If you are faced with mounting debts and dwindling income, a Chapter 7 bankruptcy filing may be your best option. Bankruptcy is nothing to be ashamed about. The whole point is to give debtors a fresh start by discharging debts they will never be able to repay.

Do You Qualify for Chapter 7?

Congress extensively rewrote the bankruptcy laws in 2005. One consequence is that debtors must pass a “means test” to qualify for Chapter 7 bankruptcy. The means test looks at your average income for the six months prior to your bankruptcy filing. Your average income must be less than the median income for a household of your size in Arizona.

A qualified Pinal County Chapter 7 bankruptcy attorney can advise you on the best way to handle the means test. Even if your average monthly income is currently higher than the state median—it is about $75,000 for a two-person household in Maricopa and Casa Grande — you may be able to wait a few months if you know your income will decline.  If you still cannot pass the means test, a bankruptcy attorney can advise you of your other options, including filing for Chapter 13 bankruptcy.

How Much Can I Keep in a Chapter 7 Bankruptcy?

Bankruptcy is not designed to leave you with nothing. To the contrary, the law exempts a good deal of personal property from the bankruptcy process. Any asset that is exempt cannot be seized by your creditors or the bankruptcy court to pay off your debts.

Congress established a number of default exemptions in the bankruptcy code itself. But individual states may require their residents to use a different set of exemptions. Arizona is one of those states.  This means if you are a resident of Casa Grande, or Maricopa City, and file for Chapter 7 bankruptcy, you use the Arizona exemptions.

For many Denver residents, the most important exemption is the homestead exemption. This exemption allows you to keep or some or all of the equity you have in your primary residence. In Arizona, the homestead exemption is $250,000; however, this state exemption can be limited by a unique bankruptcy exemption if you have owned your home for less than 1215 days.

Why Do I Need a Bankruptcy Attorney?

This is only a brief overview of Chapter 7 bankruptcy. The law frequently changes in this area, and there are many details to consider. Filing for bankruptcy without an attorney is never advisable. An experienced Pinal County Chapter 7 bankruptcy attorney can provide you with specific advice on your situation.