FAQ (Frequently Asked Questions)

Please note: Bankruptcy laws vary by state, the following is applicable to Arizona

What is bankruptcy?
Bankruptcy permits you to work out a plan to lower your debt and discharge some of it (Chapter 13) or completely eliminate most (Chapter 7) of the debt you owe to your creditors.

What is the difference between secured and unsecured creditors?
Unsecured creditors include credit cards, medical bills, attorneys fees, and other debts where you do not have something tangible the creditor can easily take back. Secured creditors include banks holding mortgages on your home, auto dealers you have a car loan with, and financing secured to a loan like for furniture or a TV. Secured debt generally cannot be discharged in a bankruptcy, but the bankruptcy laws provide protection so you can usually keep one car and your home, provided you continue to make the payments. 

Will a bankruptcy stop creditors from contacting me?
Yes. Once you file for bankruptcy, the “automatic stay” goes into effect. Unsecured creditors are prohibited from contacting you or trying to collect during that time. Once the bankruptcy discharge is signed by the judge, unsecured creditors are permanently banned from from ever trying to collect from you again. 

Why should I hire an attorney?
There are many pitfalls to filing bankruptcy. If you do not file properly, you risk having the petition dismissed. It costs another $500 to reinstate a Chapter 7 bankruptcy that has been dismissed for being improperly filed. Have you heard the saying, “An attorney who represents himself has a fool for a client?” Even attorneys won’t represent themselves in areas of law they do not have expertise in. 

How do I know whether a Chapter 7 or Chapter 13 bankruptcy is best for me?
We can go over the facts of your situation and tell you which option appears to best fit your situation. A Chapter 7 bankruptcy will completely eliminate your unsecured debt. This may be the best option for someone with a lot of credit card debt. However, there are income caps that apply, and in Arizona, you must fall under the income ceiling for your county in order to qualify. A Chapter 13 bankruptcy will lower your payments to your creditors and establish a payment plan of five years to repay everything. 

If I have no money, how can I afford a bankruptcy?
Currently you are probably paying hundreds of dollars a month to unsecured creditors. If you file bankruptcy, you can stop paying all those creditors immediately and afford the $995 fee for a Chapter 7 bankruptcy and $299 court filing fee. You may even be able to get back payments you’ve made to unsecured creditors within 40 days of filing for bankruptcy.

How often can I file for bankruptcy?
You can file for Chapter 7 bankruptcy eight years after filing for a previous Chapter 7 bankruptcy, or six years after filing for Chapter 13. You can file for Chapter 13 bankruptcy four years after filing for Chapter 7, and two years after filing for a previous Chapter 13 discharge. If you did not fully complete a previous Chapter 13, there is no discharge and you may be able to file sooner.

How long will a bankruptcy stay on my credit record?
Usually 7-10 years. However most people’s credit scores actually improve by about 100 points a year after filing bankruptcy, due to so much bad debt being eliminated. You will also start getting credit offers in the mail immediately after filing for bankruptcy. It is also possible to buy a home immediately after filing for bankruptcy, although you may be required to put down a substantial down payment. 

What else can I keep if I file for bankruptcy?
Besides your home ($150,000 equity) and car ($5000 equity) up to a certain amount, you can keep a reasonable amount of personal property, such as jewelry ($1000 for engagement and wedding rings), clothing, tools of the trade for your job ($2500), and home furnishings ($4000). If you have life insurance, you can keep up to a cash surrender value of $25,000 and life insurance proceeds of $20,000.

What do I need to do to get started?
You will need the last two months of your pay stubs, and will need to be caught up on your last two years of federal and state income tax filings (you do not need to have paid any taxes owed however). We will need a list of your creditors and how much you owe, but we usually pull a credit report with your permission that has almost all that information on it. The process is pretty fast, and filing for bankruptcy can usually be done within just a few days after the initial consultation.

How long does a bankruptcy take?
Typically the discharge is entered within 60 days after filing. 

What else happens in the bankruptcy process?
There is a 341 meeting of the creditors. It is usually a very short 5-10 minute meeting with the trustee, where the trustee looks for anything unusual. Creditors who have disputes with anything in your filing will show up to this meeting. Typically, if your bankruptcy has been prepared by an experienced attorney, creditors will not show up.

Can I file with my spouse?
Yes, you can file jointly with your spouse at no extra cost.