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It is vital that you seek legal advice from a qualified attorney on your individual situation. It will almost certainly cost you less to seek advice before acting than it will to repair your mistakes.

Diane L. Drain

Diane L. Drain, attorney, retired law professor, wife, mother, mentor & community spokesperson


What is a Chapter 7, and what does the means test and exempt property entail?

Shopping for legal services should be done with caution. Any lawyer’s reputation, expertise, and commitment should all be taken into account. Choosing the wrong counsel for your case is akin to selecting a terrible surgeon for your operation. Check the attorney’s reputation and experience by asking for references. I understand that money is tight, but this decision could have a significant impact on your future. If you don’t understand the dangers, you could lose your tax refunds and other valuable assets.

Diane, by the way, offers a free consultation.

A Chapter 7 bankruptcy is a tool that can be used to help people start over.

A chapter 7 bankruptcy is a federal law that allows a person to be relieved (discharged) from paying their obligations by entering bankruptcy. The individual keeps exempt assets, continues to pay on secured items they want to keep (home, car), and turns over all non-exempt assets to the trustee-in-bankruptcy. Some debts, on the other hand, are unaffected by bankruptcy. Section 523 of the United States Code.

While some of the information in this page is relevant to Arizona cases, the majority of it is bankruptcy law that applies to all Chapter 7 bankruptcy cases.

This basic information should help you understand how bankruptcy works, but keep in mind that it does not cover everything you need to know to file Chapter 7 bankruptcy. Video explaining chapter 7 basics.

Chapter 7 bankruptcy is intended to give a person a “fresh start.”

After you’ve liquidated and paid the value of all of your non-exempt assets to your creditors, you’ll be able to eliminate or discharge all of your unsecured debts. Certain unsecured obligations are not dischargeable in a Chapter 7 bankruptcy. Typically secured debts are unaffected by Chapter 7 bankruptcy. That means that if you want to keep your home or car, and there are obligations owed on it, you must make timely payments, or pay the value of the property.

What is Bankruptcy and How Does it Work?

Bradley’s Bankruptcy Basics (link to another website).

Many people ask me if they “can file for bankruptcy on their own.”

“Yes, anyone has the legal right to perform their own open heart surgery, so why not their own bankruptcy?” I always respond. (Thank you for the quote, Judge Baum.)

Before the regulations changed in 2005, I believed that only a fool would file their own bankruptcy, no matter how “easy” it was.

In reality, many lawyers stopped practicing bankruptcy law when the law was changed because it had gotten so complicated. Never take advice from someone who filed their own bankruptcy. They had a “fool for a client” and almost certainly committed at least one federal felony, yet they escaped detection. The current laws are being strictly enforced, and the Attorney General’s Office is pursuing bankruptcy fraud relentlessly.

You will wind up paying their advertising costs if you use those who advertise on TV.

Also, “legal document preparers” should be avoided. These are people who desire to be lawyers but have chosen not to attend law school. Instead, they act as though they know the law, or worse, they are disbarred attorneys or other parasites who prey on the vulnerable.

Always double-check your lawyer’s credentials with their state bar.

Inquire about the lawyer’s recommendations. The majority of people get decent lawyers by asking their friends or relatives for recommendations.  Check out online reviews as well, but be wary of unscrupulous lawyers who pay for bogus ratings.

Hiring a cheap lawyer can be very expensive.

• First and foremost, inform the debtor about the need of filing for bankruptcy. It is critical that the debtor completely disclose all assets and liabilities (no exceptions). This instruction takes several hours, and the most of it must be completed by an attorney, not an attorney’s assistant.
• Assist the debtor in determining whether bankruptcy is the best solution for the debtor’s financial troubles based on the quantity and nature of the obligations owing.
• Assist the debtor in preparing their estate for bankruptcy so that just a small portion of their assets must be turned over to the Trustee later. Pre-bankruptcy planning.
• Examine the Debtor’s payment and transfer history to evaluate probable exposure to the Debtor and others.
• Assist the debtor in gathering the data and information needed to compile the bankruptcy schedules and statements for filing.
• Prepare the necessary petitions, schedules, and statements for bankruptcy court filing.
• Decide whether or not the education classes are required. If this is the case, submit the relevant certificates to the court.
• Obtaining the required injunctions and restraining orders by filing bankruptcy petitions, schedules, and declarations with the court.
• Attend the Debtor’s Meeting of Creditors.
• As necessary by the court, prepare and file updated schedules.
• Address redemption, surrender, and reaffirmation difficulties.
• Respond to creditors’ and/or the Bankruptcy Trustee’s queries.

