Reagen Kulseth

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3333 North Campbell Ave · Suite 10 · Tucson, AZ 85719
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Debt can cause frustration, stress and depression. However, with the help of an experienced law firm, you can overcome the burden. Contact The Law Office of Reagen Kulseth to receive sound legal advice.

Chapter 7 Bankruptcy

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is a means by which a person is released (discharged) from paying his or her debts by filing for bankruptcy. The person (debtor) is permitted to keep those assets that are exempt from liquidation, reaffirm (continue to pay) on secured assets he or she wants to keep, and surrenders all of the other non-exempt assets to the bankruptcy trustee. Under Chapter 7 of the Bankruptcy Code, all non-exempt property of the debtor is sold and the proceeds of the same are distributed to the creditors. Ordinarily, most (if not all) debts would be discharged within months of your Tucson Attorney filing a bankruptcy petition. An added advantage to Chapter 7 bankruptcy is that by signing a reaffirmation agreement, a debtor can continue to pay for a car loan or a mortgage on their home. If you are considering Chapter 7 bankruptcy, contact a Attorney in Tucson as soon as possible.

Who can file for Chapter 7 bankruptcy?

Any person who resides in, who does business in or who has property in the United States may file under Chapter 7, except for people who were involved in another bankruptcy case that was dismissed within the last 180 days on certain grounds or who received a Chapter 7 discharge.

How much does it costs to file for Chapter 7 bankruptcy?

The court's filing fee is $299 for a Chapter 7 bankruptcy, whether you are filing for bankruptcy individually or jointly with your spouse. In addition to the court filing fee, the petitioner must pay approximately $100 to take two mandatory classes. Our office will assist you in making arrangements for both classes. Attorney fees vary based on the complexity of the case.

Help from a Tucson Law Firm

What is the role of the attorney in a bankruptcy proceeding?

A Tucson bankruptcy lawyer is responsible for-

  • Analyzing the amount and character of the debts owed
  • Assembling the information and data necessary to prepare the bankruptcy schedules and statements for signature and filing
  • Preparing the proper petitions, schedules and statements for filing with the bankruptcy court
  • Reviewing the debtor's credit history and records to identify all of the creditors
  • Attending the meeting of creditors with the debtor
  • Preparing and filing amended schedules as required by the court
  • Addressing issues related to redemption, surrender or reaffirmation
  • Responding to inquiries from creditors and/or the bankruptcy trustee

How do I know if I qualify to file Chapter 7 bankruptcy?

A debtor must satisfy the "means test" in order to qualify for Chapter 7 bankruptcy. The "means test" is a formula that determines whether the person filing for bankruptcy protection has enough income to pay the expenses that are allowed, plus extra money to pay to non-priority, unsecured creditors such as credit cards. If your income is below the average for your state, then you can file for Chapter 7 bankruptcy without any problems. If your income is above the state average, however, the means test determines if you have enough disposable income to pay off some or all of your debt and looks at your disposable income (the amount left over after paying your expenses). If your disposable income is too high, the bankruptcy court may decide that you can pay off at least some of your debts, and prevent you from filing for Chapter 7 bankruptcy. A debtor who fails the means test may be required to convert the case to a Chapter 13 bankruptcy or lose the bankruptcy protection completely. For more information on qualifying for Chapter 7 bankruptcy, seek the help of Law Firms in Tucson.

What classes are required before and after filing a bankruptcy?

Our knowledgeable Attorney in Tucson can explain that due to concerns of people abusing the protections under the U.S. Bankruptcy Code, everyone who files for Chapter 7 bankruptcy is required to take a credit counseling class within 180 days BEFORE filing their bankruptcy petition. Proof of completion of the class must be filed at the same time as the petition itself. The purpose of the pre-filing counseling class is to help the debtor gain a full understanding of the process of a new bankruptcy filing, to understand the consequences of bankruptcy with regard to their credit score, and to investigate available alternatives to filing for bankruptcy.

After filing for bankruptcy, a second class is required for education purposes. The debtor must take this class between the time that he or she files a bankruptcy petition and the bankruptcy is discharged. Typically, the pre-discharge classes are two hours in length. During that class the consumers learn about budgeting and more effective money management skills. They also learn about the proper uses of credit, how to re-build a positive credit record, how to recognize predatory lending practices and how to avoid such practices, and how to take steps to protect against identity theft.

