Filing bankruptcy Chapter 7 can discharge or eliminate most of the types of debt available to debtors so that you can be granted debt relief for a fresh start. However, filing for bankruptcy grants you bankruptcy protection so that you are safe from creditor harassment, collection calls, foreclosure, car repossession, and wage garnishment, not all debts are dischargeable when you file for bankruptcy and you will still need to pay what you owe.
What are the Dischargeable Debts in Arizona?
After qualifying for the means test and credit counseling required in bankruptcy Chapter 7 and Chapter 13, it will then enable you to discharge the following debts:
- Credit card bills
- Medical bills
- Tax debt
- Past utility bills
- Loan debt
- Student loans if you experienced undue hardship
- Attorney fees
Note that if your debts were acquired through fraud or misconduct, such debts will turn into non-dischargeable debts.
What are Non-dischargeable Debts in Arizona?
As mentioned above, not all debts can be removed when a person files for bankruptcy. Such debts include:
- Alimony
- Child support
- Debts to a prior spouse according to the bankruptcy and divorce laws in Arizona
- Fines
- Student loan
- Purchase of luxury goods
- Cash advances
- Debts acquired through pretense or fraud
What are the Debts you Need to Pay Off?
In Arizona, there are two types of debt that you need to continue paying during Chapter 7:
1. Post-Petition Debts – are bills you incur after you file a bankruptcy petition. While the petition is still pending when you acquired other debts, the bankruptcy court will not include such debts to be discharged, you will need to pay back your lenders. Common examples of post-petition debts are:
- Utilities
- Lease or rent payments
- Homeowner association or condominium fees
- Recent taxes
- Insurances
2. Secured debts – are debts that are secured by mortgage payments and other debts that put a lien on your property as collateral. Common examples of secured debts are:
- Mortgages
- Car loans
- Business property loans
- Line of credit for a home equity
Unsecured debts can be wiped out but secured debts will not because it is the creditors’ rights to be paid.
Due to Chapter 7 being a liquidation bankruptcy where the trustee will liquidate the debtor’s assets and use the proceeds to repay the creditors, the bankruptcy trustee will pay the secured debts first as a priority before the unsecured debts. Furthermore, most liens will remain on the secured property even if the debts are discharged. Take, for example, car loans where you are required to make monthly payments If you declare bankruptcy and your car loans are discharged as a result, you are not obligated to pay the motor vehicle anymore but your bank or whoever has the right to the vehicle will take back the car.
Talk to a Bankruptcy Attorney in Arizona
The Bankruptcy Code allows an individual to file for bankruptcy cases without the need of a bankruptcy lawyer, but doing so is risky because the laws are changing and the bankruptcy process can be very complex without prior knowledge. If you are considering bankruptcy but you are not yet certain if filing bankruptcy is the best choice, we, at Phoenix Fresh Start Bankruptcy Attorneys, will help you get to the right decision to resolve your financial problems and obtain a fresh start. Our bankruptcy lawyers in Arizona are experienced in bankruptcy-related matters. Call us now for a free legal consultation!
