The Process for Filing an Arizona Bankruptcy
Provided by HG.org
Bankruptcy can be a complicated process with many technical requirements and provisions. Understanding the basic steps for a bankruptcy in Arizona will help you know how to prepare and what to look out for as you move forward.
Credit Counseling
The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six (6) months before filing for bankruptcy and to complete a financial management instructional course after filing bankruptcy.
Means Test
Under the same 2005 Bankruptcy Act, your income and expenses must be analyzed to determine if you qualify to file a Chapter 7 or if you must file Chapter 13. To apply the means test, the court will look at your average income for the six (6) months prior to filing and compare it to the median income for Arizona. If the income is below the median then you will be eligible for Chapter 7 bankruptcy. If your income exceeds the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter 13.
Your will likely still be able to file a Chapter 7 bankruptcy if you are unable to pay at least $6,000 over the next five (5) years (that equates to $100 per month) to your unsecured creditors after your living expenses. Of course, if you can pay at least $10,000 over five (5) years ($166.67 per month or more) your Chapter 7 will likely be denied.
If you could afford more than $6,000 but less than $10,000 over five (5) years, a mathematical formula determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you cannot afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 even if you qualify to file under Chapter 7.
Gathering Paperwork
To qualify for bankruptcy, you must itemize your current income sources; major financial transactions for the last two (2) years; monthly living expenses; debts (secured and unsecured); and property (all assets and possessions, not just real estate). You should also collect your tax returns for the last two (2) years, deeds to any real estate you own, the title(s) to your car(s), and any loan documents you may have.
Filing
Once you have gathered all of the necessary information, you should determine which property you believe is exempt from seizure based on the Arizona exemptions. It would be best to consult an attorney for this step, given the complexity of Arizona and federal law affecting this process. To actually file, either you or your attorney, will need to file a petition and several other documents with the bankruptcy court for your federal district. Along with your petition, you will have to file several documents, called schedules, that describe your current financial status and recent financial transactions for the last two (2) years. If your creditors or the judge discover that you have not identified all assets and debts in your bankruptcy filing, it could jeopardize the outcome of your petition.
Chapter 13 Requirements
If you are filing a Chapter 13 bankruptcy, you must also submit a proposed repayment plan. After reasonable monthly expenses have been paid, the question will be “how much money will you have left to put toward outstanding bills?” How this money is to be distributed among creditors is based on a system called “priority.” Priority claims (such as taxes and child support) must be paid in full; unsecured debts (like credit card debt and medical bills) are usually only paid in part. In some cases, unsecured debts can be paid off for as little as 10 cents on the dollar, though this is usually the bottom limit, and your particular payoff may be different.
Additionally, a Chapter 13 repayment plan must meet three requirements:
1) It must be delivered in good faith.
2) Unsecured creditors must be paid at least as much as if a Chapter 7 bankruptcy had been filed. Generally, this is the value of all the nonexempt property you own ( for more information, review the Arizona bankruptcy exemptions).
3) All disposable income must be paid into the plan for at least three (3) years (you may use up to five (5) years in order to meet the second test that you pay at least as much as in a Chapter 7).
If you have filed Chapter 13, you must begin making your plan payments. Generally these payments will be withdrawn directly from your wages and you or your attorney should make the appropriate arrangements for that to occur.
Automatic Stay
Once you have filed your paperwork with the bankruptcy court, an automatic stay immediately goes into effect. This provision prevents creditors from making direct contact with you or staking a claim on any of your property from the day of filing forward. This will stop any foreclosure proceedings, harassing phone calls, or car repossessions. If you have filed Chapter 13, you must begin making your plan payments or you may lose this protection.
Bankruptcy Trustee
Upon filing, the court will assume legal control of your debts and property not covered by your Arizona exemptions. A trustee will be appointed to your case by the court. The job of the trustee is to see that your creditors are paid as much as possible. This person will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and can challenge any element of your case.
Meeting of Creditors
Approximately a month after filing, the trustee will call for a meeting of creditors, which the debtor must attend. This proceeding is also referred to as the § 341 meeting, named after the corresponding section of the bankruptcy code. Creditors rarely attend a Chapter 7 bankruptcy meeting; one or two creditors may attend a Chapter 13 meeting, especially if there is a question as to the legitimacy of some aspect of the plan. Objections are typically resolved by negotiation between the debtor or the debtor's counsel and the creditor. If a compromise can not be reached, a judge will intervene.
The meeting of creditors is usually very brief (literally as little as five minutes in most cases). You will receive notice of the location of the meeting but you may contact the court to confirm the address and time. Most Chapter 7 filings involve no non-exempt assets, however, if you filed for Chapter 7 and do have non-exempt assets, you will have to turn over non-exempt property (or its fair market value in cash) to the trustee after the meeting. The trustee will sell this property and distribute the proceeds to your creditors. If the property is not worth a great deal or would be hard to sell, the trustee may decide to abandon the property, returning it to you. Trustees and creditors have 60 days to challenge the debtor's right to a discharge. If there are no challenges, you will receive a notice from the court that your dischargeable debts have been discharged within about three (3) to six (6) months.
Chapter 13 Plan Confirmation
If you filed a Chapter 13 plan will need to attend a hearing before a bankruptcy judge that will either confirm or deny the repayment plan. If your plan is confirmed and you make good on it, the balance (if any) on the dischargeable debts you owe will be eliminated at the end of your term.
