What Happens During A Chapter 7 Bankruptcy in Arizona?

It is often the case that once a client decides to go ahead and file for chapter 7 protection, they are anxious to get the whole thing settled. They want the fresh start that is promised in the Bankruptcy Code. It is often source of frustration for them when they realize that filing bankruptcy cannot happen at the drop of a hat. I thought I would take a few minute here and explain the process to you, in hopes of preventing future frustration.

Let’s assume you and I previously met at my Phoenix office for a free chapter 7 bankruptcy consultation. After mulling over your options for several weeks, considering other options such as loan modification and debt consolidation, you decide to file. This is what happens next.

You first must retain me as your Phoenix bankruptcy attorney. This means that you will sign a written fee agreement and pay an agreed upon retainer and any additional fees. In exchange for these fees the contract will describe the legal services I am providing for you, likely the preparation and filing of your Arizona chapter 7 bankruptcy petition.

At this point, the ball is in your court. You will receive guidance on the necessary information that I will need to file your petition, and believe me the number of documents I request will make you dizzy. This includes a comprehensive list of assets and replacement values, a comprehensive list of creditors, copies of pay stubs, a comprehensive monthly budget that shows your net income and all expenses, copies of filed income tax returns, and various other documents (bills, deeds, titles, etc.). 

You also need to enroll in mandatory credit counseling courses which are now required under the 2005 revisions to the bankruptcy code. This will be an additional fee, unless previously negotiated in your contract. Depending on your contract, I may enroll you in these courses myself.

There will then be a period of time from a week to several months where you and I communicate back and forth regarding any discrepancies while I am completing your bankruptcy petition. How quickly the petition is completed depends mostly on the quality of the documents you initially provide me with. Other factors may plan in as well, including my current caseload and extenuating circumstances unique to your filing.

Once we are both satisfied with your bankruptcy petition, and I have confirmed that you are indeed ready to proceed with the filing (i.e. you have used your debit card to spend all non-exempt money in your bank account on provisions and food), I will simply upload an electronic version of your petition and it will be official. 

After filing, your case will be assigned to a Trustee. The Trustee will send you a questionnaire to complete and will request a similar stack of documents. Please make a copy of all documents that the trustee requests, prior to mailing in the completed questionnaire and documents.

You will then get notice of your meeting of creditors. You and I will meet just prior to this meeting, and will attend it together. Please remember that you need both your driver’s license and social security card or your meeting will be rescheduled.

After your meeting of creditors, you will have a 60 day waiting period. During this time, it is possible for creditors to file a Complaint to Determine Dischargeability of Debt or Objecting to Discharge. While this is not a normal occurrence, it can happen in cases where you racked up a few too many credit card purchases in the weeks approaching your bankruptcy filing. Remember, the bankruptcy law is in place to help grant you a fresh start, but is not meant to defraud your creditors.

If no objections are made by your creditors, you are still looking at another ~60 days until you receive your discharge in the mail. This is exciting, but does not mark the end of your bankruptcy. Depending on your specific case, and the assets the trustee must liquidate, your bankruptcy will not be considered closed for 1-4 years. This is because the trustee must still liquidate your assets, and distribute the bankruptcy estate among your creditors.

I should also warn you that the trustee considers your bankruptcy estate to include any large assets (think tax refund, inheritance, etc.) acquired in the 6 months after filing for bankruptcy protection. So even though you may consider you debts a thing of the past, your trustee might see it differently (especially if you just happen to get a big fat inheritance check 2 months after filing.)