How Long Does a Chapter 7 Bankruptcy Case Take in Arizona?

Chapter 7 Bankruptcy

When you are in debt and creditors are constantly calling, you certainly want to find the right legal remedy as a resolution for financial struggles. You have probably realized that debt can be a never-ending battle when it reaches a certain point, where you are barely making monthly payments that only go toward fees and interest. Chapter 7 may be an option if you qualify, and it is a way to eliminate the debt that weighs you down. However, one important factor in your decision is how long a Chapter 7 bankruptcy case takes in Arizona.

While it is understandable that you want to get rid of debt quickly, there are several steps in Chapter 7. Some requirements will apply even before you file, and there is considerable preparation in advance. Plus, it is wise to consider all bankruptcy options and learn how other solutions might suit your needs. Once you file your petition, there are multiple stages with the Chapter 7 bankruptcy case itself.

It is critical to have legal representation when considering bankruptcy, especially if timing is a concern. When you have a Chapter 7 bankruptcy attorney in Arizona, you avoid the mistakes and delays that can hold back your case. Some background information about the process is also helpful.

Statistics on Debt and Bankruptcy in the US

When you take a look at some of the data on consumer debt in America, you can see why many people look to bankruptcy as a solution. Statistics on debt and bankruptcy reveal that credit cards and personal loan debt spiked in 2023, with increases of 16 percent and 21 percent respectively. In addition:

  • In total, adults in the US carry more than $17.29 trillion across different types of debt as of Fall 2023. This figure represents an increase from the $16.11 trillion in total debt that was reported for 2022.
  • Mortgage debt is the highest percentage of consumer debt, at $11.49 trillion. Credit cards represent $1.02 trillion, and personal loans are $189.4 billion of the total. Personal loan debt grew the most from 2022 to 2023, at a rate of more than 21 percent year-over-year.
  • In 2023, the total number of bankruptcy filings increased 13 percent from the previous year. There were almost 433,700 bankruptcy petitions filed in 2023. The vast majority of these filings, almost 416,600 petitions, were for individuals, married couples, and non-business entities.

Summary of Chapter 7 Bankruptcy

You can better understand how long a Chapter 7 case takes when you know what has to happen during the proceedings. Chapter 7 bankruptcy involves the discharge of your qualifying debt, eliminating it at the end of the process. However, before your debt can be wiped out, the bankruptcy trustee may exercise its powers of liquidation. Your assets could be sold to pay back creditors, though you do have the advantage of exemptions. For instance, you can protect the equity in your home, vehicles, work-related equipment, and personal belongings.

The key to Chapter 7 is that the eligibility rules are very strict. You must qualify based on your income under one of two tests:

  1. Your earnings fall below the state median income level, as adjusted according to household size. Through this test, you automatically qualify. 
  2. If your income is higher, you may be eligible through the Means Test. This assessment reviews your income along with monthly expenses. 

When you do not meet either of these criteria, you are disqualified from Chapter 7. You may still consider Chapter 13, which is a debt reorganization bankruptcy. 

Timeline of a Chapter 7 Case

Now that you know the discharge of your debt and liquidation of your nonexempt assets are at the core of a Chapter 7 case, you can review the steps in the process.

  • Complete the required credit counselling course within 180 days before you file your Chapter 7 bankruptcy petition. 
  • Prepare and file the bankruptcy petition, along with all required schedules.
  • Submit your Chapter 7 filing fee, which is $335.
  • Wait for the court to schedule the 341 Meeting of Creditors, where you will be asked about your finances and the information on your petition. 
  • The bankruptcy trustee will make arrangements to liquidate any nonexempt assets. If your assets would not bring a significant profit, you may be allowed to keep them.
  • The case is completed and your debts are discharged.

In sum, this Chapter 7 bankruptcy process could take around 4 to 6 months. If there are mistakes or delays in getting documentation to the bankruptcy court, your case may last much longer. Note that Chapter 7 is a quicker process than Chapter 13, which takes 3 to 5 years for you to complete the debt repayment plan. 