The court sets the filing fees, which change over time.

Whether you file bankruptcy separately or jointly with your spouse, the charge is the same. In addition to the court filing fee, each participant is required to attend two classes. The price of the two classes is determined by the provider. We will put you in touch with a contact for a reasonably priced provider. We will provide you m ore information on these classes.

As to attorney fees:

The 2005 Bankruptcy Reform Act necessitates a lot more effort for everyone, including the Debtor’s attorney. As a result, many attorneys have totally abandoned the bankruptcy profession. Those who stayed realized that they needed to raise their costs to cover the added effort. We won’t be able to provide a precise charge for the attorney’s time without first reviewing your situation.  The more problematic your position is, the more the fees. The good news is that our initial consultation and assessment of your situation is completely free of charge.

Other clients have told me that my fees are far lower than those charged by other firms (particularly TV and billboard advertising firms). Those who charge more than double the going rate and use strong-arm methods to get people to hire them.

Why are our fees lower than those charged by television advertisers?

Only if my clients gather information in a systematic manner, filling out as much of the needed information as is relevant to their circumstance, will I be able to do so. If a client only delivers part of the needed information, I will have to raise my costs since I will be compelled to complete more of the client’s job. As a result, a client who fails to supply the names, dates, addresses, and/or amounts requested on the questionnaire will be charged more for attorney time than a client who reads the directions and completes their side of the task without my excessive participation. That isn’t to say that you shouldn’t inquire. In a properly filed bankruptcy, thoroughness and correctness are critical. Inaccurate paperwork might cost you a lot of money.

Incomplete paperwork might result in you losing your bankruptcy protection, costing you more in attorney fees defending fraud allegations, and possibly putting you in jail. My role is to assist you in avoiding all of these issues. As a result, thoughtful questions are encouraged.

Exemptions, sometimes known as “exempt property,” are a key concept in both Chapter 7 and Chapter 13 bankruptcy. The Chapter 7 Trustee seizes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors when you file for bankruptcy under Chapter 7. Your exempt property cannot be taken by the Trustee, and you are entitled to keep all of it. The exemption rules of the applicable state determine what property is “exempt” and what property is “non-exempt.” For bankruptcy purposes, each state has its own set of exemptions. Go to the main menu, Bankruptcy, Arizona Exemptions, for a link to Arizona exemptions. The exemptions are available in PDF format for download. Only Arizona residents are allowed to use these exemptions. Arizona exemptions (YouTube video).

Arizona Exemptions can be found by clicking here

Just because you live in Arizona when you file for bankruptcy doesn’t mean you’ll be able to claim Arizona exemptions.

As a result, you and your bankruptcy counsel must decide which state laws will determine your exempt assets before filing bankruptcy. The state exemption statute that applies to your bankruptcy is established by where you lived for the previous 730 days (two years) prior to filing your bankruptcy. If you did not live in Arizona for the entire two-year period prior to filing your bankruptcy, your bankruptcy exemptions will be those allowed by the state in which you lived for 180 (6 months) days immediately prior to the two-year period, or the state in which you lived for the greater portion of that 180-day period. Are you confused yet? Making a diagram of where you lived and when so we can talk about this issue.

For example, if a person has resided in Arizona for more than two years and files bankruptcy today, he or she may use the Arizona property exemptions. However, if that person did not live in Arizona for two years, he or she will have to rely on the exemptions of the state in which he or she spent the previous two years. It’s likely that the previous state’s exemptions are only available to residents. As a result, the individual filing for bankruptcy will have to rely on federal exemptions. In many circumstances, the bankruptcy exemptions provided by the previous state will be superior than those provided by Arizona law.

Consider the case of John. In January, John sells his Georgia home for $100,000 and relocates to Arizona. John buys an Arizona homestead for $100,000 in March of that year, obtains an Arizona driver’s license, and registers to vote in Arizona. John loses his job 14 months after coming to Arizona and declares bankruptcy. John’s bankruptcy would be subject to Georgia’s relatively limited exemption laws, and he might not be eligible for Arizona’s homestead protection (but laws change and so may this result).

