Filing for Chapter 7 bankruptcy can be a daunting process, but understanding the timeline and the steps involved can help you navigate this journey more confidently. Arizona Bankruptcy Attorney Alison Briggs at Atlas Law, LLC aims to provide a comprehensive overview of the Chapter 7 bankruptcy process in Arizona, detailing each step from filing to discharge, and offering a realistic timeline to help you plan accordingly.

Understanding Chapter 7 Bankruptcy in AZ

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals and businesses who are unable to repay their debts. Unlike Chapter 13, which involves a repayment plan, Chapter 7 bankruptcy in Arizona aims to liquidate non-exempt assets to pay off creditors, with most remaining unsecured debts being discharged. This process provides a fresh financial start for debtors.

Pre-Filing Requirements for Declaring Bankruptcy in Arizona

Before you can file for Chapter 7 bankruptcy, there are a few preliminary steps you must complete:

1. Credit Counseling: You must complete a credit counseling course from an approved agency within 180 days before filing. This session will help you evaluate your financial situation and consider alternatives to bankruptcy.
2. Means Test: The means test determines if your income is low enough to qualify for Chapter 7. It compares your income to the median income in your state. If your income is below the median, you pass. If it’s above, you may still qualify based on your expenses and debts.

These steps typically take about a week to complete, depending on how quickly you can schedule and attend the credit counseling session.

Step-by-Step Timeline for Chapter 7 Bankruptcy in Arizona

Once you’ve completed the pre-filing requirements, you can begin the Chapter 7 bankruptcy process. Here is a step-by-step breakdown of the timeline, from filing to discharge:

Step 1: Filing the Bankruptcy Petition (Day 1)

The first official step in the Chapter 7 process is filing the bankruptcy petition with the bankruptcy court. This includes several documents:

• Bankruptcy Petition: The official form to initiate the process.
• Schedules: Detailed lists of your assets, liabilities, income, expenses, and a statement of financial affairs.
• Creditor Matrix: A list of all your creditors and their contact information.
• Statement of Intention: Indicates whether you plan to keep or surrender secured property.

Upon filing, an automatic stay is issued, which immediately stops most collection actions against you, including lawsuits, wage garnishments, and phone calls from creditors.

Step 2: Appointment of the Bankruptcy Trustee (Within 1–2 Weeks)

Shortly after filing, the court appoints a bankruptcy trustee to oversee your case. The trustee’s role is to review your documents, manage the liquidation of non-exempt assets, and distribute the proceeds to creditors.

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Step 3: Meeting of Creditors (341 Meeting) (20–40 Days After Filing)

The 341 meeting, also known as the Meeting of Creditors, is typically scheduled 20–40 days after you file your petition. During this meeting:

• Bankruptcy Trustee’s Questions: The bankruptcy trustee will ask you questions under oath about your financial situation, assets, debts, and any recent financial transactions.
• Creditors’ Questions: Creditors can also attend and ask questions, although they rarely do.

Step 4: Trustee’s Review and Possible Asset Liquidation (1-2 Months After 341 Meeting)

Following the 341 meeting, the trustee will review your case in more detail:

• Non-Exempt Assets: If you have non-exempt assets, the trustee will liquidate them to pay creditors. This process can take several weeks to a few months, depending on the complexity of your assets.
• No Asset Cases: If you have no non-exempt assets, your case is considered a “no-asset case,” and the trustee will file a report indicating that there are no assets to distribute.

Step 5: Debtor Education Course (Within 60 Days After 341 Meeting of creditors)

You must complete a debtor education course from an approved provider within 60 days after the 341 meeting. This course focuses on managing your finances and avoiding future financial problems. Upon completion, you’ll receive a certificate, which you must file with the court.

Step 6: Objections to Discharge (Within 60 Days After 341 Meeting)

Creditors and the trustee have 60 days after the 341 meeting to file objections to the discharge of your debts. Common reasons for objections include fraud, concealment of assets, or failure to comply with court orders. If no objections are filed, the process of filing bankruptcy moves forward smoothly.

Step 7: Discharge of Debts (3-6 Months After Filing for Debt relief in Arizona)

Assuming there are no objections, and you’ve completed all required courses, the court will issue a discharge order typically 3–6 months after filing your petition. This order eliminates most of your unsecured debts, including credit cards, medical bills, and personal loans. Some debts, such as most student loans, taxes, and child support, are not dischargeable under Chapter 7.

Post-Discharge Considerations

After receiving your discharge, there are a few additional steps and considerations:

1. Rebuilding Credit: Start working on rebuilding your credit by obtaining a secured credit card, paying bills on time, and monitoring your credit reports for errors.
2. Financial Planning: Utilize the knowledge gained from the debtor education course to create a budget, save for emergencies, and avoid future financial pitfalls.
3. Dealing with Non-Dischargeable Debts: If you have any non-dischargeable debts, make a plan to manage and pay them off as efficiently as possible.

Arizona Bankruptcy Timeline Summary

Here’s a summarized timeline of the Chapter 7 bankruptcy process:

• Pre-Filing Requirements: 1 week (Credit Counseling and Means Test)
• Day 1: File Bankruptcy Petition
• 1–2 Weeks After Filing: Appointment of Trustee
• 20–40 Days After Filing: 341 Meeting
• 1–2 Months After 341 Meeting: Trustee’s Review and Possible Asset Liquidation
• Within 60 Days After 341 Meeting: Debtor Education Course and Objections to Discharge Period
• 3–6 Months After Filing: Discharge of Debts

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Filing for Chapter 7 bankruptcy in Phoenix is a significant step towards financial recovery for those overwhelmed by debt. The process, from filing to discharge, typically takes about 3–6 months, but this can vary depending on individual circumstances and the complexity of the case. Understanding each step and the overall timeline can help you prepare and navigate the process more effectively.

If you’re considering filing for Chapter 7 or Chapter 13 bankruptcy, consulting with an experienced Arizona bankruptcy attorney, and preparing for your bankruptcy filing can provide valuable guidance and help to ensure that you meet all requirements and deadlines when declaring bankruptcy in Phoenix, Tucson, Mesa, Chandler, and Glendale, Arizona.

Author: Alison Briggs, bankruptcy attorney Atlas Law Arizona