The Bankruptcy Code lets you keep certain "exempt"
property. These exemptions may apply to assets such as your home, vehicle,
household goods and furnishings and retirement accounts. The value of property
that can be claimed as exempt varies from state to state.
For example, in Arizona, you (or you and your spouse) can exempt
up to $150,000 in equity in your home. This is known as a "homestead exemption."
You may also exempt up to $6,000 in the fair market value (FMV) in one vehicle;
$6,000 in the FMV of household furniture and appliances; up to $500 FMV in
clothing; and up to $2,000 FMV in engagement and wedding rings. Except for the
$150,000 homestead exemption, these exemptions are doubled if you are married.
Most retirement accounts are exempt from bankruptcy
in Arizona, including Individual Retirement Accounts (IRAs), ERISA qualified
benefits, and pensions. Life insurance policies are also generally exempt.
Other exempt assets generally include child support
and alimony that are necessary for the debtor’s support.
Yuma Bankruptcy: An Overview
Our Yuma bankruptcy attorneys help individuals and
businesses file for bankruptcy protection and eliminate dischargeable debts.
In Arizona and all other states, both individuals and
businesses can file for bankruptcy protection and have their debts discharged or
Bankruptcy can be filed under Chapters 7, 11, 12, and 13 of
the U.S. Bankruptcy Code. For individuals and couples, the most common forms of
bankruptcy are Chapter 7 (a liquidation) and Chapter 13 (personal
reorganization). Chapter 11 is commonly used to reorganize businesses but is a
powerful tool to help individuals reorganize as well. Chapter 12 is a
reorganization exclusively for family farmers. While many attorneys specialize
in either Chapter 7 and Chapter 13 (often referred to as consumer bankruptcy
attorneys) or Chapter 11 and Chapter 12, our attorneys have significant
experience helping individuals, businesses and creditors in all Chapters of
One of the primary purposes of bankruptcy is to discharge
certain debts to give an individual debtor a "fresh start." When the bankruptcy
is finalized, you (the debtor) are no longer responsible for certain debts.
While most debts are dischargeable, certain specific types of debts are not.
Common types of non-dischargeable debts include child support and student loans.
Recent tax debts are usually non-dischargeable but some types of tax debts may
be dischargeable. Our attorneys have represented debtors with all types of debts
and are able to plan the most effective bankruptcy for the client, maximizing
the discharge and/or working out a plan to repay the non-dischargeable debts,
while stopping penalties and interest from accruing. Schedule a consultation in
our Yuma office to see how we can help you.
HOW BANKRUPTCY WORKS
A bankruptcy case begins with the filing of a petition with
the Bankruptcy Court. In addition to the petition, you must file schedules
listing your assets, debts, income and expenses. The purpose of the schedules is
to show the Court, the Trustee, and creditors what has been going on in your
economic life prior to filing for bankruptcy. Between 20 and 40 days after the
petition is filed, a meeting of creditors is held. An individual must attend the
meeting and answer questions regarding financial affairs and property. In a
business case, the principal of the business debtor attends the meeting and
answers questions about the business’ assets and liabilities.
Protection. Filing a bankruptcy petition stops collection
actions against you and your property through the "automatic stay." As long as
the automatic stay is in effect, creditors are prohibited from calling, suing,
or garnishing your wages. Even creditors with non-dischargeable debts will be
prohibited, at least temporarily, from attempting to collect the debt. Our
office works with you to make sure all your creditors are listed on the
bankruptcy schedules and to stop the collection calls, garnishments and
Credit Reports. A bankruptcy can be reported on your credit
report for up to ten years from the date of filing the petition. Initially, the
bankruptcy can negatively affect your credit score and your ability to obtain
new credit. However in many cases, an individual’s credit score can improve
quickly once a discharge is entered. At your initial consultation the bankruptcy
attorney can discuss the impact of bankruptcy on your credit and what options
you will have to rebuild credit in the future.
CHAPTER 7 IS THE MOST COMMON FORM OF BANKRUPTCY
A Chapter 7 is called a "liquidation" which means that the
bankruptcy trustee gathers and sells all the non-exempt assets and uses the
proceeds to pay creditors. An individual is allowed to keep certain "exempt"
property. Exempt property usually includes your home, vehicle, household goods
and furnishings, social security and retirement accounts. Even though a debtor
may keep exempt assets, liens on those assets don’t usually go away with the
bankruptcy. Our experienced bankruptcy attorneys can assist you in evaluating
your exempt and non-exempt assets.
Eligibility for Chapter 7. An individual wanting to file a
Chapter 7 case must be eligible for Chapter 7. An individual is eligible if
their debts are not primarily consumer debts or if they meet certain income
requirements. Our bankruptcy attorneys will do a thorough analysis of your debts
and expenses to assist you in selecting the bankruptcy chapter that will provide
you with the most benefit. A business that files for a Chapter 7 is turned over
to the trustee who usually dissolves the company and sells the assets for the
benefit of creditors.
CHAPTER 13: A BETTER CHOICE FOR MANY DEBTORS
Under Chapter 13, you (the debtor) propose a plan to pay
your creditors over a three- to five-year period. You are not required to pay
unsecured creditors in full and, upon completion of your Plan, unpaid balances
are usually discharged.
Eligibility. Any individual, even if self-employed
or operating an unincorporated business, is eligible for Chapter 13 relief as
long as their debts fall under certain permitted limits that are periodically
adjusted. A corporation or partnership may not be a Chapter 13 debtor.
Advantages. In some cases, Chapter 13 offers advantages
over a Chapter 7 liquidation. Perhaps most significantly, if you are behind on
your mortgage payments, Chapter 13 allows you to stop the foreclosure and make
up the missed payments over three to five years. Depending on the value of your
home, a Chapter 13 may allow you to strip off a second mortgage on your
residence. In some situations, individuals can also rewrite their vehicle loans
to pay the fair market value at a reasonable rate of interest over the life of
the plan. Chapter 13 also allows individuals to lower a higher rate of interest
on a vehicle loan to a reasonable interest rate. If you are employed and have a
home or car with a loan, our attorneys will help you evaluate if Chapter 13 is a
viable option to help you pay off your secured debts and discharge unsecured
CHAPTER 11 FOR INDIVIDUALS
Both individuals and businesses can file a Chapter 11
bankruptcy. Individual Chapter 11 are usually ideal for an individual with more
assets and higher debts. The cost of a Chapter 11 is higher than a Chapter 7 or
Chapter 13, however often the benefits make the additional cost a worthwhile
investment. Our attorneys have extensive experience in individual and business
Chapter 11 cases and can help you analyze the best strategy for your
Chapter 12 allows "family farmers" and "family fisherman"
to restructure their finances and avoid liquidation or foreclosure. It is
similar to a Chapter 13 bankruptcy, but provides additional benefits to this
special class of debtors. Our bankruptcy attorneys have significant experience
in Chapter 12 and can thoroughly analyze if you qualify for and will benefit
from a Chapter 12 bankruptcy.
A business can file for protection under either Chapter 7
or Chapter 11. As discussed above, Chapter 7 is a liquidation where the trustee
takes over the business and the pre-bankruptcy owners relinquish control over
the business. In a Chapter 11, the business owner remains in control of the
business, subject to the oversight and jurisdiction of the court. Chapter 11
business reorganization allows a business to restructure its assets and
liabilities so that it may pay off some of its debts and continue to operate.
After a Chapter 11, a reorganized business has the opportunity to rebuild its