Phoenix Bankruptcy Lawyers Discuss The Benefits & Drawbacks Of Filing For Bankruptcy In Arizona
Millions of Americans and tens of thousands of Arizonans are struggling financially due to the coronavirus pandemic. This could lead to a surge in bankruptcy filings in the Phoenix Metro area as well as maricopa county. Therefore, declaring bankruptcy in Phoenix may be a good option to address your debts, but it doesn’t come without disadvantages. Thus, before making the decision to declare Chapter 7 bankruptcy, you should inform yourself about the pros and cons of a Chapter 7 filing.
Benefits Of Filing Chapter 7 Bankruptcy In Phoenix
Discharge Unsecured Debts
Chapter 7 bankruptcy can discharge thousands of dollars of credit cards, medical bills, personal loans, repossession deficiencies, back rent, some taxes, and more. Some people may struggle with debts, but they are mainly secured debts, or they are priority debts that can’t be discharged in bankruptcy. However, several of our clients discharge tens of thousands of dollars worth of debt through Chapter 7. If you are uncertain about your debt structure, schedule a consultation with a bankruptcy attorney to review your debts for dischargeability.
Declaring Chapter 7 Bankruptcy In Phoenix: Stop Foreclosures, Repossessions, Wage Garnishments, and More
Once your case is filed, you will be protected by the Automatic Stay. The Automatic Stay stops your creditors from repossessing your assets, foreclosing on your home, garnishing your wages, shutting off your utilities, etc. You will be protected until your bankruptcy is discharged, unless your case is discharged or your creditor petitions for an exception to the Automatic Stay.
May Improve Your Credit Score Over The Long Term
Filing bankruptcy may take a hit on your credit score, but it may have no initial impact, or even a small positive effect. If you take the proper steps to rebuild your credit after bankruptcy, you will see a dramatic improvement in your score in the 12-18 months after your case is discharged.
Declaring Bankruptcy Is a Fast & Simple Legal Procedure
Some legal matters will require hours of your day for months, or even years. Chapter 7 bankruptcy should not be one of those matters. Once you have assembled your necessary documents for your petition, you will submit them to your attorney or draft your petition. You will need to take an online credit counseling course- about 1 hour- before filing your petition. You will need to attend a hearing known as a 341 Meeting of Creditors 30-45 days after your petition is filed. These hearings are typically scheduled to last 30 minutes. Lastly, you will complete a second credit counseling course. Once you have completed these relatively simple steps, you will sit back and wait the required 60 days after your 341 Meeting of Creditors before your debts are eligible for discharge.
Chapter 7 Allows You To Surrender & Abandon Leases, Mortgages & Loans That Are Too Expensive
Several of our clients come to our offices in vehicles with high mileage, mechanical issues, and a loan balance far higher than the car’s Kelley Blue Book value. Chapter 7 bankruptcy is a chance to start fresh, and surrender the vehicle without the typical fees and penalties associated with that. You may be able to finance a vehicle just as soon as the day after your petition is filed, if you find a lender that works with bankruptcy clients. Similarly, you can abandon rental leases, mortgages, and other contracted loans that are no longer financially viable in Chapter 7 bankruptcy.
Chapter 7 Bankruptcy In Phoenix Stops Creditor Harassment
The Automatic Stay stops your creditors from collection while your case is active, but bankruptcy can help you stop creditor harassment long before then. If you are planning to file bankruptcy but need more time to prepare, you can retain your bankruptcy attorney in advance. Once you inform your creditors that you have retained a bankruptcy attorney, your creditors must contact your attorney instead of you.
Disadvantages Of Filing Chapter 7 Bankruptcy In Phoenix
The Automatic Stay Freezes Your Credit Cards
The Automatic Stay that goes into effect when your petition is filed freezes all of your assets, including your credit cards. Because these debts will be discharged in your bankruptcy, you can’t continue using them while your case is pending. You won’t be able to get new credit cards until your case has been discharged.
There are also restrictions to how you can use your credit card before your Chapter 7 case is filed. There are certain spending limits in place to prevent debtors from fraudulently incurring debts before filing bankruptcy without any real intention to ever repay. If you are found to have violated these rules, you may be required to pay the balance before your case can be discharged, or it may not be discharged with your other debts in the bankruptcy.
Ineligibility For Home Loans For 2 Years After Filing Bankruptcy
You will need to wait 2 years from the date your Chapter 7 bankruptcy petition is filed before you can qualify for most home loans. However, a Chapter 7 bankruptcy won’t make you ineligible for residential leases.
Derogatory Marks On Your Credit Report
A Chapter 7 bankruptcy will remain on your credit report for 10 years. Lenders and other institutions will see your bankruptcy and take it into consideration when you apply for lines of credit in the future. In comparison, a Chapter 13 bankruptcy will remain on your credit for 7 years.
Doesn’t Discharge Student Loans, Child Support & Other Debts
It is extremely rare to discharge student loans in bankruptcy. Only debtors who meet the strict requirements of the Brunner Test will see their loans discharged through a Chapter 7 bankruptcy filing.
Domestic obligations, like child support and spousal maintenance, can’t be discharged in Chapter 7. Not only that, but the Automatic Stay in a Chapter 7 won’t stop a wage garnishment due to back child support or spousal maintenance. These wage garnishments can only be stopped by a Chapter 13 bankruptcy plan that pays off the full balance.
Taxes are only dischargeable in Chapter 7 bankruptcy if they meet certain requirements: (1) they have been due for at least 3 years; (2) they were filed at least 2 years ago; (3) the debt was assessed at least 240 days before filing; (4) you didn’t commit tax evasion or fraud. Debts stemming from personal injury and criminal cases are also often nondischargeable in bankruptcy.
Contact Our Phoenix Chapter 7 Bankruptcy Attorneys Today For Help
The benefits and disadvantages of bankruptcy will be impacted by the specific facts of your case. Your income, possessions, and other factors could all make Chapter 13 bankruptcy or another route a better choice for you. To learn more about how Chapter 7 bankruptcy will impact you, and your other debt relief options, call today to schedule your free consultation at (480) 263-1699. Our Phoenix Bankruptcy Lawyers are ready to assist you with your debt relief needs.
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