Financial difficulties can strain even the most diligent of debtors, and when bills exceed revenue, it might become necessary to seek protection against creditors. Under the bankruptcy protection laws of the United States, debtors can find relief from creditors unwilling to take no for an answer when it comes to restructuring your debt.
A Chapter 7 bankruptcy provides a legal opportunity to get control of your debts when creditors are unwilling to work with you here in the Grand Canyon State. In most cases, a debtor will keep all of their property as exempt.
In exchange, if the debtor is eligible for a discharge, obeys the rules of the bankruptcy court, and pays the court’s filing fee, the trustee can release them from the legal responsibility to pay those discharged debts. A Chapter 7 bankruptcy is an excellent way to get back on your feet financially in the event you fall behind with your creditors.
What is a Chapter 7 Bankruptcy Filing?
A Chapter 7 bankruptcy filing, once completed, results is an order from the United States bankruptcy court that orders the release of a debtor from their financial obligations once they have complied with the terms of the bankruptcy filing. Additionally, once filed, the procedure itself provides relief from creditors demanding payment until the situation resolves itself through the court process. A Chapter 7 bankruptcy is less expensive than a Chapter 13 filing, and takes less time to execute than a typical Chapter 13 filing.
What is a Means Test?
In 2005, the United States Congress passed legislation to tighten the ability to file for bankruptcy protection. One of the primary mechanisms to establish this framework includes the necessity of taking and passing a means test that measures a somewhat distorted state of their financial picture. The means test looks to the filer’s monthly income with an eye to determining whether the debtor falls within established guidelines based on family size and state of residence as reported by the United States Census Bureau.
Types of Debt not Dischargeable under Chapter 7 Bankruptcy
When considering whether to file a Chapter 7 bankruptcy in Arizona, it is important to realize that such action will not necessarily rid the debtor of all their outstanding debts. Some of the more common debts that are not amiable to a discharge in a Chapter 7 bankruptcy proceeding include:
- IRS tax debts less than 3 years old
- Certain debts that existed, but not discharged in earlier bankruptcy
- Student loans
- Debts for certain fines and penalties
- Debt incurred through criminal behavior like fraud or embezzlement
A Chapter 7 bankruptcy, in certain circumstances, can seriously lessen the financial obligation a debtor is responsible for after resolving their bankruptcy, but making sure that your debts will be covered under the proceedings is the first step towards financial solvency.