No, you will be able to protect your exempt property.

Certain property is deemed exempt and out of reach of your general creditors under the laws of the state where you live, as well as federal legislation. The list of exemptions is specific to the state in which you file bankruptcy and the length of time you lived there. If you own property that isn’t on the exemption list, you must give it over to the Trustee. Warning: To repay child support or alimony/maintenance, all of your property, including exempt property, may be sold.

A link to a list of properties that are exempt under Arizona law can be found in the main menu above.

Keep in mind that the 2005 Bankruptcy Reform Act made significant changes to the law regarding exemptions. To claim Arizona exemptions, you must have lived in Arizona for the previous two years. Otherwise, you’ll have to use the different exemptions.

Secured debts are included separately from unsecured debts in bankruptcy proceedings.

Personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, as well as other credit cards used to purchase consumable things, are examples of unsecured debts. Unsecured debts include car leases, medical expenses, and personal loans. Secured debts are those for which the creditor has a security interest in your property as collateral. Mortgages, vehicle loans, finance company loans (typically secured by household belongings), furniture, computers, and gadgets are examples of secured debts. If you paid for products with the store credit card, such as one from Home Depot, Best Buy, or another retailer, the business is likely to have a security interest in the items you bought, making it a secured creditor.

hand holding a houseSecured Property

You must either reaffirm or redeem secured obligations or surrender secured property to the creditor after filing a Chapter 7 bankruptcy. You have the right to keep any secured property as long as you make timely payments on the loan for that property. If you choose to surrender secured property, however, the secured creditor will not be able to sue you or try to recover any money from you. Borrowers have been compelled to sign cross-collateralized agreements by several credit unions. This means that the borrower consented to their bank or savings union seizing their bank accounts in order to pay for the vehicle’s or credit card late payments.

If you’re not sure whether you signed these types of documents, go over the paperwork you signed when you bought your car or created your account. Before defaulting on a car loan, you should consider moving your money to a new bank.

Do not bank with Wells Fargo; they have been known to freeze accounts despite the fact that you owe them no money.

Make sure you tell your lawyer about all of your liabilities, no matter how minor.

Even if you’re confident that claim will never be made against you, make a list of any claims that might be made against you. The debt should be listed and explained in the bankruptcy if you are a co-debtor on a note, have personally guaranteed any debt, or are liable on any mortgage. You must also indicate any bills that you are disputing. This includes any previous responsibilities to any mortgage firms for a repossessed home or even a short sale, as well as any mortgage insurance agencies (such as a VA loan). Include any obligations that someone pledged to pay for you, such as selling your property to someone who agreed to pay you, but the sale was completed without the debt being fully paid off.

All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)

An executory contract is a legal word that refers to a contract between two parties that includes an obligation owed by at least one of them (such as a car lease or a residential lease). A lease agreement for a car or a home is the most typical example.

An executory contract can be assumed or rejected in Chapter 7 bankruptcy by the debtor or the trustee. Before the court delivers a bankruptcy discharge, which normally occurs 90 days after filing, a debtor must decide what to do with an executory contract.

A vehicle leasing is an example of an executory contract. If the debtor does not wish to keep the leased vehicle, he can return it to the leasing firm and be released from any further obligations. If the debtor wishes to keep the car, he or she must assume the lease and make timely payments. The lease assumption must be signed by both the debtor and the creditor, but the judge’s approval is not required. The leasing company can repossess the car if the debtor cannot make the lease payments, but it cannot sue the debtor for any deficiency.

The “Mean’s Test” is a formula that assesses whether a person applying for bankruptcy has enough income to cover all of the allowable expenses, plus enough money to pay non-priority, unsecured creditors like credit cards.

The means test is a method devised by Congress to determine who is qualified to apply for bankruptcy under Chapter 7. People with incomes below the state median and debts that are predominantly not consumer obligations are exempt from the means test. This indicates that if 51 percent or more of the debts are commercial obligations, the potential debtor will not be subject to the means test.

The Debtor must calculate their “current monthly income,” which includes any money from spouses, rents (less costs), bonuses, and any “assistance” from family or friends. Allowable living expenditures and secured and priority debt payments are deducted from total income to arrive at a net income or monthly disposable income that can be utilized to pay down unsecured non-priority debts. If the net income, multiplied by 60, is larger than (1) either 25% of the nonpriority unsecured claims or $6,000, or (2) greater than $10,000, the chapter 7 can be contested. The debtor may be forced to convert the case to a chapter 13 or risk losing all bankruptcy protection. §707(b).

