If you are overwhelmed by significant debt and are not eligible for other options such as offer-in-compromise or payment plans, you may wish to consider bankruptcy. While it may sound dire, often, bankruptcy is a great opportunity for those saddled with large amounts of debt to potentially eliminate their debt and get a valuable fresh start.
Understanding the Types of Bankruptcy
Most individuals who are facing significant amounts of debt end up filing Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is the most common type of bankruptcy that’s filed in Arizona. In a Chapter 7 bankruptcy, an individual’s assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of the assets are then handed over to a trustee who then pays creditors. Once the creditors have all been paid off, your debts are canceled. Chapter 7 is a good option for individuals who are unable to pay off debts and are looking at lawsuits from creditors.
If you don’t qualify for a Chapter 7, you may be able to file Chapter 13, which reorganizes your debt do you can pay them back with a monthly plan in three to five years. This repayment plan is known as a debt repayment schedule. The payments will usually depend on your income, the money you owe and your ability to pay it back. This is a good option for those who have already filed a Chapter 7 within the past six years or for people who are able to repay their debts in three to five years. This is also a good option for those whose income has disqualified them from filing a Chapter 7 bankruptcy.
How Often Can You File Bankruptcy?
Unless a court has ordered otherwise, there are no restrictions under Arizona law for how many bankruptcy cases you can file. However, there are certain time requirements for discharging the debt, which is, of course, the main motivation behind filing for bankruptcy. Whether or not you can file a bankruptcy and get your debts discharged again will depend on the following factors:
- The type of bankruptcy you previously filed.
- The type of bankruptcy you wish to file.
- How the prior bankruptcy ended (discharge of debts, dismissal or dismissal with prejudice).
- How long it’s been since you previously filed.
If you got your debts discharged through Chapter 7, you will need to wait eight years from the date you filed that case before you can file another Chapter 7. If you got a discharge in Chapter 13, you’ll have to wait two years from the date you last filed the case. It usually takes three to five years for you to get done with the repayment plan in a Chapter 13 bankruptcy. Once your first Chapter 13 is closed, you may be able to immediately file a Chapter 13 again.
If you previously got your debts discharged through a Chapter 7, but are seeking to file a Chapter 13 now, you must wait four years from the date of your prior filing. This is often called a Chapter 20 bankruptcy, and it can be an effective way to pay off priority debts. If you filed Chapter 13 before and want to file Chapter 7 now, you must wait six years before you file again. However, this limit does not apply if you paid back all your unsecured debts or paid back at least 70 percent of your unsecured debts with the Chapter 13.
Filing for bankruptcy protection may sometimes be the best option. However, it could also become an overwhelming process. That is why it would be in your best interest to contact an experienced Chandler bankruptcy lawyer who can help you better understand your rights and options.
If you live in Chandler Arizona we recommend that you contact us to schedule a time to meet with one of our lawyers.
Pew Law Center
333 N Dobson Rd #5, Chandler, AZ 85224