Bankruptcy Explained by State
Borrowers throughout Arizona have not been immune to the economic difficulties crippling households across the United States, and the need for strict management of credit accounts has never been greater for American families. At the same point, even as debtors across Arizona and the southwest turn their eyes to various debt relief approaches mentioned by the media or recommended by friends or relatives, too many consumers let things slide until they believe that there’s nothing left to do with their ever more depressing finances than declare bankruptcy. The authors of this article have personally worked with dozens of Arizona borrowers over the past few years that, after a lifetime of taking pride in their responsibilities, have suddenly been forced to consider the notion that they will not be able to satisfy the debts they have taken out through traditional means. We understand how hard this may be for borrowers to suddenly acknowledge the need to simply start over once accumulated debts have risen to a certain tipping point, and, for many Americans, the desire to abolish their burdens lies hand in hand with a certain level of guilt. As it happens, bankruptcy – both practically and by dint of reputation – sadly fulfills both of these requirements, and an unfortunately large segment of Arizona households puts off debt management until there’s no other option remaining.
There isn’t any simple equation to extinguish debt loads that have already risen to the point where borrowers need even think about utilizing external authorities licensed in the state of Arizona to liquidate their burdens of consumer debt. All the same, whenever debtors look upon their amassed accounts and find that they cannot reasonably calculate a budget that would eliminate their revolving debt load within a decade, something must be done. Whether from medical emergencies or lingering unemployment or those unexpected setbacks and responsibilities that every Arizona household shall inevitably come across (or, to be honest, even from an extended period of thoughtless spending), once borrowers finds themselves facing the prospect of foreclosure upon their primary residence or once they realize that they are going to be unable to meet their minimum credit card payments, they must examine debt relief alternatives. Chapter 7 debt elimination bankruptcies may be the most obvious solution for consumers in Arizona and across the United States, but there are more than a few problems with bankruptcy protection as it currently stands.
It is true, should you qualify for the Chapter 7 bankruptcy program under Arizona law, many of your unsecured loans would be wiped clean, but you should not make the mistake of believing that all of your debts will simply vanish. While most every citizen understands that tax liens, criminal penalties, and familial obligations (alimony or child support) remain on the books, did you know that student loans – even if held through private companies – are no longer eligible for bankruptcy discharge? Even in regards to credit card debts or other unsecured and revolving accounts, purchases above five hundred and fifty dollars for so called luxury goods and cash advances larger than eight hundred dollars made in the months before filing could be considered fraud and punishable by law. There’s much more to bankruptcy than is generally understood by the Arizona citizenry, and aspects of the laws change every day. The bankruptcy your brother or boss or past roommate may have successfully declared just four years ago likely no longer exists – at least, no longer in a recognizable form.
Spring of 2005, the United States Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act after incessant pushing by lobbyists funded by the credit card companies. In the years following BAPCA, as it became known, the subsequent changes to the bankruptcy code ruined the chances of many borrowers in Arizona and across America to take advantage of the Chapter 7 program and purposefully worsened the living conditions and financial potential of all debtors’ who would seek protection from whatever obligations they were unable to satisfy. Chapter 7 bankruptcies, also known as debt liquidation bankruptcies, are certainly the most well known form of governmental protections against debts they are unable to pay. Indeed, many consumers in Arizona (and, for that matter, around the United States) would be surprised to learn that there are forms of bankruptcy beyond the Chapter 7. In many ways, the debt liquidation procedure does work in the same way as we all originally imagined bankruptcy would from board games and cartoons. Financial obligations (of a specific kind, to be sure) are forever erased and the player declaring personal bankruptcy does (in most cases, considering the effects upon credit ratings and assets) lose at least the next few rounds. It’s still certainly the easiest and quickest type of bankruptcy protection, and it will eliminate the majority of credit card bills and unsecured accounts: though, it’s important to recognize, not nearly all of them.
Under the changes to the federal bankruptcy code in the years after BAPCA, citizens now must pass what has been called a means test in which every borrower’s gross annual income – as based upon their earnings six months prior to filing bankruptcy paperwork – will be compared to the average earnings of individuals and families within the state. As things now stand, in order to be eligible for Chapter 7 debt liquidation bankruptcy protection as a resident of Arizona, you will have to make less than forty thousand dollars a year (add a member to the household, the number grows to fifty three thousand; add another, it grows to fifty nine thousand; add another, it grows to sixty six thousand; for every additional individual, there’s another seven thousand dollars) from the officials guidelines of February, 2008.
These levels of income, extrapolated from numbers compiled throughout Arizona by the national census bureau, are due to change, of course, and there’s still some wiggle room as regards expenses. When whichever trustee chosen by the Arizona courts examines the initial bankruptcy paperwork, they also take notice of payments owed upon home mortgages, vehicle loans, delinquent taxes, child support alongside other familial obligations, and higher education loans amounting to less than fifteen hundred dollars a year. If, once all of the preceding monthly bills (and the day to day expenses for an individual or family in Arizona as determined by the Internal Revenue Service) have been deducted from the gross income of whomever intends to declare bankruptcy, the courts still calculate that the filers should still be able to pay at least one hundred dollars a month toward their various debts over the next five years, the current governmental and Arizona state statutes insist that the borrowers attempting bankruptcy be switched over to the Chapter 13 debt restructure program.
Traditionally, Chapter 7 bankruptcies were considered ‘no asset’ and borrowers, presuming they had no significant investments, would not necessarily fear any dangers from the process beyond a still prevalent social stigma and the sudden destruction of their credit rating, but, after the 2005 alterations to the bankruptcy code, a host of stipulations specifically intended to weaken the protections involved and harass those borrowers that attempt to find solace in governmental safety nets wreaked havoc upon the last chance generations had depended upon. After the new laws took effect, borrowers must have their tax returns in order to even approach the bankruptcy courts, and they will have to complete a credit counseling course from a governmentally approved debt management firm before filing the initial paperwork. There are several such companies in Arizona, debtors within the state of Arizona should consider themselves lucky compared to their countrymen who hail from less populated regions, but the substantial costs are still far beyond what many of the most desperate borrowers who’ve fallen to such straits would be able to pay (these credit counseling firms, of course, require payment up front).
As you probably already know, one of the greatest drawbacks from Chapter 7 bankruptcy – and, perhaps, along with the damage done to credit reports and FICO scores, the signal reason that more consumers do not attempt debt elimination – is the likelihood that your assets (which, for the purposes of the Internal Revenue Service, could mean anything from your stock portfolio to your bed sheets) will be seized by agents of the court for an eventual auction intended to partially remunerate past creditors whose loans have been discharged through bankruptcy. Depending upon the whim of the arbitrarily chosen court trustee, families could lose nearly everything they own to be sold for pennies on the dollar. In past years, before the 2005 legislation altered the national bankruptcy code, households filing for Chapter 7 were made to list their personal property in terms of the value of the objects upon resale which, for anyone who’s ever held a garage sale, is virtually nonexistent for most items. Now, however, the Chapter 7 documents insist upon a description of all possessions that records their theoretical REPLACEMENT value, and replenishing a household in this fashion could cripple many families.
Fortunately, for borrowers who’ve been living in Arizona, the state bankruptcy law is much more generous to those filing bankruptcy than what would be granted by the federal guidelines. Given the space this sort of cursory summary permits, there’s no way to list all of the potential exemptions allowed through Arizona bankruptcy statutes, but we’d at least like to try to outline some idea of what borrowers may expect from the proceedings. In terms of real property, the homestead