Basically, if a debtor can pay $100 per month to their unsecured creditors, their chapter 7 bankruptcy may be challenged. This law is interpreted differently by different courts.

To comprehend the Mean’s Test, you must first understand a few terms.

It is not current, monthly, or income. Instead, it’s your family’s entire income for the previous six months, plus monthly gifts and donations from others toward household expenses. Social security, maybe unemployment (to be assessed by a court), and benefits to war crimes/terrorism victims are not included in income. §101(10A). The total current monthly income is then deducted from the allowed expenses. The IRS Standards and 707(b)(2)(A)(ii) specify the expenses that are allowed. This last figure is referred to as the Debtor’s “monthly disposable income.” To assist you in gathering this information, our office will provide you with a form.

After calculating “monthly disposable income,” the Debtor must compare it to the median family income in the Debtor’s state.

The Debtor may file a chapter 7 if his or her “monthly disposable income” is less than the median family income. However, continue reading to the next paragraph.

Comparison of Schedules I and J:

Even though the Debtor passed the net current monthly income test, if the Debtor’s real monthly income, minus the allowable monthly costs, is greater than an unstated sum (which is not clearly defined), the Debtor may still have difficulty filing a chapter 7. When a Debtor has been unemployed for numerous months in the last six months, but suddenly earns more than is required to pay the allowable expenses, this situation can arise.

If the court concludes that the Debtor should not be in Chapter 7, the Debtor or their counsel may be sanctioned for reimbursement of the Trustee’s reasonable attorney fees expended in prosecuting the case. (Rule 9011 and 707(b)(4)(A)).

Every customer who files Chapter 7 or 13 bankruptcy must take a credit counseling “briefing” and file a certificate of compliance with their bankruptcy.

There might be a very, very rare exception for emergency conditions, but they must still show that they attempted to obtain the class within the final 5 days of filing, and they must complete the course and produce a certificate of compliance within 30 days after filing their bankruptcy petition. Never presume that the court will allow this late filing; your bankruptcy will almost certainly be dismissed, and you will have to start over (plus there are other consequences).

A financial management class must also be completed within 45 days of filing your bankruptcy. Failure to do so will result in additional penalties and expenditures when it comes to getting your bankruptcy discharged. There will be fees charged for those classes, unless you cannot afford to pay such fees.  Diane and Jay will walk you through the steps.

A word of caution about all of the companies who provide the certificates: their bankruptcy information is frequently inaccurate. You should speak with a bankruptcy lawyer in your state. We’ll tell you all you need to know about both of these classes.

Following your bankruptcy, you must take a Personal Financial Management class.  THIS CLASS SHOULD NOT BE TAKEN BEFORE FILING FOR BANKRUPTCY.

Credit Counseling and Debtor Education classes must be approved by the US Trustee’s Office.


(click the question below and the answer will appear)

  • The Debtor may not submit any papers to the Bankruptcy Court until he or she is confident that the information is (1) accurate; and (2) warranted by existing law or a good faith argument for the modification of the existing law.

    9011 is a rule. To put it another way, someone who is representing himself in a bankruptcy must be familiar with both the bankruptcy and state laws that pertain to their circumstance. Ignorance of the law is not an acceptable excuse.

    Regarding the information submitted by the Debtor, the Debtor’s counsel must make the same oath. Under Section 707(b)(4), sanctions may be imposed.

    Section 521 describes:

    • the documents that must be filed
    • the 60 day deadline for filing the pay checks
    • filing of the Mean’s Test (Official Form B22A)
    • deadline for filing statement of intention and performing same (§§111, 521(a)(2) & (a)(6),
    • appear at the required creditor’s meeting
    • complete the required credit briefing class (before filing the bankruptcy §109(h)) and budget class (after filing the bankruptcy §§111, 727(a)(11)).
    • 7 days before the creditor’s meeting deliver to the Trustee a copy of the last tax return filed or a transcript, provide the Trustee with proof of identity and other documents (bank statements, wage statements, tax returns, car titles, etc).
    • Click here for the timeline. (§521(i)(1).
    • All creditors must receive notice of the bankruptcy (§521(a)(1)(A).
      • This notice requirement includes all addresses on all mail received in the last 90 days prior to filing. §342(c)
      • Failure to provide notice to the correct address may mean the creditor can continue legal actions outside the bankruptcy court, until they receive notice at the correct address.

