Liquidation bankruptcy
Chapter 7 bankruptcy is commonly referred to as a “straight” bankruptcy and is often what people think of when they think of bankruptcy.
Chapter 7 bankruptcy wipes out most of your debts and in return you may have to surrender some property. There is no option for a payment plan with a Chapter 7 bankruptcy. Your debts will be eliminated forever. You can even win the lottery the next day and not have to pay them back. You can, but you wouldn’t have to. There are some exceptions. Income tax refunds for pre-bankruptcy tax years, divorce property awards, inheritances, and life insurance that you become entitled to receive within 180 days of bankruptcy.
There is a chance that your property will be seized, sold and the money will go to you creditors. This only happens 4 percent of the time. Most cases are no asset cases which means it would be more hassle than it’s worth to sell your possessions.
Qualifying for a Chapter 7 bankruptcy in Arizona
In order to qualify for a Chapter 7 bankruptcy earning more than the median income for Arizona, you’ll have to pass the Means Test. In order to pass you will have to show that you don’t have enough income to pay a significant portion of your debts. The means test is pretty complicated, but most people pass. The hardest part is putting together the information necessary that you will need to provide.
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