Arizona Bankruptcy Questions and Answers

What is Bankruptcy?

Bankruptcy is a legal process that helps individuals or businesses eliminate or restructure secured and unsecured debts when they are unable to pay. A bankruptcy petition is filed with the bankruptcy court, triggering an automatic stay that stops creditors from calling, halts foreclosures, and pauses collection efforts. Depending on the financial situation, debtors may qualify for Chapter 7 bankruptcy cases, which liquidate assets, or Chapter 13, which creates a debt repayment plan.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy cases allow individuals to discharge most unsecured debts, including credit card debt and medical bills, while the trustee program sells non-exempt assets to repay creditors. The bankruptcy process requires passing a means test based on the filer’s income, and once completed, the court grants a discharge that eliminates qualifying debts. However, certain obligations like child support, some tax deficits, student loan debt, and secured debts, such as mortgage payments, may not be discharged.

How Long Does Bankruptcy Chapter 7 Last?

The bankruptcy process for Chapter 7 bankruptcy typically lasts four to six months from the filing date until the filer is granted a discharge order. The impact on a credit report lasts up to 10 years, affecting the debtor’s ability to borrow money in the future.

What is the Means Test For Chapter 7?

The means test for Chapter 7 determines if a debtor qualifies to file for Chapter 7 based on their income and ability to repay debts. Courts compare the debtor’s income to the state median income, and if it is below the threshold, filing for bankruptcy can be an option. If income exceeds the limit, further calculations assess secured and unsecured debts, and necessary payments monthly to determine eligibility. The trustee program reviews financial records, and failing the test may require filing for Chapter 13, where a plan to repay creditors is established.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy allows individuals with regular income to restructure secured and unsecured debts through a court-approved payment plan lasting three to five years. In Chapter 13 bankruptcy, debtors can keep assets while making payments monthly toward mortgage payments, business debts, and other debts. Once the plan is completed, the bankruptcy court issues a discharge, eliminating remaining eligible debts and providing long-term financial relief.

What is The Difference Between Chapter 7 and Chapter 13 Bankruptcy?

The main difference between Chapter 7 and Chapter 13 bankruptcy is how debts are handled. Chapter 7 eliminates most unsecured debts. In contrast, Chapter 13 bankruptcy allows debtors to keep assets and repay secured and unsecured creditors through a court-approved plan over three to five years. Both types of bankruptcy filings provide protection and require approval from the bankruptcy court before a discharge is granted.

How Many Times a Day Can a Creditor Call You Before It Becomes Harassment?

Under federal law, creditors must follow Fair Debt Collection Practices Act (FDCPA) rules, which prohibit excessive collection efforts. While there is no set number of times a creditor can call per day, typically, creditors stop calling after being notified of a bankruptcy petition or request for written communication only. Filing for bankruptcy protection triggers an automatic stay, which legally stops all creditor harassment and lawsuits.

Contact a Phoenix creditor harassment attorney to see how filing bankruptcy can help.

What Happens When You File For Bankruptcy in Arizona?

When you submit a bankruptcy petition in Arizona, the court issues an automatic stay, stopping foreclosures, repossessions, and collection efforts, at least temporarily. A trustee reviews financial records, including bank accounts, assets, and debtor’s income, to determine eligibility. In Chapter 7, non-exempt assets may be liquidated, while in Chapter 13 bankruptcy, debtors enter a monthly plan to cover debts incurred. However, certain debts, such as child support, tax obligations, and some secured debts, may still be owed.

Does Bankruptcy Clear Tax Debt?

Filing for bankruptcy can eliminate some tax debts, but only under specific conditions. Many tax debts remain owed unless they meet legal requirements, including being at least three years old, assessed at least 240 days before the filing date, and filed on time without fraud. Chapter 7 may eliminate certain income tax deficits, while Chapter 13 bankruptcy allows tax repayment through a reimbursement plan. However, certain taxes, such as payroll and fraud-related taxes, are usually non-dischargeable under the bankruptcy code.

Can You File Bankruptcy On Student Loans?

Filing for bankruptcy on student loans is difficult, but under certain circumstances, it may be possible to discharge them. To eliminate student loan debt, a debtor must prove undue hardship through an adversary proceeding in court, which requires showing that repayment would cause extreme financial difficulty. The bankruptcy judge and trustee will review the debtor’s financial situation, debtor’s income, and monthly payments to determine if the debt qualifies for discharge. If the court grants a bankruptcy discharge, it may eliminate part or all of the student loan debt, but many borrowers must still include these loans in a debt repayment plan.  This is an area of law that is evolving rather quickly.

For assistance filing bankruptcy, contact a Phoenix student loan bankruptcy lawyer from our legal team.

Can You File Bankruptcy and Keep Your House?

Yes, filing for bankruptcy does not automatically mean losing your home, but it depends on the type of bankruptcy filing and your debts. In Chapter 7, the trustee may sell non-exempt assets, including your home, unless it is protected under state exemptions. In Chapter 13 bankruptcy, homeowners can keep their property by following a debt repayment plan to stay current on mortgage payments.

When Is It Too Late to Stop Foreclosure in Arizona?