    Failure to meet these dates will very certainly result in the bankruptcy case being dismissed.

    Some of the preceding requirements may not apply if the Debtor is a corporation, or if the debts are not predominantly consumer obligations, or if the Debtor has nonexempt property in excess of a certain dollar amount. §101(3).

The bankruptcy stay is a bankruptcy measurelaw that prevents creditors from contacting the debtor after you file for bankruptcy. This might be a problem if the lender who owns your house or car decides to stop issuing monthly statements. It is your obligation to ensure that you pay these debts on time; otherwise, the lender may seek permission from the court to seize your home or vehicle.

The filing of the petition results in an automatic stay of all collection actions under 11 U.S.C. 362. Unless the Debtor has filed a prior bankruptcy within the previous 12 months, 11 U.S.C. 301, 302, 101(42).

If the Debtor has filed a previous case within the last 12 months, the automatic stay is only good for 30 days. §362(c)(3)(A).

If the debtor wishes to extend the automatic stay, he or she must make an application to extend the stay as soon as the bankruptcy is filed.

If the Debtor has filed two or more cases in the last 12 months, there is no automatic stay. §362(c)(4)(A)(i)

A case that has been dismissed is still a filed case. A Debtor’s failure to grasp these restrictions is not an excuse.


Always read and follow the court’s directions.

Unless you sign up for e-mail notification, your orders or instructions will be mailed to you. As soon as you receive the instructions, you should contact your attorney for advice on what to do. As a result, it’s critical that you keep the court and your attorney up to date on your current address.

Your property is sold at a public auction, and the proceeds are divided among your creditors who have filed claims (Proof of Claim) in your bankruptcy. This auction is open to you, your family, and your friends. These funds will also be used to cover the costs of administering your estate. Your case’s Trustee will be liable for paying his or her attorney or other professional.


What is a proof of claim?

No-Asset Case:

Your case will be called a “no-asset” case if you have no money or property worth more than the exemptions allowed by law. The Trustee/court will decide whether or not your case is a no-asset case shortly after the Meeting of Creditors.

Unless a creditor files an objection to your discharge, the Trustee requests an extension of time, or you want additional time to reaffirm debts, your discharge will usually be entered about 120 days after your case was originally filed. Your case will most likely be closed soon after you are discharged.

You must hand over your tax refund check to the trustee when you get it.

Any right to a tax refund that you had when you filed bankruptcy is an asset of your bankruptcy estate, and it belongs to your trustee. If the amount is minor, you might be able to get the check returned. However, you should expect the trustee to deduct a portion of your refund equivalent to the amount owed to you on the filing date.

Pre-bankruptcy planning is something you should discuss with your attorney.


When you file for bankruptcy, your papers become public record. Some credit-reporting companies may make a public record of your filing. In addition, your name will be published in at least one Arizona newspaper, if not more. However, because your name will be displayed alongside hundreds of other debtors on a page, it is unlikely that it would stand out.

To reaffirm a debt, the Debtor must sign a new contract with the lender, reaffirming his or her personal liability for the loan.

This is commonly done with automobiles. Before reaffirming any personal liability for a debt, the Debtor should always consult with their counsel. There may be alternatives to confirming the lien, such as surrender, redemption, or avoidance. If a debtor voluntarily decides to reaffirm and re-establish their personal liability to a creditor after considering their choices and entering into a formal agreement to that effect signed by both the debtor and the creditor, the debtor must then present the agreement to the Court for approval.

Even after signing the reaffirmation agreement, the Debtor has 60 days to cancel it.

If a debtor does not take advantage of other options before confirming the obligation, the debtor is obligated by the conditions of the new arrangement and can be sued if the debt is not paid.

The Debtor faces the risk of being sued on any new deal they sign after filing bankruptcy.

If the debtor does not sign a new contract, the lender will not be able to sue, but they may be able to repossess the vehicle – MAYBE. This is where things get a little more difficult. The Debtor could keep their automobile under the former bankruptcy legislation as long as they made regular monthly payments and kept their insurance current. A reaffirmation agreement was not needed of them. That way, if the car later turned out to be a lemon, the Debtor may surrender it to the lender and avoid any deficiency action (lawsuit).

