If you’re burdened with a massive pile of debt that you can’t repay, filing bankruptcy can be your last resort to solve your debt problems.

Bankruptcy is a legal process designed to help you eliminate a part or all of the total amount of debt you owe to a creditor. It can help you live a debt-free life and have a fresh start.

When you declare bankruptcy, you will have the chance to reorganize your finances, pursue debt settlement, and pay off your outstanding debts. However, as tempting as it may seem, bankruptcy doesn’t work for everyone. There are several factors that you need to consider before filing for bankruptcy.

Our competent Arizona bankruptcy lawyers can help you determine if filing bankruptcy is the best debt relief option to solve your financial problems. Schedule a consultation with us today at Glendale Bankruptcy Attorneys.

Bankruptcy is one of the most common debt-relief options that can wipe out or reduce your outstanding debts. Filing for a bankruptcy petition is often considered the last option after all other solutions are explored. It is a “second chance” opportunity to rebuild your finances under the protection of bankruptcy laws.

Bankruptcy filings are generally governed by federal law; however, bankruptcy laws may vary from state to state. There are specific bankruptcy rules that you need to follow. A reliable Glendale bankruptcy attorney can help you file for bankruptcy in compliance with all the applicable state laws and regulations governing bankruptcy proceedings.

Before you declare bankruptcy, you need to know how to choose the most appropriate bankruptcy type that will help you pursue total debt repayment. There are two common types of bankruptcy – Chapter 7 and Chapter 13 bankruptcy.

Chapter 7, also known as liquidation bankruptcy, involves selling or liquidating a part or all of your assets to pay back your debts. In case that you do not own any property and have a tight budget, this is generally the best option for you. This is considered the fastest type of bankruptcy since most unsecured debts such as credit card debt, personal loan, and medical debt are considered “forgiven” within three to six months. However, you may lose some of your personal property.

Chapter 13, or also called the reorganization bankruptcy, allows you to keep your assets and properties. In this chapter, you can restructure and reorganize your debts through an income-based repayment plan that will last for three to five years. This chapter is best for you if you have assets you want to keep or a mortgage you want to get current on.

Both bankruptcy chapters can help

• Eliminate unsecured debts
• Stop foreclosure or repossession
• Stop wage garnishment
• Prevent utility shut-offs
• Halt debt collection calls or actions

However, it will have a significant effect on your credit score. Before choosing a bankruptcy chapter, you need to assess your financial situation carefully. A credible bankruptcy attorney in Glendale, AZ, can review your finances and advise you on your options and determine whether filing bankruptcy is right for you.

There are specific requirements that you must meet to file for each type of bankruptcy. If you want to file for bankruptcy, you must pass a means test. This test will determine if you are qualified to file for bankruptcy Chapter 7 or Chapter 13. It is a way for the United States Bankruptcy Court to decide whether you cannot pay your debts. The means test will consider your income, assets, expenses, and unsecured debts.

Chapter 7 bankruptcy requires you to pass one of two means tests. Your family income will be compared to the median income in Arizona. If your family’s income falls below the median income, it means that you pass the first means test. On the other hand, if your family’s income is higher than the median income, you may still be qualified to pass the second means test. To do this, you need to deduct the allowable living expenses.

In contrast, if you choose to file Chapter 13 bankruptcy, passing the means test is not required. However, the court will use a similar computation to calculate your monthly payment and set the length of the repayment plan. To qualify for Chapter 13, you will have to prove that you have enough disposable income to pay your debts throughout the repayment plan. A qualified Glendale bankruptcy lawyer can help you determine which bankruptcy chapter you’re eligible for.

Not all debts qualify for bankruptcy. Whether you file Chapter 7 or Chapter 13 bankruptcy, you are required to repay certain debts. Here are some of the debts that can’t be discharged in bankruptcy:

• Court-ordered alimony
• Student loan debt (only if undue hardship is proven)
• Court-ordered child support
• A federal tax lien for taxes owed to the U.S. government
• Reaffirmed debt
• Court fines and penalties

In Chapter 7 bankruptcy, debt, personal loans, business debts, and medical bills can be wiped out. On the other hand, Chapter 13 bankruptcy requires you to repay most of the debt. This chapter wipes out most unsecured debts, plus debts from a divorce (except support payments) and loans from a retirement plan. A bankruptcy may reduce some of the secured debts under Chapter 13 through a “cramdown,” in which the approved repayment plan reduces the amount you owe. If you have qualifying debt to dismiss, an “automatic stay” will stop creditor harassment on those debts during bankruptcy proceedings.

Bankruptcy doesn’t mean that you’ll lose everything that you have. Although both types of bankruptcy may require you to sell assets to help repay creditors, some property types may be exempt from sale. In Arizona, there are bankruptcy exemption laws that can help you protect your property from liquidation.

Exempt properties are assets that you can keep and protect from creditors. These are items that are necessary for living and working. It includes your vehicle, clothing, household goods, tools of your trade, pensions, and a portion of any equity you have in your home.

You may not protect some of your assets with bankruptcy exemptions, and these are categorized under non-exempt property. In Chapter 7 bankruptcy, home foreclosure or car repossessions are possible as you seek debt relief. Your appointed bankruptcy trustee will oversee the process of selling and liquidating your non-exempt property. The proceeds will be allocated to your creditors according to the priority payment plan.

On the contrary, filing Chapter 13 bankruptcy allows you to save your property. However, you need to pay back the equivalent non-exempt property value to your creditors under the debt repayment plan agreement. A seasoned bankruptcy attorney in Glendale can help you understand the bankruptcy exemption rules in Arizona.

Bankruptcy comes with both advantages and disadvantages. As a bankrupt individual, you worry about the consequences you might face once you file for bankruptcy. One of the common concerns is the after-effect of bankruptcy on your credit score.

Once you have filed for bankruptcy, it will stay on your credit history for 7-10 years, and it can damage your credit score. However, the effect of bankruptcy on your credit report will gradually fade with time as you think of ways to improve your credit score after bankruptcy. Rebuilding credit requires a lot of effort, hard work, and practical debt management skills.

Bankruptcy gives you a chance to repay your debts and help you get back on track. However, bankruptcy is not necessarily beneficial for everyone. Keep in mind that filing bankruptcy comes with severe consequences, including long-term damage to your credit score. There are many factors to consider before you declare bankruptcy.

Whether you are thinking about filing for bankruptcy or in the process of completing the bankruptcy petition, do not hesitate to seek legal help from our experienced Arizona bankruptcy lawyers at Glendale Bankruptcy Attorneys. You don’t have to go through these legal and practical decisions alone. Our Glendale bankruptcy law firm can help you review your bankruptcy case details and evaluate your assets and debts. We will determine if bankruptcy is the best option to help get your financial life back under control.