Are you interested in filing bankruptcy in Peoria? If so, our Peoria bankruptcy lawyers can help. We assist clients in filing for bankruptcy relief under Chapter 7 and Chapter 13 of the Bankruptcy Code. Both chapters of bankruptcy provide debt relief, but Chapter 7 has strict income requirements to qualify for a bankruptcy discharge. Chapter 13 is a wage earner’s plan that requires debtors to reorganize debts into a three or five-year bankruptcy repayment plan.
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Should I File a Chapter 7 Bankruptcy in Peoria?
The Chapter 7 bankruptcy process is intended for individuals who do not have enough money to repay any portion of their unsecured debts. The process requires debtors to “pass” a Means Test that calculates their median income and compares it to the median income for Arizona.
You “fail” the Means Test if your median income is above the Arizona median income. However, you could pass the disposable income section of the Means Test and still qualify for a discharge (debt forgiveness) under Chapter 7. Your disposable income is the money you have each month after paying ordinary living expenses. If your disposable income is low enough, you could qualify for a Chapter 7 discharge.
If you are eligible for a Chapter 7 discharge, there are still several factors you want to consider before filing a Chapter 7 case.
- Chapter 7 is a liquidation bankruptcy. If you have assets with equity that exceed the Arizona bankruptcy exemptions, the Chapter 7 trustee could sell the property.
- Some debts may not be discharged, including taxes, alimony, child support, student loans, restitution, and other debts owed to the government.
- A Chapter 7 case will not help you save your home or car if you are behind on the payments. You need to catch up on those payments immediately to keep the assets.
Most Chapter 7 cases filed in Arizona are no asset cases, meaning the person does not lose any property. No-asset Chapter 7 cases are generally completed in about four to six months.
Should I File a Chapter 13 Bankruptcy in Peoria?
A Chapter 13 bankruptcy is a reorganization case. You reorganize your debts into a monthly plan based on your disposable income, debts, assets, and other factors. Most Chapter 13 plans filed in Arizona are five-year plans. If your median income exceeds the Arizona median income, you are required to file a five-year bankruptcy plan.
Some of the benefits offered by Chapter 13 include:
- Catch up mortgage payments over time to prevent foreclosure;
- Might be able to lower car payments;
- Stretch out tax debt payments over several years;
- Include past due alimony and child support to avoid court sanctions or other penalties; and,
- Protect assets that have non-exempt equity from being liquidated.
Before filing a Chapter 13 case, you want to discuss the requirements for Chapter 13 with an experienced Peoria bankruptcy attorney. You are entering a five-year bankruptcy repayment plan. You cannot incur new debt or sell significant assets without court approval. You may be required to submit copies of tax returns to the Chapter 13 trustee, which could increase your plan payments if your income increases.
Contact Our Peoria Bankruptcy Attorneys for More Information
There are pros and cons of filing bankruptcy under Chapter 7 and Chapter 13. Our Peoria bankruptcy lawyers carefully review your financial situation to determine which chapter of bankruptcy is best for you. We discuss the benefits and consequences of filing under each chapter of bankruptcy to help you decide if bankruptcy is right for you.