Arizona Bankruptcy Questions

What Is A Chapter 7 Bankruptcy In Arizona?

Chapter 7 Bankruptcy is designed to help individuals by eliminating and discharging unsecured debt. Chapter 7 Bankruptcy laws allow the bankruptcy filer to reaffirm certain secured debt. In most cases, this would include debts such as a mortgage or a loan for an automobile.

What this means is that you can eliminate all revolving credit card debt and keep your home and car by agreeing to continue to repay those loans.

So, in essence, a Chapter 7 Bankruptcy in Arizona is a legal proceeding where a person is released, or discharged, from paying his or her debts, and the filer keeps those assets that are exempt from the legal process, and continues to pay on secured items the filer wishes to keep. All non-exempt assets that are not reaffirmed are turned over to the bankruptcy trustee.

What Does It Cost To File A Chapter 7 Bankruptcy With Our Office?

The fee charged by our office to represent the debtor in a typical Chapter 7 Arizona Bankruptcy is $1,750.00. The debtor is also required to pay a $299.00 filing fee with the Bankruptcy Court. In the event a Chapter 7 Bankruptcy involves any contested matters, or delinquent taxes, or past due child support or spousal maintenance, there will be additional fees charged, because there will be additional services provided by our firm.

Every individual who files Chapter 7 or 13 Bankruptcy is required take a credit counseling briefing within 180 days prior to the filing of his or her bankruptcy. A certificate of completion of this class must be filed with the Bankruptcy Court. After the Chapter 7 Bankruptcy is filed, the filer must also attend a budget class within 45 days after the filing of the bankruptcy. There are fees charged for these classes. The pre-filing credit counseling class normally costs around $50, and will take 60 to 90 minutes. It can be done in person, by telephone, or through the internet. The post-filing budget class also typically costs around $50, and will take a minimum of 2 hours. It also can normally be done in person, by telephone, or though the internet, and can include home study time.

What Is The Mean’s Test When It Comes To Filing A Chapter 7 Bankruptcy?

The Mean’s Test is a formula used in Bankruptcy Court that determines whether the person filing for bankruptcy protection has enough income to pay allowable monthly expenses, plus additional income to pay to non-priority, unsecured creditors (such as credit card debts). The filer is required to calculate his or her current monthly income, from all sources. Then, the allowable living expenses and the payments for secured and priority debts are subtracted from the total income, resulting in a monthly disposable income figure that could be used to pay the unsecured and non-priority debts. The Chapter 7 Bankruptcy can then be challenged if the net income, when multiplied by 60, is greater than either 25% of the non-priority unsecured claims or $6,000. In such a case, the Bankruptcy filer may be required to convert the case to a Chapter 13 Bankruptcy, or lose the bankruptcy protection completely.

Are There Debts That Cannot Be Discharged In Bankruptcy?

There are some debts that will not be discharged even after your bankruptcy is concluded. The following should be considered a partial list of certain debts that you cannot normally discharge in a Chapter 7 or Chapter 13 Bankruptcy.

· Taxes due within the last three years or taxes that were not assessed because of fraud.

· Debts related to obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive.

· Debts that are not listed in your bankruptcy filings, unless the creditor had knowledge of the case in time to file a claim.

· Debts related to fraud, embezzlement or larceny.

· Debts for domestic support obligations (child support and spousal maintenance).

· Debts for intentional injury.

· Debts for certain fines and penalties that are payable to governmental entities.

· Debts for student loans that were insured by a governmental agency, unless undue hardship would result. The undue hardship condition is very difficult to prove.

· Debts that were or could have been listed in a previous bankruptcy case in which your discharge was waived or denied.

· Debts that are owed to a single creditor for a total of more than $500 for the purchase of luxury goods that was incurred by you within the 90 days before you filed the petition for bankruptcy.

· Cash advances totaling more than $750 that arose from the extensions of consumer credit under an open ended credit account incurred within the 70 days before the bankruptcy was filed.

· Debts for personal injury judgments that resulted from auto accidents in which the filer was intoxicated.

· Homeowner’s Association fees incurred after the bankruptcy filing.

· Monies owed to a pension, profit-sharing, stock bonus or other such plan.

What Is A Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy in Arizona is also sometimes called a wage earner's plan. It allows individuals with regular income to develop a plan to repay all or part of their debts. Under Chapter 13 Bankruptcy, the filer proposes a repayment plan to make installment payments to creditors over three to five years. If the filer’s current monthly income is less than the state median income, the plan will be for three years unless the court approves a longer period “for cause.” If the filer’s current monthly income is greater than the state median income, the plan generally must be for five years. However, in no case may a plan provide for payments over a period longer than five years. During the plan period, the law forbids creditors from starting or continuing collection efforts.

Who Is Eligible To File A Chapter 13 Bankruptcy?

In a Chapter 13 Arizona Bankruptcy, many of the same bankruptcy documents that are filed in a Chapter 7 Bankruptcy are also filed in a Chapter 13 Bankruptcy. In addition to these documents, the filer also files a Plan of Reorganization. Under the Plan of Reorganization, it is the filer’s intention that over the next 3 or 5 years (depending on the Plan) the filer will pay all of his or her disposable income to the creditors through the Bankruptcy Trustee. At the end of the Plan period, the remaining debts will be discharged, unless they are non-dischargeable.

