What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is designed for debtors who are having financial difficulties and are unable to pay off their existing debt. The end goal of a Chapter 7 is to discharge most if not all of your debts. A Chapter 7 bankruptcy will last approximately 120 days from start to finish.
What types of Debt can be eliminated in a Chapter 7?
The term “discharged” is used to mean that your debts have eliminated. Barring improper conduct the following are common examples of debts that can be discharged in Chapter 7 bankruptcy: credit cards, medical, vehicle repossessions, foreclosures, apartment leases, pay day loans, legal fees, personal loans and civil lawsuits. This is a short list as there are many other types of debt that can also be discharged in Chapter 7 bankruptcy.
What types of Debt cannot be eliminated in a Chapter 7?
Congress has decreed that certain types of debts cannot be discharged in bankruptcy. These include domestic support obligations, recent tax debts, student loans (generally), government fines or penalties, and can also include debts incurred by fraud. For example, taking out large cash advances on your credit cards or going on large shopping sprees with your credit cards leading up to a bankruptcy filing could be deemed as improper conduct and result in the bankruptcy Judge denying you discharge for those debts.
Will I lose my Property if I file for Chapter 7?
Each State has its own laws called “exemptions” that will help protect property in a bankruptcy filing. For example, if Arizona exemptions apply in your case, you may protect up to $6k equity in a vehicle and $6k equity in household goods. These exemptions double if you are married. Arizona exemptions will also fully protect most retirement accounts and allow for a $150k equity in a homestead. There are many other exemptions available and it is important that you honestly disclose all of your assets while planning with your bankruptcy attorney.
Who qualifies to file Chapter 7?
If you make over the median income for your household size, then you will have to take a “means test” to see if you qualify for Chapter 7. The means test was created by Congress in 2005 to help prevent abuse of the bankruptcy system by high earning debtors. If you fail the means test, then you may be eligible to file for Chapter 13 bankruptcy. Even if you earn more than the median income for your household size, an experienced bankruptcy attorney may still be able to qualify you for Chapter 7. The means test is complex and you should seek the advice of a competent bankruptcy attorney to help determine whether you qualify.
Will a Chapter 7 ruin my Credit?
There is probably not any hard data on the immediate effects of a bankruptcy filing on your credit score, but it is safe to say that it will take a hit soon after the case has been filed. The exact effect will vary from case to case. The Credit Bureaus do not reveal the algorithms they use for developing their credit scores, so their secret sauce recipe remains a mystery. That being said, there are certain aspects of your credit score that will improve with a bankruptcy discharge. For example, all of the bad debt that has been ruining your credit will be wiped out. In fact, most of my clients have reported an average of a 100 point increase in their credit scores as early as 12 months after a bankruptcy discharge. Many have also reported being able to finance the purchase of a vehicle immediately after a bankruptcy case is filed. In short, a bankruptcy will negatively impact your credit in the short run, but in the long run provides an opportunity to rehabilitate your credit and start fresh.
How much does it Cost to file Chapter 7 bankruptcy?
The Court currently charges a filing fee of $335. You will also be required to take two credit counseling courses that will run you anywhere from $20-$50. The remainder of the cost will largely depend on the attorney you choose to represent you in your case. Many attorneys will quote you a price after they have met with you and gauged the complexity of your case. By some estimates the average attorney fee in Arizona is about $1600. If you are looking for the best value, check out my fees here. I think you will be pleasantly surprised.
How does bankruptcy provide a Fresh Start?
Those stuck with a difficult financial past can find refuge in bankruptcy protection. Bankruptcy can help you wipe out old debts and allow you a new beginning. If you feel that you have exhausted all of your other options and are ready to explore how a bankruptcy can help you with a fresh start, then call 623-258-4466 to schedule a free consultation.
Does everyone qualify for a Fresh Start?
Although some limitations to exist, most people will qualify for some form of bankruptcy protection. The two most common forms of bankruptcy are Chapter 7 and Chapter 13. The powers of bankruptcy are real and can have a positive effect on your financial outlook.
How can a bankruptcy Fresh Start help me know?
If you are constantly worried about the next collection call, wage garnishments or bank levies. If your creditors and debt worries keep you up at night. If you feel stuck in your financial predicament and need a way forward, then bankruptcy may be right for you.