A Chapter 13 bankruptcy is the second most common type of bankruptcy.  According to http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx, a Chapter 13 bankruptcy is also called a wage earner’s plan.  It enables individuals with regular income to develop a plan to repay all or part of their debts.  Under this Chapter, debtors propose a repayment plan to make installments to creditors over three to five years. 

            There are a few advantages to filing a Chapter 13 over a Chapter 7.  According to http://ezinearticles.com/?The-Advantages-of-Chapter-13-Bankruptcy&id=560652, foreclosures are the biggest reason that most people choose Chapter 13 bankruptcy rather than the more attractive Chapter 7.  With Chapter 13, homeowners who face foreclosure proceedings can halt the legal action by choosing this bankruptcy option. 

            Another reason that debtors choose a Chapter 13 bankruptcy over a Chapter 7 bankruptcy is because it allows the debtors to repay secured debts over a period of time.  Usually, the debtor’s payment plan will lower the monthly payments owed by the debtor to a particular creditor.  Most people who file a Chapter 13 bankruptcy feel as if they have a moral obligation to repay their debts. 

            Another advantage of filing a Chapter 13 is that it enables the debtor to change the nature of the second mortgage on their home.  According to http://ezinearticles.com/?Advantages-of-Filing-For-Chapter-13-Bankruptcy&id=3939365, filing a Chapter 13 can change a debtor’s second mortgage into an unsecured debt.  This is an important distinction because as an unsecured debt, a debtor will not have to repay the full amount the debtor owes on their second mortgage.  This will lower the amount the debtor is paying for their house and the second mortgage will be discharged, if the debtor completes the repayment plan. 

            A Chapter 13 bankruptcy can benefit many debtors, but a debtor has to be sure that this is right for them.  The best thing that a debtor can do is talk with an attorney to see which bankruptcy option is best for them.

            Bankruptcy is very common in today’s society.  It is not uncommon to know someone who has filed bankruptcy.  Bankruptcy used to be viewed in a negative way by many people, but today it is possible to file bankruptcy and avoid the negative stigma generally associated with it. 

            According to http://www.filingchapter7bankruptcy.com/, bankruptcy can allow a debtor relief from excessive debt by providing a fresh start.  A debtor is able to discharge some or all of their debt and it allows them time to get back on their feet without harassment by creditors.  Bankruptcy laws can also benefit creditors by giving them a means to collect at least partial payment of a debt in a timely manner. 

            According to http://www.creditinanutshell.com/html/chapter-7-bankruptcy.html#1, Chapter 7 bankruptcy is a liquidation proceeding.  The debtor turns over all nonexempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors.  The debtor receives a discharge of all dischargeable debts.  In order to file a Chapter 7 bankruptcy the debtor must reside in the United States or have a place of business in the United States, the debtor must not have been granted a discharge either under Chapter 7 or 13 in the last 6 years, the debtor must not have had a bankruptcy filing dismissed in the last 180 days, and it must not be fundamentally unfair to grant the debtor relief under Chapter 7. 

            One final important fact debtors should know, is that filing bankruptcy can be expensive.  According to www.balancepro.net/education/publications/bankruptcyfacts.html, court costs and attorney’s fees add up and are non-dischargeable.  Depending on a specific debtor’s situation, this is money that potentially could be spent bringing past-due accounts current or making payment arrangements.  Also, a debtor may lose their property.  If a debtor’s assets are worth more than state and federal exemption guidelines, the assets will be liquidated and the proceeds divided up among the debtor’s creditors.  This can include the debtor’s home, car, heirlooms, and jewelry.

             There are many myths about bankruptcy and it is important that the debtor know which ones are true and which ones are false.  Is it true that everyone will know if a debtor has filed for bankruptcy?  According to www.moneycentral.msn.com/content/Banking/bankruptcyguide/P77617.asp, unless a debtor is a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are the debtor’s creditors.  It is true that bankruptcy is a public legal proceeding, however, the number of people filing is so massive that very few publications have the space to run all of them. 

