What is Chapter 7? Phoenix Bankruptcy Lawyer Explains

The most common Arizona consumer bankruptcy is chapter 7. Joe Volin has been representing people in the Mesa Tempe Chandler area in the Phoenix Bankruptcy Court since 1986.

A Chapter 7 eliminates most debts and stops all bill collectors. There are a few exceptions, debts that cannot be eliminated.  A Chapter 7 case is started by filling a detailed financial statement with the Phoenix Bankruptcy Court which is part of the Federal Court system.

Just filing the bankruptcy papers with the Court causes an automatic court order to go into effect. It is called the automatic stay. That Court order makes it illegal for any creditor to do anything to try to collect money or take property from you. That includes all debt collection calls, lawsuits, garnishments, foreclosures, and even tax levies.

Right after the case is filed the Phoenix Bankruptcy Court will send a copy of the court order to your creditors. The Court order will state that it is illegal for them to contact you or do anything to try to take your money or property.

Most creditors will honor this Court order. Occasionally a creditor will ignore the Court order and continue to try to collect, file a lawsuit or call you. When that happens my policy is to sue the creditor for contempt of court and money damages. I promise you that I won’t charge you anything, even out of pocket costs, unless we collect money for you and I promise you that my fees will be less than the amount paid to you. When a creditor breaks the law with one of my clients, we will make them pay you!

Chapter 7 is a two way street. The goal of the case is to obtain a bankruptcy discharge. The discharge is a court order that legally eliminates most debts. In return, creditors get a share of property you own that is not specifically protected by law. Most people don’t own any property that is not protected, so no property is lost.

The laws that allow you to protect property are called bankruptcy exemptions. Although the bankruptcy law is a Federal statute, this federal law allows the individual states to pass laws that say what property will be protected in bankruptcy cases filed by people living in their state. Because of this provision in the law, what will be protected in your case might be different that what was protected in another person’s case.

Arizona exemptions allow most people to protect and keep their house, car, personal belongings such as furniture and appliances, clothing, retirement plans, life insurance, and tools of the trade. In the overwhelming majority of the bankruptcy cases I have handled in the past 24 years of appearing in the bankruptcy court my clients have not lost any property. This takes careful planning. The law allows you to rearrange what you own so long as it not done fraudulently. One of the most important things I will help you with is the planning to help make sure that you do not lose property that could have been protected.

After the bankruptcy is filed the Court appoints a person called a Bankruptcy Trustee. The Trustee is an investigator. It is his job to find out if you own any property that should be taken and sold. This money is then divided up among your creditors. The Trustee is paid a commission. This causes the Trustee to aggressively look for property that can be collected for your creditors. It also causes some trustees to try to collect property that they may not have any legal right to take. This is where having a lawyer who is not afraid to fight for you in Court can make a real difference. We regularly need to challenge the trustee’s right to take some of our client’s property and we have rarely lost these battles.

Your creditors will get sometime to challenge your bankruptcy. It does not happen often because the creditor will have to prove that you have done something illegal or fraudulent to be successful. This is another situation where having a lawyer with courtroom experience makes a big difference. When a creditor challenges your bankruptcy you will need an attorney who knows how to try a case in Court to prove that you have not done anything wrong.

Another player in the Chapter 7 case is called the U.S. Trustee. The U.S. Trustee’s Office is part of the U.S. Justice Department. This is where another attack on your right to file bankruptcy may come from. They will challenge your case if they think that you can pay a reasonable amount to your creditors. Basically, chapter 7 is for people who cannot afford to pay their bills, not for people who don’t want to pay their bills. Part of my job is to be ready to prove that you are honest and deserve the protection of the bankruptcy laws. This is one more situation where having a good trial lawyer will make a huge difference. It doesn’t happen often but we have had more than a few cases challenged by the U.S. Trustee and successfully defended these challenges.

The goal of the Chapter 7 case is called a discharge order. This is a court order that makes the protection of the bankruptcy court permanent. It legally eliminates the debts and makes it illegal for the creditors to do any, ever, to try to collect. This is another situation where some creditors will ignore the law and continue to try to collect. When that happens we want to know. I will sue the creditor and collect money for you when it does.

After we get your discharge order we will help you get your credit reports properly updated. Just because you received a discharge order does not mean that your creditors will automatically update your credit report to show that the money is no longer owed. Many people go through bankruptcy and can’t get credit a year or two later. They think it is because of the bankruptcy. Often it is not the bankruptcy but the inaccurate information that continues to be reported on their credit report. I will show you have to prevent this from happening to you and how to reestablish your credit after bankruptcy. Most people can rebuild their credit and qualify to buy a house at a competitive interest rate in about two years. We will show you how.

How the bankruptcy laws work often depend on the situation. I have been representing people in the Phoenix bankruptcy court since 1986 and I am convinced that there is no such thing as a routine bankruptcy. In my office you meet with the lawyer who is going to personally handle your case. Everyone deserves personal attention. We schedule one hour appointments at no charge so that we will have time to learn the details of your situation and answer your questions. We are also happy to discuss things on the telephone or through email after our meeting to cover additional questions and clarify things. To schedule a time to meet please call us at 480-478-0323.