In Arizona, it is not too late to stop foreclosure until the court finalizes the sale of the property. Filing a bankruptcy petition triggers an automatic stay, which immediately stops foreclosure proceedings, creditors calling, and other efforts. Homeowners can use Chapter 13 bankruptcy allowing them to catch up on debt payments over time. Chapter 7 may stop foreclosure only if specific exemptions protect the home.

How Long Does Bankruptcy Stay On Your Credit Report?

The length of time a bankruptcy filing remains on a credit report depends on the type of bankruptcy filed. Chapter 7 stays on record for 10 years from the date of filing, while Chapter 13 bankruptcy remains for 7 years after completion of the debt repayment plan. During this time, lenders may view a bankruptcy petition as a negative factor on a credit history, affecting a debtor’s ability to owe money or obtain credit.  

What Does Bankruptcy Petition Mean on a Credit Report?

A bankruptcy petition on a credit report indicates that an individual has an official filing. Filing for bankruptcy signals to lenders that the debtor is undergoing the bankruptcy process, which may impact their ability to get loans or open new bank accounts. However, bankruptcy generally improves your debt to income ratio, which can help to reduce the impact of the credit report on your ability to borrow.

Who Can File a Joint Bankruptcy in Arizona?

In Arizona, married couples can file bankruptcy under a joint bankruptcy petition under Chapter 7 or Chapter 13, combining their personal property and debts into a single case. However, only one spouse is required to file, and the non-filing spouse may still be responsible for specific debts if they are not included in the case. Filing for bankruptcy triggers an automatic stay, stopping collections, foreclosure, and creditor harassment for the filing spouse.

What is the Downside of Filing for Bankruptcy in Arizona?

The main downside of filing for bankruptcy in Arizona is the impact on a credit report, making it harder to secure loans or mortgages for several years. Additionally, bankruptcy court may require selling assets in Chapter 7 bankruptcy, while Chapter 13 bankruptcy demands strict adherence to a debt repayment plan. Specific debts, such as child support, many tax debts, and secured debts, remain non-dischargeable, and creditors stop calling only temporarily under an automatic stay.

Does Credit Counseling Hurt Your Credit?

No, credit counseling itself does not negatively affect a credit report, as it is a required step before filing for bankruptcy under federal and state law. However, entering a debt repayment plan may appear on a report, which some lenders may view similarly to bankruptcy protection. Unlike bankruptcy filing, credit counseling does not involve the bankruptcy trustee program, and participation alone does not indicate personal liability issues.

Is Bankruptcy Filing Public Record?

Yes, a bankruptcy filing is a public record and can be accessed through bankruptcy court documents. This includes details about the bankruptcy petition, the party from the trustee program, debts, and the debtor’s personal assets. However, access may require searching court records or requesting documents from the United States trustee program.

What is a Bankruptcy Trustee?

A bankruptcy trustee is a court-appointed official who oversees cases as part of the United States trustee program. In Chapter 7, the United States trustee program assigns a private trustee to manage the sale of personal property and distribute funds to unsecured creditors. In Chapter 13, the trustee program ensures that debtors follow their court-ordered plan. The United States trustee program also investigates bankruptcy petitions for fraud, verifies debtor’s income, and works with judges to enforce federal and state law.

How Much Does It Cost to File Bankruptcy in Arizona?

The cost to file a petition for Chapter 7 in Arizona is $338, and the cost to file Chapter 13 is $313. These are the filing fees that must be paid to the court in order to open your case.  Other fees may also apply, like the fees for the two counseling classes that the court requires you to take, along with attorneys’ fees if you hire an attorney.

How Much Does Bankruptcy Chapter 7 Cost in Arizona?

The cost of filing for bankruptcy Chapter 7 includes a bankruptcy court filing fee of approximately $338, plus additional expenses for credit counseling, trustee program fees, and attorney representation. The trustee program oversees the case, ensuring compliance with federal and state law. Additional costs may arise if the case involves secured debts or non-filing spouse considerations.

How Much Does Consumer Credit Counseling Service Cost in Arizona?

Consumer credit counseling services are required before filing for bankruptcy and typically cost between $25 to $50, depending on the provider. The United States trustee program approves specific agencies.

How Long Does the Bankruptcy Process Take in Arizona?

The process of filing for bankruptcy in Arizona varies depending on the type of case. Chapter 7 typically lasts four to six months. Chapter 13 takes longer, generally lasting three to five years.

What is A Reaffirmation Agreement?

A reaffirmation agreement is a legal contract in Chapter 7 bankruptcy where a debtor agrees to continue paying a secured debt instead of having it discharged. These agreements are typically used for mortgages, car loans, or other obligations tied to personal property as a security, allowing the debtor to keep the property.

The trustee program and judge must approve the reaffirmation agreement, ensuring it does not create an undue financial burden. If a debtor fails to make payments after signing a reaffirmation agreement, the lender can resume efforts to collect debts and repossess the debtor’s personal property. While filing for bankruptcy eliminates many unsecured debts, reaffirming a secured debt keeps the debtor legally responsible for repayment.

Federal Bankruptcy Laws and Bankruptcy Codes