How Assets and Property Are Affected by Bankruptcy

What is the automatic stay?

Under 11 U.S.C. 362, the filing of a bankruptcy petition creates an automatic stay, prohibiting all collection actions. A few days after a Chapter 7 petition is filed, the court mails a notice to all creditors, ordering them to refrain from any further action against the debtor. If you cannot wait this long, you or your bankruptcy lawyer in Tucson can notify one or more of the creditors of the bankruptcy filing. In short, the automatic stay stops most lawsuits that have been filed against you as well as garnishments, foreclosures, repossessions and creditor harassment. The filing of a Chapter 7 petition does not affect criminal proceedings, paternity actions and collection of domestic support obligations (child support) through wage withholding.

Will I lose all of my property if I file bankruptcy?

Under Arizona law, certain properties are declared to be exempt and out of reach of your general creditors. A trustworthy Tucson Law Firm can provide you with a full list of property and assets that are exempt. If you owe back child support or spousal maintenance/alimony, however, your exempt property may also be seized and sold to pay the debt. Here is a list of just some of the types of exempt property in Arizona:

  • Up to $150,000 of the equity in a home, townhouse, condominium, mobile home, or mobile home and lot in which the debtor resides.
  • One motor vehicle not in excess of a fair market value of $1,500. If the debtor is maimed or crippled, the fair market value of the motor vehicle shall not exceed $4,000.
  • Domestic pets, horses, milk cows and poultry not in excess of an aggregate fair market value of $500.
  • All food, fuel and provisions actually provided for the debtor's individual or family use for six months.
  • Some household furniture, furnishings and appliances personally used by the debtor are exempt from process provided their aggregate fair market value does not exceed $4,000. You must reside in Arizona for the last two years in order to use Arizona exemptions. Otherwise, you will have to use the state that you lived in for the six months prior to the last two years prior to filing a bankruptcy.

What happens to the property turned over to the bankruptcy trustee?

The bankruptcy trustee will immediately begin to collect all of your property to which he is entitled by law. You are obligated to protect those assets until the trustee can make arrangements to pick them up. A public auction is held and your property is converted into cash, which is then distributed to those of your creditors who file claims against your bankruptcy estate. After the auction of the items, the trustee will notify your creditors to file a proof of claim, usually within six months after the meeting of creditors. All claims not objected to will receive a pro-rata share of whatever the trustee has collected. The fees for the auctioneer, trustee and their attorney are paid out of the funds they collected, not by the debtor.

What will happen if there is no money or property to turn over to the bankruptcy trustee?

If you have no money or property of a value in excess of the exemptions allowed by law, your case will be considered a "no-asset" case.

How does filing for bankruptcy affect my credit rating?

Once you file for bankruptcy, your credit rating will drop anywhere from 80 to 220 points. When you file for bankruptcy, you are still obligated to pay student loans, child support, taxes, fees and other types of debt. If you are delinquent on these payments, your credit rating may drop an additional 70 to 120 points. Lenders will compare your information against others who have filed for bankruptcy to calculate your credit rating. A Chapter 7 bankruptcy will remain on your credit report and potentially affect your credit rating for ten years.

It may not take long after your discharge, however, to substantially raise that rating. Several financial institutions openly solicit business from recent debtors, apparently because they know that the debtor cannot file for Chapter 7 bankruptcy again for at least eight years. If there are compelling reasons for filing for bankruptcy that were not within your control, such as an injury or illness, the creditor may take that into consideration when rating your credit after bankruptcy.

What is a reaffirmation agreement?

A debtor can keep non-exempt property for which a debt is owed by reaffirming the debt. This is most commonly done for mortgages and vehicles. The debtor will sign a new agreement with the lender re-establishing his/her personal liability to a creditor. This agreement is then submitted to the court. The court may refuse to sign the reaffirmation agreement if it appears that the debtor cannot afford the contractual payments.

What is a discharge in bankruptcy?