Under the 2005 Reform act, a reaffirmation agreement is only binding if it is entered into before the discharge is filed, the debtor receives the numerous disclosures required from the creditor (except credit unions – 524(c).  The debtor does not rescind the agreement, and the court approves the reaffirmation agreement (which may include a hearing). (524)(c).

If it appears that the Debtor will be unable to make the contractual payments, the Court may refuse to sign the reaffirmation agreement.

So, what exactly is the issue? Some creditors argue that if the debtors want to keep the car, they must sign a reaffirmation agreement under the new bankruptcy law. However, a debt must be “enforceable under relevant non-bankruptcy law, whether or not discharge of such debt is waived,” according to Section 524(c). There does not appear to be a default that is “enforceable under applicable non-bankruptcy law” if the Debtor keeps the car payments current, has insurance, but refuses to sign the reaffirmation agreement. After all, the creditor is getting paid every month.

However, because the law is always changing, it is crucial to consult with an attorney before signing any arrangement.

Your lawyer has the option of signing or not signing your reaffirmation agreement. Negative disposable income, no concessions by the creditor on principal or interest, or the attorney considers there is an undue hardship assumption. You must sign a Reaffirmation Agreement Explanation detailing why you now have the financial ability to pay a reaffirmed debt if your attorney does not “allow” reaffirmation. Your explanation will be reviewed by the bankruptcy court, who will either deny or grant the reaffirmation. If the bankruptcy court decides that reaffirmation is not in your best interest for a “fresh start,” he or she will deny it.

Perhaps in a circumstance when the creditor is proposing better terms on a new contract, such as a principle reduction equivalent to the vehicle’s current fair market value and a lower interest rate. Nothing prevents the Debtor from negotiating these new terms as part of any reaffirmation agreement, but the lender has the option to reject them, and the court cannot compel the lender to accept them.

In bankruptcy, a debtor can “redeem” secured personal property such as furniture, computers, automobiles, or other items that were bought on credit. To redeem a property means to buy it from the secured lender for its current fair market worth, taking into account its age and condition. This may be a suitable alternative if the property is worth less than the secured loan. The issue is that most redemptions require full payment at the moment of acceptance or approval by the court.

A discharge is an order from the court that says you don’t have to pay your obligations to the creditors listed in your bankruptcy documents as long as the law allows and the court didn’t issue a non-dischargeability order.

The discharge is a legal procedure that relieves you of the majority of your legal obligations to your creditors. Creditors who have been discharged in bankruptcy can no longer pursue you for obligations you accrued before filing bankruptcy. Even after the discharge is issued, there are still debts that remain. Child support, alimony, school loans, most taxes, and a variety of other responsibilities are among these debts. An experienced bankruptcy lawyer can help you figure out which debts are discharged and which aren’t. Video explaining the discharge.

Student loans, child support, alimony/maintenance, government fines or penalties, most taxes, and a few other obligations are not dischargeable under the current legislation.

A permanent federal injunction is what this is called.

A discharge frees debtors from personal obligation for any dischargeable debts, while creditors whose debts are discharged are barred from collecting those debts from the debtors. In chapter 7 cases, companies do not receive discharges; only people do.

Non-dischargeability complaint.

After the creditor’s meeting, creditors and the trustee have 60 days to file a complaint stating that they believe there is a good reason why their debt should not be discharged (forgiven) or why this chapter 7 case should not be continued (Bankruptcy Code 523(a)(2), (4), (6, and (15)). In some situations, the Trustee might ask the court to deny a chapter 7 discharge.

The Debtor’s involvement in their case does not end when a discharge is granted.

The Debtor is not excused from executing the obligations imposed by the Bankruptcy Code. The Debtor’s responsibility to submit assets or tax refunds to the Trustee after the discharge is issued is an example of a continuing duty. If the Debtor fails to fulfill these obligations, an action to rescind the discharge may be brought. This means that the Debtor has gone through all of this trouble and now has no protection from creditors garnishing paychecks, filing lawsuits, or seizing bank accounts.  Plus all the listed debts may not be discharged in a future bankruptcy.

A creditor with a valid lien on the debtor’s property (such as a house, automobile, furniture, or jewelry) may collect the property or its value even after the discharge.

