Arizona Bankruptcy Court Laws
When debt becomes too much to handle, it's time to take action to resolve a serious financial situation. Bankruptcy can present a solution to the problem, whether allowing the debtor to reorganize debt or start anew financially. Before filing for bankruptcy in Arizona, here are a few things to keep in mind.
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Common Types of Bankruptcy
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There are several types of bankruptcy for both personal and business finances. Among the most common for personal bankruptcy are Chapter 7 and Chapter 13. Chapter 7 allows debtors to charge off most debts to achieve a fresh start. To qualify for Chapter 7, debtors must make less than the Arizona median income for their size of household. For those who don't qualify for Chapter 7 or want to hold onto certain liabilities such as a home or a car, Chapter 13 bankruptcy lets debtors reorganize debts under a manageable repayment plan over a few years' time. Chapter 11 is a common form of bankruptcy for businesses because it allows for debt restructuring while the business remains open.
Excluded Debts
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Although bankruptcy gets rid of most debts, a few liabilities cannot be charged off, including alimony, child support, most student loans, back taxes and recent luxury purchases.
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Chapter 7
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Before filing for bankruptcy, debtors are required to complete a credit counseling and debt education course approved by the court. To file for Chapter 7 bankruptcy, you must present a statement of financial affairs, which includes a complete list of your debts, assets, property, income and living expenses, along with a filing fee to the bankruptcy court. A trustee is appointed to determine if any of your assets can be sold to pay debts. After filing, creditors cannot collect or attempt to collect on the debtor. About 30 days after filing, the debtor must attend a 341 meeting, otherwise known as the first meeting of the creditors. In the 341 meeting, the trustee can ask the debtor questions about his or her debts, property and income. Creditors can also attend the meeting but rarely do. About 90 days after the 341 meeting, the bankruptcy court issues an order to creditors to discharge debts.
Filing Chapter 13 Bankruptcy
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As with Chapter 7 bankruptcy, Chapter 13 filers also have to provide a statement of financial affairs. Those filing for Chapter 13 bankruptcy also have to present a three- to five-year debt repayment plan for the approval of a court-appointed trustee. Upon approval, debtors make payments to the trustee, and the trustee distributes the money to the creditors listed in the plan. In case of hardship such as serious illness or losing a job, the plan can be modified to fit the debtor's income. But, in some cases, if the debtor does not keep up with the payments, the Chapter 13 bankruptcy can be dismissed and creditor collection efforts can resume.
Chapter 11 Bankruptcy
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To restructure organizational debt, filers must present schedules of assets, liabilities, income, expenditures, contracts and leases to the bankruptcy court. A disclosure statement, which describes the nature of the business, and a plan of reorganization are also due at the time of filing.
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