Bankruptcy Lawyers Phoenix, AZ
Qualifying for a Chapter 7
Chapter 7 is the most commonly filed bankruptcy amongst individuals. If a person finds themselves owing more money to creditors than they have, or can foreseeably earn, Chapter 7 is the best option. The assets that person owns will be liquated and used to pay off their debts. After that, the bankruptcy is usually dismissed. Chapter 7 is often referred to as a “fresh start”.
There is no specific dollar amount of debt needed to qualify for a Chapter 7. So to determine their eligibility, the individual must take a means test as provided by the U.S. Bankruptcy Court. The test is designed to take into account income, expenses, and family size. If an individual’s income is too high or if they’ve filed for bankruptcy in the recent past, the filer may become ineligible for a Chapter 7.
Qualifying for a Chapter 13
Chapter 13 works best for people who don’t qualify for Chapter 7 but still need debt relief, have non-dischargeable debts like child support, or have fallen behind on house/car payments and want to/can catch up on payments.
The actual amount varies with the consumer price index, but in general, an individual who wants to file a Chapter 13 must have no more than $349,725 in unsecured debt (credit card bills, personal loans) and no more than $1,184,200 in secured debts (mortgage, car loan).
Chapter 13 is often called the “wage earner” bankruptcy, because the individual must have a reliable source of income. Their finances are reorganized into a plan that allows the them to pay back their creditors over three to five years while maintaining control and ownership of their assets.
While bankruptcy can be a viable solution for dealing with your consumer debts, remember that it doesn’t eliminate all kinds of debt. You will still be on the hook for certain debts, including the following:
- Government Debts: back taxes, student loans, etc.
- Family Court Debts: alimony, child support, divorce settlements
- Crime Debts: traffic tickets, fines, restitution payments, etc.
Hire a Bankruptcy Lawyer
Hiring a lawyer to assist you is one of the most important steps in determining your eligibility, successfully filing bankruptcy, and avoiding legal consequences. Bankruptcy can be a lengthy process, sometimes lasting years. An experienced bankruptcy lawyer will be familiar with the law and can help you meet all your deadlines. Failure to meet certain requirements may result in the case being dismissed without any of the debts being discharged.