However, if the debtor owns property that is subject to a judicial lien or a non-purchase—money security interest, the Debtor must bring the matter before the Court for an order removing the lien’s effect. A Motion to Avoid a Lien is the name for this action.

If a debtor wants to keep assets with secured liens (such as a house or automobile), he or she can either make regular payments to the lender or pay the lender a lump-sum payment equal to the item’s fair market value (redemption).

Reaffirmation agreements are not required for home loans in Arizona bankruptcy.

Discuss the issues with your attorney and see if they will sign the agreement so that your payments will appear on your credit reports.

Usually by mail, unless you have asked for electronic notification. In some states there may be a court hearing, which you must attend, where the court will explain the meaning of the discharge, or the reasons for denying your discharge, if it is not granted.

Arizona does not have this discharge hearing, unless yours is a very unique situation.

The law changes and the following may not be accurate.  Talk to your attorney.

If your discharge in bankruptcy is granted, in most circumstances all of your debts will be discharged except the following list, which is intended to be only an outline of most debts that are not discharged.

  • Taxes due within the last three years or taxes not assessed because of fraud.
  • If the bankruptcy court so rules, debts for obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive.
  • Debts not listed on your bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim.
  • If the bankruptcy court so rules, debts for fraud, embezzlement or larceny.
  • Debts for domestic support obligations (alimony, maintenance or support).
  • If the bankruptcy court so rules, debts for intentional injury.
  • Debts for certain fines and penalties payable to governmental units.
  • Debts for student loans that were insured by a governmental agency, unless not discharging the debt would impose an severe undue hardship. This undue hardship must be properly plead to the Court and the judge will decide based on your unique situation.
  • Debts that were or could have been listed in a prior bankruptcy case in which you either waived your discharge or your discharge was denied.
  • Debts that are owed to a single creditor (of an amount specified in the Code) for the purchase of “luxury goods” incurred by you in the 90 days before you filed the petition for bankruptcy. The 90 day period may be long, depending on your history of paying, what the money was used for and your “intent” at the time of incurring the debt.
  • account incurred by you an the 70 days before the bankruptcy was filed, regardless of the number of creditors involved.
  • DUI personal injury judgments against you resulting from car accidents in which you were a drunk driver.
  • Post-petition Homeowner association fees.  Note – pre-petition HOA assessments are normally still attached to your home.
  • Monies owed to a pension, profit-sharing, stock bonus or such other plan.

If the Debtor gives a deposit or other security to their utility company immediately after filing bankruptcy to ensure the payment of future services, the utility may not halt service, refuse to serve, or discriminate against the Debtor for paying their account.

However, if the Debtor pays a utility bill, don’t be shocked if a significant deposit is asked whenever a new service is sought.

Yes. Bankruptcy is a federal proceeding, and the bankruptcy court has the authority and jurisdiction to discharge debts incurred throughout the United States.

For a year after you receive your discharge, notify your attorney immediately if your address or phone number changes. Make certain that the Court and the Trustee are both aware of your new address.

Yes, after filing bankruptcy, you can pay off as many debts as you want or need to. Obviously, you must continue to pay the lender if you want to keep your home and automobile. You must also settle the debts for which you have entered into a Reaffirmation Agreement. (For more on reaffirmation agreements, see the section above.)

After bankruptcy, don’t take on any new credit for at least a year.

I advise you to avoid making any payments unless they are absolutely necessary. Once they were relieved of the responsibility to pay the high interest rates on their credit cards and other unsecured debts, my clients tell me they had more money than they ever imagined.

First, double-check that the debt was included in your bankruptcy. If it wasn’t, you might still have time to include it.

Do not disregard the case; else, a default judgment will be entered against you. Respond to the lawsuit by filing an answer in the court where you were sued, claiming that the debt was discharged through bankruptcy. When the judge discovers that the debt was listed in bankruptcy and then discharged, the case is usually dismissed. If the judge does not dismiss the case, you can seek an injunction from the bankruptcy court ordering the creditor to stop pursuing you.

A bankruptcy discharge is a valid legal defense against any debt that has been duly discharged, but you must assert it.

Normally, 8 years have passed since the last chapter 7 or 11 petition was filed.