            Is it true that all of a debtor’s debts are wiped out in Chapter 7 bankruptcy?  The answer is no.  According to http://www.bankrate.com/brm/news/debt/debtmanageguide/bankruptcy-myths1.asp, certain types of debts cannot be discharge, or erased.  They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud.  It is also very unlikely that a judge will discharge legal settlements agreed to by a debtor as the result of someone suing them.  While many debts of the debtor will be discharged,  a debtor needs to be aware that certain debts may not be discharged. 

            Another myth of bankruptcy is that a debtor will never be able to get credit again.  Is this true?  The answer is no.  According to http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/12MythsAboutBankruptcy.aspx?page=2#4, it won’t be long before the debtor is getting credit card offers again.  They will just be from subprime lenders that will charge very high interest rates.  Also, if a debtor has a credit card with a zero balance on the day they file bankruptcy, the debtor does not have to list it as a creditor since no money is owed on it.  This means that the debtor might be able to keep that card even after the bankruptcy.

Bankruptcy can be very beneficial to debtors but a debtor has to remember that bankruptcy does have some long term effects.  According to http://www.bankruptcy-courts.net/bk-long-term.html, filing puts the world on notice about the debtor’s personal financial affairs.  Since it’s a civil court proceeding, it becomes a matter of public record.  In some cases, such as Chapter 13 proceeding, even a debtor’s employer can be involved because this chapter requires deductions from a debtor’s paycheck. 

            Another long term effect of bankruptcy is that the bankruptcy stays on a person’s credit report for up to 10 years and this could hinder a person’s ability to get a job, establish new credit, get insurance and even securing a place to live.  Also a debtor will have to pay for their attorney, court fees and filing fees upfront. 

            According to http://www.bankruptcylawinformation.com/index.cfm, bankruptcy is listed in the top five life-altering negative events that a person can go through, along with divorce, severe illness, disability, and loss of a loved one.  Very few people that have gone through bankruptcy would say that it is just a painless cleaning of your debts, where afterwards you can easily begin a new life. 

            According to http://bankruptcy-reports.info/long-term-effects-bankruptcy-finances/, the rule of law states that a bankruptcy may remain on your record for ten years, and while that may technically be true, the effects of the bankruptcy can start to diminish within minutes after the proceedings end.  Choosing bankruptcy is never an easy decision, and the sure and certain knowledge that your credit will be affected in a major way for many years afterward is true but sometimes this is truly the only option available to some.     

            Deciding whether or not to file bankruptcy can be difficult.  A debtor should weigh the pros and cons before deciding whether or not to file bankruptcy.  If a debtor is truly uncertain about their decision than they should contact an attorney.

There are six different types of bankruptcies that a debtor can file.  A debtor can file a Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, or a Chapter 15 bankruptcy.  Chapter 7 and 11 bankruptcies are the most commonly filed types of bankruptcies.  According to    http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx, a Chapter 7 proceeding does not involve the filing of a plan or repayment as in a Chapter 13 proceeding.  Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims, like creditors, in accordance with the provisions of the Bankruptcy Code.  A Chapter 13 proceeding offers individuals a number of advantages over liquidation under Chapter 7.  One such advantage is an opportunity to save their homes from foreclosure.  Individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time through a Chapter 13 filing. 

            Chapters 9, 12, and 15 are less common types of bankruptcies.  According to www.outofbankruptcy.info, a Chapter 9 bankruptcy is a formal proceeding that allows an individual or business to get their financial debts under control.  This type of bankruptcy was developed to help debtors and creditors. 

            According to http://www.extension.umn.edu/distribution/businessmanagement, Chapter 12 was added to the Bankruptcy Code in 1986.  It was designed specifically for the reorganization of family farms.  Chapter 12 is closely modeled after Chapter 13, however it has a higher debt ceiling and, therefore, applies to many more farm operations.  Chapter 12 is only available to persons who meet the definition of “family farmer” set forth in the statute.  A family farmer may be either an individual or a corporation or partnership. 