Categorizing Debt in Bankruptcy

Chapter 7 enables you to wipe out qualifying debt, so there are some types you may not be able to discharge. The bankruptcy process for individuals is intended to eliminate unsecured debt, including credit cards, medical debt, retail store and gas cards, and lines of credit. Unsecured debt includes any credit or loan extended to you in which you did not pledge collateral. Secured debt is not discharged through Chapter 7. The most common type of secured debt in bankruptcy is your mortgage, where your home may act as collateral.

In addition, there are many types of debt that you cannot eliminate because of bankruptcy rules or other laws. Examples of nondischargeable debt include: 

  • Court-ordered alimony or child support;
  • Many types of taxes, though some income tax debt is eligible for discharge;
  • Fines and fees owed to government and administrative agencies; and,
  • Amounts you owe because of a lawsuit in which you injured someone while drunk driving.

How You Can Move the Process Along

When timing is important with a Chapter 7 case, you should realize that there are many things you can do to ensure a smooth process. The first is retaining an Arizona bankruptcy attorney to guide you through Chapter 7. You are less likely to make errors or omissions that delay your case in the bankruptcy court system. To support your lawyer’s efforts with the bankruptcy process, keep the following points in mind.

  • You need to gather and organize all financial documentation on your assets, income, expenses, and debts.
  • Be fully honest with your attorney about your debt, as you will not maximize the benefits of Chapter 7 unless you disclose all the details.
  • Never attempt to transfer assets for less than fair market value in the months before filing for bankruptcy. You risk allegations of fraud since it might appear that you are trying to protect your property from liquidation. 
  • Do not make any luxury purchases or buy high-ticket items in the months before you file for Chapter 7. These acts do not reflect well on your financial aptitude. 

Myths About Chapter 7 Bankruptcy

There is a wealth of misinformation about Chapter 7, Chapter 13, and bankruptcy in general that could cloud your judgment if you do not get clarification. Dispelling these myths is important, so consider a few points:

  • It is not true that creditors can continue to pursue you after you file. Once you submit your petition, there is an automatic stay on all creditor activities.
  • In another myth about the automatic stay in bankruptcy, you should note that there are exceptions to the ban on creditor efforts. Your mortgage lender can request that the bankruptcy court lift the automatic stay, enabling the bank to pursue foreclosure on your home.
  • Many people believe the myth that Chapter 7 will destroy your credit. Untrue, because you will have more financial opportunities once you rid yourself of debt. You will just need to be patient, as Chapter 7 remains on your credit report for 10 years. 
  • Contrary to some assumptions, you can file for Chapter 7 if you have filed for bankruptcy in the past. However, there is a waiting period. To file Chapter 7, you must allow up to 6 years after a Chapter 13 case and 8 years after a previous Chapter 7. 

Benefits of Chapter 7

For many individuals and married couples who discharge debt through Chapter 7, the tension of financial struggles is also eased. You no longer dread picking up the phone, just to hear a harassing creditor on the other end. Your financial future is bright and clear without the uncertainty of debt to stand in the way. Even though your credit score will dip, your situation does not improve if you do nothing. Many debtors would need years or even decades to catch up on debt, during which time your credit score will fall anyway.

With Chapter 7, you get a fresh start and a clean slate with credit. As your credit report continues to list the bankruptcy case, you can still take action to benefit your finances. Make sure to pay all bills for utilities, cell phone, cable, and other services on time, in full. You might also consider a secured loan, in which you deposit a sum of money with a lender that extends credit.

Consult with an Arizona Bankruptcy Lawyer About Chapter 7

These are significant benefits that could make a major positive impact on your financial future, so you are wise to get started right away. While we cannot predict an exact figure on how long your Chapter 7 bankruptcy case will take, our team at DebtBusters will ensure a smooth process. To learn more about how we can help with debt, please contact our offices in Scottsdale, AZ at (866) 223-4395 or via our website. We can schedule a no-cost consultation with an experienced Chapter 7 bankruptcy attorney.

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