Frequently Asked Questions

Are you considering filing for bankruptcy? We’ve compiled a list of frequently asked questions related to Chapter 7, Chapter 11 and Chapter 13 Bankruptcy filings. And don’t worry, we eliminated the legalese and explain everything in plain English. If you don’t see your question listed, feel free to contact one of our debt relief specialists anytime.

Chapter 7 Bankruptcy Questions

What is chapter 7 bankruptcy?
Chapter 7 is the most common form of bankruptcy for individuals. It allows you to walk away from the debt you owe, although the company in charge of your bankruptcy is required to sell off your non-exempt assets to creditors — which could include your home and car (but not necessarily).

Who qualifies for chapter 7 bankruptcy?
To determine this, your gross income in the previous six months need to be below the medium state income. This standard varies from year to year. It’s best to contact a bankruptcy lawyer for the current standard.

How long does a chapter 7 bankruptcy take?
Generally speaking, this lasts anywhere from 90 to 120 days after the filing date. You may be asked show up to a “meeting of creditors” during this time, in which creditors are able to ask you questions. Although, most creditors typically don’t attend this meeting (even though you are required to show up for it).

Is chapter 7 bankruptcy a matter of public record?
Yes, chapter 7 bankruptcy is public record. So, anyone is able to look into this information and find it online or in the paper, should they want to.

Will I loose my retirement savings by filing chapter 7 bankruptcy?
You don’t have to worry about your retirement, as this is all protected and isn’t considered property of your estate.

How long will a chapter 7 bankruptcy remain on my credit report?
Chapter 7 bankruptcy stays on your credit for 10 years.

What is Chapter 11?

The term Chapter 11 refers to a portion of United States Bankruptcy Code. In Chapter 11, a person or business has the opportunity to reorganize their debst to make the payments more manageable.

Who can use Chapter 11?
In general, any person or business can petition the court for Chapter 11 protection. Some common exceptions are banks, insurance companies and estates. Chapter 11 bankruptcy is most often utilized by businesses.

Must a person or company liquidate assets in a Chapter 11?
A Chapter 11 works to reorganize the debts of a person or business. This will allow them to pay their debts, maintain their assets and achieve financial stability. In most cases, the liquidation of assets will not occur as part of a Chapter 11 bankruptcy filing.

How long does Chapter 11 take?
There are two distinct parts of a Chapter 11 proceeding: the pre and post confirmation periods. Basically this refers to the time until the court approves the Chapter 11 plan and the time to complete the plan. While these can vary significantly, the pre-confirmation period generally takes about a year and the post-confirmation period takes from three to five years.

How much will Chapter 11 cost?
The cost of filing for Chapter 11 will vary depending on the complexity of the case. The bankruptcy court will charge a $1,000 filing fee and $46 administrative fee to accept the filing. However, the courts recognize that those filing for Chapter 11 are struggling financially and may allow a person or business to make payments over time on this amount.

What are the benefits of Chapter 11?
The goal of Chapter 11 is to help structure debts in a more favorable manner to allow a business or individual to become financially stable. In a Chapter 11, a business can continue to operate normally, without fear of creditor collection, allowing it to make money and gain customers to improve their overall financial situation.

What is a debtor in possession?
A debtor in possession is a common term regarding Chapter 11. This term simply refers to the person or business filing for Chapter 11 who will retain power over the assets. The debtor acts as the trustee of the assets until the proceeding has ended.

What is an involuntary Chapter 11?
An involuntary Chapter 11 refers to the process of a creditor or creditors forcing an individual or business into bankruptcy.

What are the financial requirements for Chapter 11?
Depends on the case. Though, an individual or business filing for bankruptcy protection does not have to be insolvent (more debts than assets).

Can any size business file for Chapter 11?
No. There are restrictions on the businesses that can file for chapter 11. The standard is based on the perceived ability for the business in question to pay back their debt. Consultation with a bankruptcy attorney is recommended.

Arizona Chapter 13 Bankruptcy FAQ

Q: What is chapter 13 bankruptcy?

Under Chapter 13, the debtor has a regular income and agrees to repay their debt in a reasonable time frame. No assets are forfeited or liquidated. If the repayment plan is approved by the court, the debtor is protected from forced liquidation. The most significant benefit of filing Chapter 13 is that, generally, you get to keep your home from automatically being foreclosed. In addition, any third party co-signers are exempt from liability as a result of your filing.

Q: How do I know if I qualify to file?

If you’re employed, self-employed or even own an unincorporated business, you’re eligible to file. That being said, if you have had one bankruptcy petition dismissed because you willfully failed to appear before a bankruptcy court, or failed to comply with court orders from a previous filing during the preceding 180 days, you cannot file.

Q: What do I need to know about credit counseling?

Prior to filing bankruptcy under Chapter 13, you must first attend a group or individual briefing. However, if the bankruptcy administrator or trustee determine that there aren’t any approved credit counseling agencies in your area, you may be exempt from attending.

Q: Can I file for bankruptcy without a lawyer?

A: Filing without a lawyer is called ‘pro se.’ Yes, you may, but it’s not recommended. Filing pro se is never as successful as with an attorney. You will be facing experienced attorneys representing the opposing side.

Q: What will I need to provide?

You will need: A complete list of all your creditors, how much you owe them and for what products or services; A complete list of all your properties; A detailed list of all your monthly living expenses including food, clothing, utilities, medicine, shelter, transportation, taxes, etc.

Q: Does my spouse’s information need to be included if I am filing individually?

Yes. Bankruptcy cases are determined on household income.

Q: Will a bankruptcy claim appear on my credit report?

Yes.

Q: Can I have it removed?

The Bankruptcy Court does not have any jurisdiction over consumer credit reporting agencies. Nor does it notify those agencies when a case is filed. Neither can the court affect a credit report change. As a general rule, your creditors collect that information from public sources and/or will report credit information to the credit reporting agencies.

The Fair Credit Reporting Act directs that filed bankruptcy cases cannot appear on your credit report once 10 years have passed from the filing date. Generally, after 8 years, most negative credit report information will be removed.

Q: I filed for bankruptcy more than 10 years ago and it is still appearing on my credit report. How can I have it removed?

Any complaints about an organization, company or business practice can be reported to the Federal Trade Commission at 1-877-382-4357. The FTC website has a lot of information available about your credit report rights. They can assist you with claims and getting erroneous and outdated credit information removed from your credit report.

Q: What is a hardship discharge?

A hardship discharge frees the debtor from further adhering to the bankruptcy terms. It may be applied for if: (1) the debtor, through no fault of their own, is unable to complete the plan payments; (2) the creditors have already received as much as they would have in a chapter 7; and (3) plan modification is not possible. Inability to secure adequate employment due to injury or illness could justify a hardship discharge.