            A new chapter recently added to the Bankruptcy Code was Chapter 15.  It was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  The purpose of a Chapter 15 proceeding is to provide effective mechanisms for dealing with insolvency cases involving debtors, claimants, assets, and other interested parties involving one or more countries.  Chapter 15 proceedings are very rare and not used very often as compared to a Chapter 7 or Chapter 11 proceeding.

According to www.uscourts.gov/FederalCourts/Bankruptcy, debtors should be aware that there are several alternatives to Chapter 7 relief.  If a debtor is engaged in business, including corporations, partnerships, and sole proprietorships, they may prefer to remain in business and avoid liquidation.  These types of debtors should consider filing a Chapter 11 bankruptcy rather than a Chapter 7 proceeding.  A Chapter 11 is different than a Chapter 7 in that, under a Chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. 

            According to http://www.chapter-7-bankruptcy-forms.com/chapter-7-alternatives.html, sole proprietorships may also be eligible for relief under Chapter 13.  A Chapter 13 bankruptcy is for individuals who have regular income and desire (or can afford) to repay their debts.  A debtor proposes a repayment plan to the court and the debtor’s creditors for as little as 10 cents on the dollar.  Under Chapter 13, the debtor will have thirty to sixty months to repay their creditors. 

            There are many reasons why a debtor might also seek to use an alternative to bankruptcy.  According to http://bankruptcyalternativehelp.com/whyalternative.html, a debtor would be able to save their credit from being ruined for seven to ten years.  A bankruptcy can be expensive and take time to file, time that the debtor could use working or getting an education to improve their financial position.  A debtor could save their home, car and other possessions from being sold at auction for pennies on the dollar.  bankruptcy alternatives typically provide educational assistance to help a debtor understand how credit works and how to avoid any pitfalls in the future.  Finally, bankruptcy alternatives allow a debtor a single payment option for all of their credit card accounts.

How does a Chapter 7 bankruptcy work?  According to www.bankruptcyhome.com, a trustee is appointed who collects all non-exempt property, sells the assets and distributes proceeds from this sale to appropriate creditors.  A Chapter 7 bankruptcy is different from other bankruptcy filings because the debtor need not make a payment to the trustee.  According to http://www.moranlaw.net/chapter7.htm, in most consumer cases, all the assets are exempt, and therefore there are no assets to liquidate and there is no dividend to creditors.  Chapter 7 is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. 

In order for a Chapter 7 bankruptcy to work for a debtor, the debtor must qualify.  According to www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx, in order to qualify for relief under Chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity.  Relief is available under Chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent.  An individual cannot file under Chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or if the debtor voluntarily dismissed the previous case after creditors sought relief from the Bankruptcy Court to recover property upon which they held liens.  

            When all is said and done, a Chapter 7 bankruptcy proceeding can be very quick.  A debtor’s debt could be gone in as quick as two months.  However, every Chapter 7 proceeding is different and the time it takes to complete a Chapter  7 proceeding is different for each debtor.  In either case though, Chapter 7 proceedings, if done right, have the potential to be very quick.

According to http://www.lawhelp.org/documents/74261bankruptcy.html?stateabbrev=/az, bankruptcy is a legal proceeding in which a person can get a fresh financial start.  Bankruptcy can be very useful and effective in resolving financial problems in certain cases.  However, it is not the answer to all financial problems or the right step for everyone. 

            Bankruptcy can do a number of things for the debtor.  Bankruptcy can discharge legal obligations to most or all of a person’s debt.  It can stop foreclosure on the debtor’s home and give them an opportunity to catch up on missed payments.  Bankruptcy can also stop a repossession of a debtor’s car, stop wage garnishment, debt collection harassment, and even prevent or restore termination of utility service for nonpayment.  According to http://www.nwls.org/Bankruptcy.htm, Bankruptcy might even allow a debtor to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than the debtor really owes.    