In order to file a Chapter 13 Bankruptcy, a filer must first complete the Credit Counseling for Consumers Class. Then, the filer must have sufficient regular income to meet monthly living expenses that are allowed by the Chapter 13 Trustee, and make a plan payment. In order to be eligible for a Chapter 13 Bankruptcy, the filer must have less than $336,900 of unsecured debt, and less than $1,101,650 of secured debt. These threshold figures can change annually.

A Chapter 13 filer cannot be a corporation, partnership, stockbroker, or commodity broker. A Chapter 13 filer also cannot have received an earlier discharge in a Chapter 7, 11 or 12 in the last 4 years, or another chapter 13 in the last 2 years.

How Does A Chapter 13 Bankruptcy Work?

In a Chapter 13 Bankruptcy, there are three types of claims. Those claim are priority, secured, and unsecured claims. Priority claims are claims that are granted special status by bankruptcy law, such as most taxes and the costs of the bankruptcy proceeding. Secured claims are those for which the creditor has the right take back certain property (the collateral) if the debtor does not pay the underlying debt. Unsecured claims are typically claims for which the creditor has no special rights to collect against particular property owned by the debtor.

The Chapter 13 Plan of Reorganization must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim (or, in the case of a domestic support obligation, unless the debtor contributes all disposable income).

In the event the debtor wishes to keep the collateral securing a particular claim, the Chapter 13 Plan must contain language that the holder of the secured claim is paid at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (for example, a vehicle loan), and the debt was incurred within certain time frames before the bankruptcy filing, the Chapter 13 Plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (for example, a home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the Plan) so long as any arrearage is made up during the Chapter 13 Plan.

The Chapter 13 Plan does not have to pay the unsecured claims in full as long it provides that the debtor will pay all of the projected disposable income over an applicable commitment period, and as long as the unsecured creditors receive at least as much under the Chapter 13 Plan as they would receive if the debtor’s assets were liquidated under Chapter 7 Bankruptcy.

In a Chapter 13 Bankruptcy, disposable income is income (other than child support payments received by the debtor), minus those amounts reasonably necessary for the maintenance or support of the debtor or his or her dependents, and minus charitable contributions up to 15% of the debtor’s gross income. When the debtor operates his or her own business, the definition of disposable income excludes those amounts that are necessary for ordinary operating expenses. The applicable commitment period depends on the debtor’s current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size, and five years if the current monthly income is greater than a family of the same size. The Chapter 13 Plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.

What Does It Cost To File A Chapter 13 Bankruptcy With Our Office?

The fee charged by our office to represent the debtor in a typical Chapter 13 Bankruptcy is $3,500.00. The debtor is also required to pay a $274.00 filing fee with the Bankruptcy Court. Attorneys’ fees in Chapter 13 Bankruptcy are normally paid partially before the case is filed, with the unpaid balance to be paid by the Trustee from the payments the debtor makes into the Chapter 13 Plan. If the case is more complex than initially determined, then there most likely will be additional attorneys’ fees. The Bankruptcy Court will consider requests for additional attorneys’ fees, and if the requests are approved, the additional fees will be added to the debts paid through the Chapter 13 Plan.

What Arizona Bankruptcy Is Best For You? Understanding The Basics of Chapter 7 and Chapter 13.

When considering filing for bankruptcy relief, the consumer has two basic choices – Chapter 7 or Chapter 13. Because each individual’s personal financial situation is unique, you should speak with an attorney concerning which bankruptcy option is best for you.

Chapter 7 - Liquidation

Chapter 7 Bankruptcy is also known as a Liquidation Bankruptcy. Typically, Chapter 7 Bankruptcy is the best alternative for a consumer with a set amount of current debt and who does not have a great deal of property that may not be exempt in Bankruptcy Court. You can expect a Chapter 7 Bankruptcy to take between 4 to 6 months for the Court to discharge the bankruptcy action. Exempt property is property that is exempt from the bankruptcy process, and the person filing bankruptcy gets to keep the exempt property. There are specific exemptions that you need to know about and that you should discuss in detail with your attorney. Items that are not exempt may become a part of the bankruptcy estate and can be sold by the bankruptcy trustee on behalf of the estate. Your attorney can explain the issue of exemptions in detail with you.

In a Chapter 7 Bankruptcy, certain debts will be discharged once the bankruptcy is complete. A discharge means that your liability or obligation for dischargeable debts is terminated, and the creditor for that debt cannot pursue you for payment on the debt. Be aware that certain debts are not dischargeable in a Chapter 7 Bankruptcy, such as your home mortgage or your car or vehicle loan.

Once the Chapter 7 Bankruptcy case is discharged, you cannot file for Chapter 7 Bankruptcy again for at least 8 years from the date of the bankruptcy discharge.

