Discharge All of Your Debt, Keep All Your Stuff
In chapter 7 bankruptcy, the vast majority of people keep all of their stuff and discharge all of their debt, with a few exceptions. You have to qualify for chapter 7 bankruptcy by making less than the mean income in Arizona or by having no disposable net income according to a federal means test.
Filing Chapter 7 Bankruptcy in Prescott
You never intended to fall behind paying your bills, but something happened that made it impossible to pay all your bills and living expenses each month. You might have lost your job, had an accident, became ill, or lost your spouse. Regardless of the reason, you have been trying to catch up, but you just cannot seem to get a break. You need help getting back on your feet.
Bankruptcy offers a fresh start, free from debts you cannot afford to pay. A Chapter 7 bankruptcy case can eliminate your debts so that you can get back on track financially.
What is a Chapter 7 Bankruptcy?
Bankruptcies filed under Chapter 7 of the Bankruptcy Code are often referred to as “liquidation” bankruptcies. The main reason for the use of the term “liquidation” is that the bankruptcy trustee has the responsibility of determining if any assets can be liquidated to pay unsecured creditors.
For example, if you own property that has equity in excess of any liens and allowed bankruptcy exemptions, the trustee may file a notice of sale for the asset. The notice is served to all creditors and interested parties. If the court grants the motion to sell, the trustee transfers the asset pursuant to the terms in the order of sale and deposits the proceeds in the estate account.
When the bankruptcy estate receives the funds, the trustee issues a notice to file claims. The trustee must review all proofs of claim filed by creditors to determine if he needs to object to any claims. After the trustee has settled any objections, he must file a proposal of distribution before distributing the money to unsecured creditors who filed allowed claims. The trustee must file a final report after all funds are disbursed before the case can be closed.
The good news is that the majority of Chapter 7 cases filed in Arizona are “no asset” cases. In a no-asset Chapter 7, the trustee does not seize any assets. The debtor retains all property while getting rid of debt. Working with an experienced Prescott bankruptcy lawyer is key to protecting your assets and income. Call 928-277-4304 for a free bankruptcy consultation to discuss if a Chapter 7 petition is the best option for you.
How Can I Protect My Property in a Chapter 7 Bankruptcy?
The Bankruptcy Code allows debtors to claim exemptions in certain property. Bankruptcy exemptions protect property from the Chapter 7 trustee and your creditors. For example, Arizona bankruptcy exemptions allow you to exempt up to $150,000 in your home under a homestead exemption. Therefore, if your home is worth $300,000, you claim your $150,000 exemption, and you owe $200,000 on your home, there is no equity for the trustee to liquidate. You can keep your home subject to the mortgage lien.
During your consultation, we will discuss your assets and the relevant bankruptcy exemptions available to protect those assets. Before filing a case, we review your assets again to ensure we have claimed all available exemptions to protect property. The key is to be honest and tell us everything about your assets. We can only try to protect assets if we know about them before the petition is filed.
In some cases, a debtor might have an asset that has equity above the exemption. We will discuss the risk of the trustee taking the asset in comparison to the benefits of Chapter 7. You can then make an informed decision whether getting rid of your unsecured debts is worth losing the asset.
Again, most Chapter 7 cases filed in Arizona are no asset cases, so losing an asset is not a common occurrence.
Benefits of a Chapter 7 Bankruptcy Case
Filing under Chapter 7 offers several benefits that other chapters of bankruptcy do not offer including:
- Quick elimination of debt. A typical case is completed within four to six months from the filing date of the bankruptcy petition. You can receive your bankruptcy discharge and begin rebuilding your credit rating in less than six months.
- Less Costly. In most cases, the costs of filing a Chapter 7 case are less than the costs of a Chapter 13 case because there is not a bankruptcy plan and other documents that are required in a Chapter 13 case.
- No bankruptcy plan payments. In a Chapter 7 case, you do not make monthly payments under a repayment plan. Therefore, you can discharge most, if not all, unsecured debts without paying anything toward those debts.
- No limitations on debt. Under this chapter of bankruptcy, there is not a limitation on the amount of debt a debtor can have and still qualify to file under this chapter. In a Chapter 13 case, the amount of secured debt and unsecured debt is limited by statute.
Filing bankruptcy is a serious decision. Before you file a bankruptcy petition, you need to consult a Prescott bankruptcy attorney. Attempting to file a bankruptcy without an attorney can result in serious negative consequences. Failing to claim the correct exemptions, meet all deadlines, file all required forms, and attend required hearings can result in a dismissal of your case and loss of property. It is always in your best interest to consult an attorney who can help you determine the best option for getting out of debt and on the path to financial well-being.
Call a Prescott Arizona Bankruptcy Law Firm for a Free Consultation
Call our office at 928-277-4304 or use our online contact form to request your free appointment with a Prescott bankruptcy lawyer.