecured debts. However, you cannot discharge most student loan debt, child support debts, or spousal support debt. Personal injury debts, incurred while driving drunk, also are excluded from discharge.
Will bankruptcy protect me from foreclosure and repossession?
When you file for bankruptcy, you invoke the protection of the automatic stay. The automatic stay forces creditors to stop all collection actions. That includes foreclosure, repossession, bank levies, wage garnishment, and collection lawsuits. Once you file for bankruptcy, all of your creditors must work through the bankruptcy court. The automatic stay gives debtors time to reorganize their finances and ensures that all creditors are treated equally through the bankruptcy process.
How will a bankruptcy attorney help me?
The bankruptcy process is complex and a simple error can lead to dismissal of your case, leaving you at the mercy of your creditors. A bankruptcy attorney can help you navigate the bankruptcy process and protect what’s important to you. Your attorney will make sure you get the most out of your discharge so that you can move on with a clean financial slate. In addition, your attorney will help enforce the discharge if creditors try to circumvent it.
Is Phoenix Chapter 7 bankruptcy right for me?
The answer depends on your unique set of circumstances and goals. If you’re struggling with debt, you can read more about your options on our blog. We have years of experienced and have filed tens of thousands of Phoenix Chapter 7 cases. We know the courts, the judges, and the creditors. We can help you protect your important property and wipe your financial slate clean. Contact us online or give us a call for a free consultation to learn more about Phoenix Chapter 7 and how we can help you get your financial life back on track