Chapter 13 Bankruptcy - Wage Earner

A Chapter 13 Bankruptcy is known as a Wage Earner Bankruptcy. In a Chapter 13 Bankruptcy, you are permitted to keep most all of your property because you agree to repay your creditors, to the extent you can afford to do so, over a 3 to 5 year period. In a Chapter 13 Bankruptcy, you apply a portion of your future earnings to the payment of all or a portion of your debts over a 3 or 5 year period of time. In a Chapter 13 Bankruptcy, your creditors receive more from the debtor than they would under a Chapter 7 Liquidation Bankruptcy.

A Chapter 13 Bankruptcy is often times a proper choice for a debtor if the debtor has debts that are not dischargeable under Chapter 7 Bankruptcy. If you are behind on your mortgage payment and want to attempt to save your house, a Chapter 13 may be the proper choice for you to consider.

If you have debts such as taxes, child support obligations, alimony, drunk driving judgments, criminal fines and restitution obligations, or debts that are the basis of fraud, Chapter 13 Bankruptcy may be your only choice to deal with these kinds of debts. Typically, debts such as these cannot be discharged in a Chapter 7 Bankruptcy.

Credit Card Debt in Bankruptcy Proceedings

Credit card debt can be challenged by the credit card company in a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy if it can be shown that the credit card debt was the result of fraud by the consumer. You should be aware of those types of instances where the credit card company may allege that the credit card debt was incurred by fraud. This would include situations where the debtor withdrew cash advances against the credit card right before filing a bankruptcy, or where a new credit card account was opened and used to run up many purchases right before filing bankruptcy, or simply using a credit card repeatedly right before filing bankruptcy. One of our attorneys can discuss all of these issues with you prior to filing a bankruptcy.

Common Bankruptcy Questions:

How Will A Bankruptcy Affect My Credit?

After filing a bankruptcy, you should expect that credit will be more difficult to obtain. However, credit will most likely still be available to you. A bankruptcy will stay on your credit report for up to 10 years. Some lenders will consider you a better credit risk after bankruptcy because certain debts have been extinguished. It really depends on the particular lender.

Are Credit Cards Discharged In Bankruptcy?

Credit card companies are allowed to challenge the discharge of their debt in a Chapter 7 Bankruptcy. They do so by filing an adversary proceeding and claiming that the debt was incurred by fraud. Be aware that credit card debt may not be dischargeable in bankruptcy if the credit application was fraudulent or if the card itself was used fraudulently. These issues need to be discussed fully with an attorney.

Can I Discharge Child Support or Alimony In Bankruptcy?

Child support and alimony (spousal maintenance) are not dischargeable in bankruptcy.

Will I Be Allowed To Stay In My House After Bankruptcy?

Under most circumstances, a homeowner is allowed to keep his or her house after filing bankruptcy, if the mortgage payments are current and the equity in the house does not exceed the exemption amount.

What Is Redemption And Reaffirmation?

A redemption in a bankruptcy means that the debtor pays a secured creditor the present value of the collateral for the debt in a lump-sum cash payment. Once the payment is made, the collateral becomes the property of the debtor and the secured debt is extinguished.

A reaffirmation in a bankruptcy is an agreement by the debtor and the creditor to waive the discharge as to a debt and to pay the debt pursuant to the terms of the original agreement between the parties.

Can Student Loans Be Discharged In Bankruptcy?

Typically, student loans are not discharged in bankruptcy. In order to discharge a student loan, the debtor must prove what is called "substantial hardship."

Student loans are no longer dischargeable in bankruptcy just because they have been in pay status for the requisite time. The only way the loan can be modified or discharged is by proving that repayment of the loan will create a substantial hardship on the debtor/borrower and his family.

Can Taxes Be Discharged In Bankruptcy?

If the taxes are taxes that have been recently incurred, or result from unfilled tax returns, they are most likely not dischargeable in bankruptcy.

If the taxes are unsecured income taxes that first became due more then 3 years before a bankruptcy is filed, the taxes may be dischargeable. However, the debtor must have filed a tax return for those taxes and that tax return must not have been fraudulent in any way.

Arizona Bankruptcy Lawyer Fees

By hiring an attorney to assist you in filing an Arizona Bankruptcy, you are assured that the bankruptcy filing will be done correctly.

We have flat fees that we charge for most consumer bankruptcies. Each case is different and must be evaluated on its own, but our typical fee for handling a Chapter 7 Bankruptcy is $1,750.00, and our typical fee for handling a Chapter 13 bankruptcy is $3,500.00. We can explain how these fees are paid when you meet with one of our attorneys.

The Bankruptcy Courts do require that legal fees and filing fees be paid before a Chapter 7 Bankruptcy case is filed. In a Chapter 13 Bankruptcy, a portion of the legal fees can be paid through the Chapter 13 Plan.

Some people think that they can pay for their bankruptcy by using a credit card. This is not permitted. The only way to pay for your bankruptcy by using a credit card is if a family member or friend agrees to pay your fees with their credit card, and the payment cannot be a loan. We will explain all payment options when you meet with one of our attorneys.

We are a debt relief agency. We assist consumers to file for bankruptcy relief under the U.S. Bankruptcy Code.

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