How to File Chapter 7 Bankruptcy in Arizona, Utah, Idaho and Washington
Most debts can be discharged under Chapter 7 bankruptcy, also commonly known as "liquidation" of debt bankruptcy. In a Chapter 7 filing, most of your assets are exempt from execution under applicable state and federal laws. This allows you, in most instances, to retain possession and ownership of your property. The most common debts that are eliminated in this type of bankruptcy are credit card debt, repossession deficiencies on vehicle loans, and medical bills. While you will be able to retain most of your personal assets as exempt in a Chapter 7 proceeding, the non-exempt assets become property of the bankruptcy estate and will be liquidated by the bankruptcy trustee. The proceeds of the sale will be distributed among your creditors. In determining whether Chapter 7 might be the better option for you, there are several basic factors to consider:
Type of Debt/Amount of Indebtedness
The following debts are presumptively dischargeable in a Chapter 7 bankrupcty:
- Credit card debt
- Medical bills
- Deficiency balances on automobile loans
- Personal loans not secured by collateral (e.g. signature loans)
- Most civil judgments (e.g. debts for broken lease agreements)
The following debts are not dischargeable in a Chapter 7 bankruptcy:
- Secured loans (e.g. mortgage payments, car payments)
- Most tax liability (there are some exceptions)
- Student loans
- Family support obligations
- Debts incurred by fraud or intentional wrongdoing
- Criminal fines and restitution
If your debt falls under the presumptively dischargeable category, the next question to consider is whether the amount of debt is sufficient enough to file. The first thing to understand is that there are no limits (high or low) on the amount of debt you can seek to discharge. Each case is different, and the debtor and their attorney must comprehensively analyze not only the debtor's personal debt, but their assets, income and expenses, and other considerations before making a decision to file.
Generally, if one's unsecured debt exceeds their assets by a sufficient amount, and there is no reasonable likelihood of repaying that debt (very often that is the case considering the exorbitant interest rates charged by creditors) then bankruptcy should be seriously considered. Again, each case is fact specific and ideally, the decision to file should be made after a complete analysis of one's financial condition is made by a qualified bankruptcy attorney.
Assets
The next item to consider is whether an asset is "exempt "(and therefore can be retained by the debtor) or "non-exempt" (and must be surrendered in the bankruptcy process).
The following are examples of possible exemptions under state law:
- Equity in a debtor's homestead (the amount will be determined by state exemption laws)
- A vehicle with equity (the amount will be determined by state exemption laws)
- Household goods
- Any money in 401K or other qualified retirement plans and life insurance policies (contributions to those plans made too close to the filing of the bankruptcy petition may not be protected)
- Clothing
- Personal documents and records
NOTE: This is not a complete listing of "exempt" property. It should be understood that in terms of valuing property for the purpose of determining whether it is exempt, trustees generally look at the present value of the property as opposed to what an asset was worth when it was purchased. It is vitally important to have a qualified bankruptcy lawyer to help you understand what is protected and what must be surrendered in a bankruptcy case. The qualified Keith Barton & Associates bankruptcy lawyers can assist in protecting your assets in a bankruptcy case through a process called "exemption planning."
Income/Expenses
The last major area to review is a debtor's income and their monthly expenses. An important modification to the Bankruptcy Code in 2005 now requires that a debtor disclose all income received in the six months prior to filing the bankruptcy petition. This requirement not only pertains to wages, but to any other source of income, and it is necessary to disclose this information regardless of whether a debtor's circumstances have changed just prior to the filing of the petition.
If a debtor's income falls under guidelines used by the trustees then their case will presumptively be a Chapter 7. However, if the debtor's income exceeds those guidelines, the case may still qualify as a Chapter 7 if their reasonable monthly expenses (also determined by objective guidelines) exceed their monthly income. This process is sometimes referred to as the "means test," and again a qualified attorney can make a difference in helping you qualify for a Chapter 7 bankruptcy.
We Can Help!
There are many factors to consider in determining which type of bankruptcy to file. At Keith Barton & Associates, we will help you decide whether a Chapter 7 or Chapter 13 is best for you. If your world has been turned upside down because of the recent economic turmoil, let us help you get the debt relief you need. Bankruptcy is about starting over and the Keith Barton bankruptcy attorneys can help you get your financial situation turned around.
Call us right now at 1-800-416-8010 or submit a bankruptcy evaluation form. We are available 24 hours a day, seven days a week and you will hear back from us in 30 minutes - "It's Just That Easy."
