Chapter 7 Bankruptcy2020-05-16T13:53:40-07:00

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Chapter 7 Bankruptcy

Chapter 7 bankruptcy can help debtors get a fresh financial start by eliminating unmanageable debt and for most debtors, it takes only a few weeks to complete. Better yet, the relief starts immediately as filing any type of bankruptcy instantly suspends creditor harassment including wage garnishment, collection calls, lawsuits, and even foreclosure.

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Although Chapter 7 bankruptcy is what most people think of when they hear the word bankruptcy, there are some common misconceptions about its process and what it means.

Chapter 7 bankruptcy is often referred to as the “liquidation” bankruptcy because non-exempt personal property is liquidated (sold) and the proceeds are distributed to the debtor’s creditors to repay or partially repay the discharged debts. But this does not mean you lose all of your property when you file Chapter 7. In fact, most debtors do not lose any property. That is because Arizona’s bankruptcy exemptions are far more generous than many other jurisdictions, including the federal exemptions. Almost all of these exemptions can be doubled to protect additional property when married debtors file jointly.

Unfortunately, not everyone qualifies for Chapter 7 bankruptcy. Eligibility depends on the debtor’s income and expenses. Individual debtors with income lower than the state’s median income (based on household size) automatically qualify. Debtors who earn more than the median must pass the “means test” and have a debt-t0-income ratio above a certain threshold to qualify. Most debtors who do not qualify for Chapter 7  are eligible to file bankruptcy under Chapter 13.

Below are some resources to further compare advantages and disadvantages of Chapter 7 bankruptcy to other debt relief options.

We offer free consultations to help you decide whether filing bankruptcy is the right choice for your unique situation.

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