Chapter 7 Bankruptcy Lawyer Phoenix, AZ
There are two basic types of personal bankruptcy: Chapter 7 and Chapter 13. While there are some similarities and common features, the two methods differ significantly. This is an overview of Chapter 7 bankruptcy. If you have questions about which type of personal bankruptcy is right for you, please contact our firm to speak with a Chapter 7 bankruptcy lawyer Phoenix, AZ residents trust today. Although Chapter 7 bankruptcy can be an excellent way to manage debt, not everyone qualifies for this option and not everyone should choose this option over Chapter 13 bankruptcy and/or some debt relief alternatives. Working with an experienced Phoenix, Arizona Chapter 7 bankruptcy lawyer from Kamper & Estrada, PLLC will help you to make an informed decision about the debt relief solution that best fits your unique circumstances.
Chapter 7 Focuses on Discharging Debts
Unlike Chapter 13, which reorganizes debts into a manageable repayment plan, Chapter 7 allows you to simply discharge most of your debts. They are forgiven and don’t need to be repaid. This means that the bankruptcy process can be finished quickly (within a period of months) rather than three to five years.
While this sounds ideal, this process does have some drawbacks and caveats, including limits on which debts can be discharged, the loss of some property and limits on who can qualify for Chapter 7.
Which Debts Can Be Discharged and Which Cannot?
Chapter 7 allows you to discharge nearly all “unsecured” debts, meaning debts for which there is no collateral. These include:
- Credit card balances
- Medical bills
- Back rent
- Utility bills
- Personal loans
If your home and car are not yet paid off, these debts are not dischargeable, because both the home and the car can be repossessed as collateral for defaulting on the debt. There are certain other debts that cannot be discharged including federal student loans, certain taxes, child support and spousal support payments.
Will You Lose All Your Possessions?
Chapter 7 is often referred to as “liquidation bankruptcy,” because some of your assets may need to be liquidated (taken and sold) in order to partially repay your creditors. But thankfully, this doesn’t mean taking every last penny and possession you own. That would leave you in even worse financial shape, which would defeat the purpose of bankruptcy.
There are assets considered exempt from liquidation and those that are considered non-exempt. In many cases, courts will let you keep your most important possessions (like your home and vehicle) so long as you can continue to afford them. Our Phoenix, AZ Chapter 7 bankruptcy lawyer team can help you better understand what property you can keep and what may need to be liquidated as part of the bankruptcy process.
Qualifying for Chapter 7 Bankruptcy
One of the drawbacks to Chapter 7 is that it is not available to everyone. You need to pass what’s called a “means test,” to determine whether or not you have the available income to repay your debts. It considers factors such as income, family size and expenses. If you do have enough income to repay your debts (with some restructuring help), you will not qualify for Chapter 7 and will need to file Chapter 13 instead.
Consult with a Chapter 7 Bankruptcy Attorney
You likely have many questions and concerns, and that is perfectly reasonable. Before deciding whether and which type of bankruptcy is right for you, it is a good idea to speak with a knowledgeable and experienced Phoenix, AZ Chapter 7 bankruptcy lawyer. Please contact us today so that we can schedule a consultation designed to answer any and all questions you may have about your options. We look forward to speaking with you.
Benefits of Chapter 7 Bankruptcy
Making the decision to file for bankruptcy isn’t one you should take lightly. It can affect your credit for a while and make it more difficult to qualify for loans. However, it can get rid of most of your debts and take a lot of burden off your back. If you’re having trouble deciding between Chapter 7 and Chapter 13 bankruptcy, consider some of the many benefits of filing for Chapter 7.
- You Can Wipe Out Most of Your Debts: One of the major advantages of Chapter 7 bankruptcy is that you can discharge the majority of your unsecured debts, including medical bills, credit card debt and personal loans. If you were to file for Chapter 13, you would still have to pay these creditors back. Without these debts to worry about, you can concentrate on building up your savings and having a more secure financial future.
- The Process Is Quicker: Bankruptcy can be a stressful process, so you naturally want to get it over with as fast as possible. If you hire a Chapter 7 bankruptcy lawyer in Phoenix, AZ to help you file for Chapter 7, you can complete the process in as little as three months. A Chapter 13 bankruptcy case, on the other hand, can take anywhere from three to five years to complete. When you file for Chapter 7, you can get on with the rest of your life sooner and start improving your financial situation.
- You Can Rebuild Your Credit: It is true that filing Chapter 7 bankruptcy will cause your credit score to plummet. You may have a difficult time applying for mortgage loans, car loans and personal loans after the fact. However, you can start rebuilding your credit as soon as a year after filing for bankruptcy. You can start applying for credit cards, but be aware that you will be subject to higher interest rates.
- Your Creditors Will Stop Contacting You: When you’re struggling with your finances, getting daily calls from creditors can stress you out even more. Once you file for Chapter 7 bankruptcy, your creditors won’t be allowed to contact you anymore and demand payment. If creditors still try to contact you, inform your Chapter 7 bankruptcy lawyer in Phoenix, AZ right away.
- You May Be Able to Keep Your Property: A common fear people have about Chapter 7 bankruptcy is that it will cause them to lose their home. While you can liquidate your home to pay for your debt, you may be able to protect your property if you wish.