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Chapter 7

Chapter 7 Bankruptcy entails the liquidation of the assets of a debtor. Under Chapter 7 of the Bankruptcy Code, the court will appoint a trustee to each case. It is to this person the debtor will hand over all non-exempt assets. The trustee then sells such assets and allocates the proceeds to the creditors. In turn, the debtor is cleared from all dischargeable debts. However, a vast majority of Chapter 7 filers don’t have non-exempt assets; therefore no sale takes place in most Chapter 7 bankruptcies.

In Arizona, majority of consumer bankruptcy filings involve Chapter 7. It provides a fresh start for those in serious financial trouble. But before opting for the debt relief afforded by bankruptcy protection, it is crucial to understand the intricacies involved. Hiring an experienced bankruptcy attorney will help you assess if filing for Chapter 7 Bankruptcy will suit your circumstances. Your attorney can also ensure that your petition is filed without any hitch.

Starting the Process

The first step is to ascertain that you are duly qualified before filing. There are two things that make a person eligible for Chapter 7 relief: First, your income must not go over the median level for the state in which you reside. Second, in case your income exceeds the state median, the “Means Test” must be satisfied. The test is intended to evaluate your income and expenses then determine how they fair to the standard for your state. For more information on state specific median income, go to www.justice.gov. You may also go to the Means Testing website of the United States Trustee Program

Aside from the income requirement, you must also undergo a mandatory credit counselling from an agency approved by the United States Trustee’s office. For a list of approved agencies, visit the Trustee’s website at www.usdoj.gov/ust.

Filing your Petition

Preparing a bankruptcy petition is by no means easy. It can be confusing and overwhelming as there are several rules and procedures that must be strictly followed to make sure that your petition is filed correctly. You must be able to provide a complete list of creditors together with their claim types and amounts; a list of your assets, the source and amount of your income; and a comprehensive list of your monthly living expenses. Having said these, we suggest that you spare yourself from all the hassles and let one of our experienced attorneys assist you with this meticulous process.

The Process

Once your petition is properly filed, a trustee will be appointed by the court to administer your case. As aforementioned, the trustee will collect all non-exempt resources, sell them and distribute the proceeds to the appropriate creditors. However, this does not mean that a trustee will take all of your assets. Some assets are protected from your creditors’ claims, so you get to keep them. In addition, you may even qualify to reaffirm specific debts which will then be exempt from capture and repayment by the trustee.  For instance, by signing a reaffirmation agreement, you can continue to pay for a car loan or a mortgage on your home.

Under Chapter 7, you don’t have to pay the trustee for his/her services. You will also receive a discharge on all dischargeable debts. For further clarification on which debts are and are not dischargeable, we recommended that you seek the expert advice of one of our experienced bankruptcy attorneys.

If you wish to find out if you qualify for Chapter 7 relief, start by filing out our bankruptcy case review form and one of our attorneys will follow up on your eligibility within 24 hours.

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