            On the other hand, there are a few things that Bankruptcy cannot do.  Bankruptcy cannot eliminate certain rights of secured creditors, discharge debts that arise after the Bankruptcy has been filed, discharge certain debts like alimony or child support, or eliminate the obligation of a co-signer on the debtor’s loan. 

             Finally, according to http://hchoyt.com/bankruptcy_do.htm, a debtor should not borrow from or withdraw 401k, IRA, and ERISA qualified savings and retirement plans to pay bills.  Early withdrawal of these funds makes you liable for penalties and taxes which may not be discharged in bankruptcy.  ERISA and 401k funds are exempt from creditors in bankruptcy.  If you don’t use these funds, you are very likely to have them to draw on after Bankruptcy.

How does a debtor know if they are eligible to file a Chapter 7 Bankruptcy in Chandler, Arizona?  The means test is a method that is used to determine a person’s eligibility to maintain a Chapter 7 Bankruptcy.  According to http://www.nolo.com/legal-encyclopedia/article-29907.html, the means test determines whether a person’s income is low enough for them to file a Chapter 7 Bankruptcy.  Under the means test, a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income for the person’s state and family size, must show that they are not able to pay a minimum of $109.58 per month for 60 months to their unsecured creditors from their disposable income.  If the debtor is not able to make this minimum payment then they will be eligible to file a Chapter 7 Bankruptcy.

            According to http://www.moranlaw.net/means_test.htm, the means test was added to the Bankruptcy Code to create objective standards for determining which individuals are “worthy” of relief in Chapter 7.  It applies only to individuals and only those individuals whose debt is primarily consumer debt. 

            However, according to http://www.ehow.com/about_6508785_means-test-bankruptcy.html, a debtor who fails the means test might be eligible for Chapter 7 Bankruptcy if special circumstances exist.  Special circumstances include recent unemployment or a serious medical condition.  The bankruptcy court will require the debtor to provide documentation of the expense or income adjustment.  The debtor will be eligible for a Chapter 7 Bankruptcy, if the Bankruptcy Court accepts the documentation and, after considering the special circumstance, the debtor is able to pass the means test.

According to http://www.arizonabankruptcylaw.com/chapter7.html, in a Chapter 7 Bankruptcy a person wipes out their debts and gets a “fresh start”.  A Chapter 7 bankruptcy is like a liquidation.  The trustee collects all the debtor’s assets and sells any nonexempt assets.  Some debts are not discharged in a Chapter 7 bankruptcy such as alimony, child support, fraudulent debts, certain taxes, student loans, and certain items charged.  

            Another benefit to filing a Chapter 7 Bankruptcy in Arizona is that the debtor automatically suspends virtually all collection and other legal proceedings pending against that debtor.  The court will mail a notice to all creditors ordering the creditors to refrain from any further action against the debtor, a few days after a Chapter 7 bankruptcy is filed.  This is called an automatic stay.  An automatic stay is a court-ordered suspension of creditor activity against the person filing for bankruptcy.  If a creditor intentionally violates the automatic stay, the creditor will be held in contempt of court and may also be liable for damages to the person filing. 

            According to http://research.lawyers.com/Arizona/Bankruptcy-in-Arizona.html, a person should consider filing a Chapter 7 bankruptcy for a number of reasons. These reasons include: 1.The person is paying only the minimum payment on their bills, 2. The person is not able to budget themselves out of debt within five years, 3. The person is getting notices that their mortgage or loans are being foreclosed or 4. The person has had a severe financial setback, such as losing their job or a major client, being involved in a divorce or experiencing a costly illness. 

            According to http://www.buzzle.com/editorials/10-15-2005-78969.asp, the two purposes of bankruptcy are: 1. To give creditors a fair share of the money that one can afford to pay back, and 2. To give the debtor a fresh start by discharging his or her debts.  By having a court declare a person bankrupt, it actually is a statement to the creditors that they should expect less money in the repayment deal.