A discharge is the court's order stating that you do not have to pay your debts to the creditors that were listed in your bankruptcy documents, so long as the court did not entered a non-dischargeability order. Other debts that are not discharged under the current laws include student loans, child support, alimony/maintenance, government fines or penalties, most taxes and a few others. The effect of a discharge is that debtors are released from personal liability for all dischargeable debts, and all creditors whose debts are discharged are prohibited from performing any act to collect such debts from the debtors. This is known as a permanent federal injunction.

The granting of a discharge does not stop the debtor's involvement in his or her case. The debtor must continue to comply with the court's orders, such as continuing to surrender assets or tax refunds to the trustee after the discharge is entered. In the event the debtor fails to perform those duties, an action may be brought to revoke the discharge. This will mean that the debtor went through all this hassle and ends up with no protection from his or her creditors garnishing wages, suing or seizing bank accounts.

What debts are not discharged in bankruptcy?

If your discharge in bankruptcy is granted, in most circumstances all of your debts will be discharged except the following list, which is intended to be only an outline of most debts that are not discharged:

  • Taxes due within the last three years or taxes not assessed because of fraud
  • If the bankruptcy court so rules, debts for obtaining money, property, services or an extension, renewal or refinancing of credit by means of false pretenses, fraud or a false financial statement used with intent to deceive
  • Debts not listed on your bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim
  • If the bankruptcy court so rules, debts for fraud, embezzlement or larceny
  • Debts for domestic support obligations (alimony, maintenance or support)
  • If the bankruptcy court so rules, debts for intentional injury
  • Debts for certain fines and penalties payable to governmental units
  • Debts for student loans that were insured by a governmental agency, unless not discharging the debt would impose a severe undue hardship. This undue hardship must be properly pleaded to the court, and the judge will decide based on your unique situation
  • Debts that were or could have been listed in a prior bankruptcy case in which you either waived your discharge or your discharge was denied
  • Debts that are owed to a single creditor for a total of more than $500 for the purchase of "luxury goods" incurred by you in the 90 days before you filed the petition for bankruptcy. The 90-day period may be long, depending on your history of paying, what the money was used for and your "intent" at the time of incurring the debt.
  • Cash advances that total more than $1500 that arose from the extensions of consumer credit under an open-end credit account incurred by you in the 70 days before the bankruptcy was filed, regardless of the number of creditors involved
  • Debt for personal injury judgments against you resulting from car accidents in which you were a drunk driver
  • Post-petition homeowners association fees
  • Monies owed to a pension, profit-sharing, stock bonus or such other plan

Other Considerations About Chapter 7 Bankruptcy

What about my tax refund check?

Any right that you had to a tax refund at the time of filing for bankruptcy is an asset of your bankruptcy estate and belongs to your trustee. At the time that you get your tax refund check, you must turn that check over to the trustee. You should anticipate that the trustee will take a portion of the refund equal to the amount due to you on the date of filing.

Under what conditions should a husband and wife both file under Chapter 7?

Both a husband and wife should file if some of the debts to be discharged are owed by both spouses. In a community property state such as Arizona, most debts incurred during the marriage are the joint responsibility of each spouse, even if only one spouse's name is on the debt. If both spouses are liable for some of the debts and if only one spouse files for Chapter 7 bankruptcy, the creditors often try to coerce the non-filing spouse into paying the debts, even if he or she has no income or assets. If a husband and wife are considering a divorce, it is recommended that they file for bankruptcy together before the divorce, rather than after the divorce as individuals. You should also hire a seasoned bankruptcy lawyer in Tucson to assist you with your case.

May employers or government agencies discriminate against me for filing for Chapter 7 bankruptcy?

It is illegal for either private or governmental employers to discriminate against a person as to employment solely because that person has filed for Chapter 7 bankruptcy. It is also illegal for local, state or federal governmental units to discriminate against a person as to the granting of licenses (including a driver's license), permits and similar grants because that person has filed under Chapter 7.

When will I go to court in a Chapter 7 case and what do I do there?

Typically, you will only have to go to court once about a month after your case is filed. This is known as the meeting of creditors. There, you will be put under oath and questioned about your bankruptcy papers and your assets by the bankruptcy trustee. In all probability, few, if any, of your creditors will appear.

Contact Us

The Law Office of Reagen Kulseth provides you strong representation when you need it most. For your $150 initial consultation or more information about bankruptcy, call our Attorney in Tucson today at (520) 888-4200, or contact the law firm using our web form.