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Chapter 7 is the most common form of bankruptcy in Arizona and throughout the U.S. It wipes out most forms of debt, such as credit cards, medical bills, and most tax debt over three years old. It also eliminates debt stemming from vehicle repossessions and real estate foreclosures. Not everyone qualifies for Chapter 7 Bankruptcy.
In order to be eligible to file this type of bankruptcy, your income must be less than Arizona’s median income for your family size or you must pass the Means Test, which is a complicated test based on your income and expenses. Alternatively, a person may qualify for Chapter 7 based on the types of debt they have. If more than half of one’s debt is investment or business related, they may still be able to file Chapter 7 irrespective of their income.
You cannot receive a discharge in a Chapter 7 if you previously completed a Chapter 7 Bankruptcy within the last eight years. |
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Chapter 13 Bankruptcy is also known as a reorganization, because it allows for the repayment of debt over a three to five year period. Payments are based upon your disposable income, which is the income left over after you pay your necessary monthly expenses.
Chapter 13 can be a powerful tool in many circumstances. For example, a person may file Chapter 13 on the eve of a foreclosure and save their house by making small catch-up payments. In addition, it can protect assets that may not be protected under Chapter 7.
Unlike Chapter 7, everyone is eligible to file Chapter 13. Because you are repaying part of your debt, one advantage of filing this type of bankruptcy is that it appears on your credit report for a shorter period of time than a Chapter 7. |
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In the case of small businesses, most individuals who believe that they need to file bankruptcy for their business actually need to file a personal bankruptcy in the form of Chapter 7 or Chapter 13 instead.
We often encounter situations in which a corporation or LLC with few assets ends up closing or experiencing a slump, and the owner is left with debts that are personally guaranteed. In order for the business owner to avoid getting sued personally, filing Chapter 7 or 13 is often the best solution. Each business is unique, however, and will require an evaluation from one of our experienced attorneys in order to decide the best course of action. |
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