A chapter 7 discharge is only available to people who have followed the bankruptcy laws. For the next 8 years following the filing of the first chapter 7 bankruptcy, the person is not eligible for another chapter 7 or chapter 11 bankruptcy discharge. 727(a)(8). The discharge can be withdrawn if the debtor commits fraud or fails to comply as required by law. Even if a chapter 7 bankruptcy is not an option, the debtor may be eligible to file a chapter 13 bankruptcy.


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To ensure that you receive notices, obtain a copy of the debtor’s bankruptcy schedules or check with the clerk’s office to confirm that your name and debt have been recorded. This should be done at the Bankruptcy Court where the case was originally filed. A creditor should examine the debtor’s schedules to see if the creditor’s claim (what the creditor owes) was properly designated as secured or unsecured and listed in the correct amount. It’s also worth noting if the debtor contests the claim or labels it as unliquidated or contingent. If a debt was not stated on the debtor’s schedules, the creditor should immediately talk to a creditor bankruptcy attorney.  It may be necessary to file a proof of claim by the deadline.

Section 342 requires that all creditors receive notice of the bankruptcy in order for the full restraining action of the automatic stay to become effective. The debtor is to list all addresses provided by the creditor within the 90 days before the bankruptcy was filed, and/or any other address used by the creditor in another bankruptcy. Section 342(c) Again, this is new law and I would not advise the creditor to ignore any notice, written or otherwise. Once the creditor receives notice of the bankruptcy they must cease all attempts to contact the debtor or seize property, without obtain permission from the bankruptcy Court. There are monetary penalty for ignoring this prohibition. Section 343(g) and 362(k).

  • File a proof of claim. It is the creditor’s proof of claim that will govern unless specifically objected to by the debtor.
  • In a Chapter 7 no-asset case, proofs of claim need not be filed. There will not be any distribution of funds to any unsecured creditors. A no-asset is a case where all the assets of the Debtor were protected by law (exempt property). The majority of all chapter 7 cases involving individuals are no-asset cases.
  • In all other Chapter 7 cases and Chapter 13 cases, a creditor must always file a proof of claim to participate in any distribution.
  • In a Chapter 11 case a proof of claim is not required if the claim is accurately listed in the schedules and is not scheduled as disputed, contingent or unliquidated.

When a bankruptcy petition is filed, a federal restraining order known as the automatic stay prevents any creditor, collection agency, or government institution from pursuing trustee sales, foreclosures, garnishments, lawsuits, or repossessions against the debtor and his or her property. Attempting to collect money, evict the renter, garnish wages, or execute a trustee’s sale, foreclosure, or repossession without first receiving authorization from the bankruptcy court is a violation of the federal restraining order. An Order for Relief from the Automatic Stay is the name for this type of authority. Disobedience to the automatic stay can result in a hefty fine.

Shortly after a bankruptcy is filed, creditors will receive notice of an initial meeting of creditors (Section 341, Meeting of Creditors) to be held at the Office of the United States Trustee. You may attend the Section 341, Meeting of Creditors, but are not required. This meeting provides the creditor a opportunity to ask the debtor a few questions regarding its claim, its collateral, other claims against the debtor, the debtor’s plans for its bankruptcy case and any other aspects of its financial affairs. This is not an opportunity to interrogate the Debtor. This is a good time to reveal to the Trustee (the person conducting the meeting) any inconsistencies the creditor has discovered in the schedules. Make sure to be able to support any statements. Either the creditor or its counsel can attend the meeting.

You can ask the debtor questions at the creditors meeting (see above), or Bankruptcy Rule 2004 permits a creditor to take the deposition of the debtor and inquire into all aspects of its financial affairs. The scope of the examination is broad and should be taken advantage of to obtain information.

The secured creditor or landlord may ask the debtor to sign a new contract called a “reaffirmation agreement” or “lease assumption agreement” after the bankruptcy is filed but before the discharge is issued. This new contract has the same terms as the original, and Sections 524(c) and (k) outline the paperwork, disclosures, and procedures that the creditor must follow in order to get this new contract. It must be approved by the Court in order for the debtor to be bound by it.

Because 524(k)(5)(B) requires the debtor’s attorney to certify that the debtor will be able to make the payments, it’s likely that no debtor’s counsel will sign the reaffirmation agreement. This is not only absurd, but it also begs the question of how anyone could certify someone’s ability to pay a future debt.

Below is a link to a video of Bankruptcy Judge Eileen W. Hollowell, filmed explaining the reaffirmation process.