Obviously, bankruptcy can be a complicated process with many technical requirements and provisions. Therefore, it would be wise to seek the assistance of competent, qualified legal counsel to guide you through the bankruptcy process.
Copyright HG.org - Google+
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six (6) months before filing for bankruptcy and to complete a financial management instructional course after filing bankruptcy.
Means Test
Under the same 2005 Bankruptcy Act, your income and expenses must be analyzed to determine if you qualify to file a Chapter 7 or if you must file Chapter 13. To apply the means test, the court will look at your average income for the six (6) months prior to filing and compare it to the median income for Arizona. If the income is below the median then you will be eligible for Chapter 7 bankruptcy. If your income exceeds the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter 13.
Your will likely still be able to file a Chapter 7 bankruptcy if you are unable to pay at least $6,000 over the next five (5) years (that equates to $100 per month) to your unsecured creditors after your living expenses. Of course, if you can pay at least $10,000 over five (5) years ($166.67 per month or more) your Chapter 7 will likely be denied.
If you could afford more than $6,000 but less than $10,000 over five (5) years, a mathematical formula determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you cannot afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 even if you qualify to file under Chapter 7.
Gathering Paperwork
To qualify for bankruptcy, you must itemize your current income sources; major financial transactions for the last two (2) years; monthly living expenses; debts (secured and unsecured); and property (all assets and possessions, not just real estate). You should also collect your tax returns for the last two (2) years, deeds to any real estate you own, the title(s) to your car(s), and any loan documents you may have.
Filing
Once you have gathered all of the necessary information, you should determine which property you believe is exempt from seizure based on the Arizona exemptions. It would be best to consult an attorney for this step, given the complexity of Arizona and federal law affecting this process. To actually file, either you or your attorney, will need to file a petition and several other documents with the bankruptcy court for your federal district. Along with your petition, you will have to file several documents, called schedules, that describe your current financial status and recent financial transactions for the last two (2) years. If your creditors or the judge discover that you have not identified all assets and debts in your bankruptcy filing, it could jeopardize the outcome of your petition.
Chapter 13 Requirements
If you are filing a Chapter 13 bankruptcy, you must also submit a proposed repayment plan. After reasonable monthly expenses have been paid, the question will be “how much money will you have left to put toward outstanding bills?” How this money is to be distributed among creditors is based on a system called “priority.” Priority claims (such as taxes and child support) must be paid in full; unsecured debts (like credit card debt and medical bills) are usually only paid in part. In some cases, unsecured debts can be paid off for as little as 10 cents on the dollar, though this is usually the bottom limit, and your particular payoff may be different.
Additionally, a Chapter 13 repayment plan must meet three requirements:
1) It must be delivered in good faith.
2) Unsecured creditors must be paid at least as much as if a Chapter 7 bankruptcy had been filed. Generally, this is the value of all the nonexempt property you own ( for more information, review the Arizona bankruptcy exemptions).
3) All disposable income must be paid into the plan for at least three (3) years (you may use up to five (5) years in order to meet the second test that you pay at least as much as in a Chapter 7).
If you have filed Chapter 13, you must begin making your plan payments. Generally these payments will be withdrawn directly from your wages and you or your attorney should make the appropriate arrangements for that to occur.
Automatic Stay
Once you have filed your paperwork with the bankruptcy court, an automatic stay immediately goes into effect. This provision prevents creditors from making direct contact with you or staking a claim on any of your property from the day of filing forward. This will stop any foreclosure proceedings, harassing phone calls, or car repossessions. If you have filed Chapter 13, you must begin making your plan payments or you may lose this protection.
Bankruptcy Trustee
Upon filing, the court will assume legal control of your debts and property not covered by your Arizona exemptions. A trustee will be appointed to your case by the court. The job of the trustee is to see that your creditors are paid as much as possible. This person will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and can challenge any element of your case.
Meeting of Creditors
Approximately a month after filing, the trustee will call for a meeting of creditors, which the debtor must attend. This proceeding is also referred to as the § 341 meeting, named after the corresponding section of the bankruptcy code. Creditors rarely attend a Chapter 7 bankruptcy meeting; one or two creditors may attend a Chapter 13 meeting, especially if there is a question as to the legitimacy of some aspect of the plan. Objections are typically resolved by negotiation between the debtor or the debtor's counsel and the creditor. If a compromise can not be reached, a judge will intervene.
The meeting of creditors is usually very brief (literally as little as five minutes in most cases). You will receive notice of the location of the meeting but you may contact the court to confirm the address and time. Most Chapter 7 filings involve no non-exempt assets, however, if you filed for Chapter 7 and do have non-exempt assets, you will have to turn over non-exempt property (or its fair market value in cash) to the trustee after the meeting. The trustee will sell this property and distribute the proceeds to your creditors. If the property is not worth a great deal or would be hard to sell, the trustee may decide to abandon the property, returning it to you. Trustees and creditors have 60 days to challenge the debtor's right to a discharge. If there are no challenges, you will receive a notice from the court that your dischargeable debts have been discharged within about three (3) to six (6) months.
Chapter 13 Plan Confirmation
If you filed a Chapter 13 plan will need to attend a hearing before a bankruptcy judge that will either confirm or deny the repayment plan. If your plan is confirmed and you make good on it, the balance (if any) on the dischargeable debts you owe will be eliminated at the end of your term.
Obviously, bankruptcy can be a complicated process with many technical requirements and provisions. Therefore, it would be wise to seek the assistance of competent, qualified legal counsel to guide you through the bankruptcy process.
Copyright HG.org - Google+
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
