This checklist is designed to help you determine if you qualify for bankruptcy, and for what type you qualify. It can also help you determine which type will benefit you the most. However, it is not intended as a substitute to talking with an experienced bankruptcy attorney, and you should not make a decision to file, or choose the type, based on this checklist alone.
- Do you have unsecured debt (credit cards, medical bills, payday loans, personal loans)?
If you have unsecured debt, then Chapter 7 bankruptcy should be considered, unless there is a specific reason why you need to file another type. If you do not have unsecured debt, then, unless you have tax liabilities that can be discharged, Chapter 7 will likely not benefit you.
- Do you owe any taxes?
If you owe taxes, then you have to answer two more questions: (1) Are they income taxes? And, if they are income taxes, (2) how old are your tax debts?
If you taxes are income taxes and are old enough, then you could eliminate them through Chapter 7 bankruptcy. If the taxes are not income taxes, or do not qualify for discharge, then Chapter 7 will not help you deal with them, and you will benefit more from a Chapter 11 or Chapter 13.
- Do you have student loan debt?
Student loan debt is not automatically eliminated in any bankruptcy. If your goal is to eliminate student loan debt, you can file any type of bankruptcy, but would then need to file a separate legal proceeding in court to determine if the student loans can be eliminated.
- Do you owe alimony or child support?
Alimony and child support cannot be eliminated in bankruptcy, and Chapter 7 bankruptcy will not help dealing with this type of debt at all. However, if you behind on the alimony or child support, you can catch up on the payments over time through a Chapter 13 bankruptcy.
- Do you have a mortgage?
Chapter 7 will not help you deal with a mortgage. If you are current on your mortgage, this may not matter. If you are you behind on your mortgage, and want to keep the property, then you will need to do a Chapter 13 or Chapter 11 bankruptcy. These types of bankruptcy will allow you to catch up on the mortgage payments over time, or to modify the mortgage in an appropriate case.
You should also keep in mind that with the current COVID-19 crisis, there are federally-mandated regulations that provide mortgage assistance to eligible borrowers. While these regulations are in effect, they may help you avoid filing for bankruptcy if you only issue is being behind on mortgage payments.
- Do you have car payments?
Chapter 7 will also not help you deal with car payments. If you are behind on your car payments, cannot quickly catch up, and want to keep the car, Chapter 13 or Chapter 11 bankruptcy will be a better option for you.
- Do you have other secured debt?
If you are behind on any other secured debt, then you would likely want to file a Chapter 11 or Chapter 13 bankruptcy. The same is true if you want to make any modifications to the secured debt, such as extending or modifying the payments. If your payments on secured debt are current and you do not want to modify the debt, or you do not want to keep the property securing the debt, then Chapter 7 bankruptcy is usually a better option.
- Are you being sued?
Lawsuits can be taken care of in any type of bankruptcy. Therefore, a Chapter 7 would generally be all that is needed to stop a lawsuit.
- Are you being garnished?
If you are being garnished as a result of a judgment against you, any type of bankruptcy will stop the garnishment. You cannot get the money already garnished if you file for Chapter 7 bankruptcy, but in Chapter 13 or Chapter 11 bankruptcy, you could get back the money that was garnished within the 3 months prior to bankruptcy.
- Are you married?
If you are married, not separated, and reside in Arizona, both your and your spouse’s income will be counted in determining your eligibility for Chapter 7 bankruptcy, or your payment requirements in Chapter 13 bankruptcy. Most of the time it is beneficial for both spouses to file for bankruptcy together. However, that is not required, and one spouse can file for bankruptcy alone.
- Have you filed bankruptcy in the last 8 years?
If the answer is yes, and your previous bankruptcy was a Chapter 7, you cannot file a Chapter 7 bankruptcy. If the previous bankruptcy was filed at least 6 years ago, you can file a Chapter 13 bankruptcy. If your previous bankruptcy was a Chapter 13, you can file a Chapter 7 if at least 4 years has elapsed since the prior bankruptcy was filed.
- Do you expect to incur new debt in the near future?
If you expect new debt, for example from medical procedures, then it is generally a good idea to wait until the debt is incurred before filing for bankruptcy.
- Are any of your debts co-signed or guaranteed by someone else?
If someone else co-signed for your debt, their liability will not be eliminated by your bankruptcy. To protect your co-signer while you are trying to pay off or catch up on the debt, you can file for Chapter 13 bankruptcy, which protects co-signers of consumer debt while the bankruptcy is pending. If the cosigner’s liability is not a concern to you, then you can choose any bankruptcy chapter you would choose otherwise.
- Do you operate a business?
If you are a small business owner and need to deal with debt, deciding which type of bankruptcy is best requires answering two additional questions: (1) Are you a sole proprietor, or is the business a corporation or a limited liability company? And (2) If you have a corporation or LLC, is the debt in your name or in the business name? Sole proprietors can often file for Chapter 7 bankruptcy unless there are significant business assets. If there are significant business assets, then Chapter 13 would be a better option, or, if the amount of debt makes you ineligible for Chapter 13, then Chapter 11. If the business is an LLC or a corporation, then Chapter 13 is generally the better option. However, only individuals can file for Chapter 13, so if the debt is in the name of the LLC or corporation that needs to continue operating, then a Chapter 11 bankruptcy will need to be filed.
You should always consult with a qualified attorney in your jurisdiction before choosing which type of bankruptcy to file. At Yusufov Law Firm, we regularly advise our Arizona clients on bankruptcy options and help them choose the right type of bankruptcy to file. If you reside in Tucson, Phoenix, or Mesa, are considering bankruptcy and would like to discuss your options, please contact us online, or call 480-788-0098 in Phoenix/Mesa or 520-745-4429 in the Tucson.
- What debts can be discharged?
- Can I keep my house?
- Will bankruptcy stop wage garnishments?
- Do I have to give up all my assets?
- Do I have to list all my debts and assets?
- How will bankruptcy affect my credit?
- Can I discharge a payday loan?
- Can I eliminate my mortgage?
- What is a meeting of creditors?
Call us at (520) 745-4429 or (480) 788-0098 or fill out the form below and we will contact you.