I recently had a young family come to see me at my Chandler, Arizona office because they wanted to know more about filing bankruptcy in Arizona. They were current on their bills, yet struggling to get by each month. They tried, like many of you, to contact their creditors and get lower payments or some sort of relief. They were hopeful, because they had been with “X” Bank for so many years. Certainly “X” Bank would want to help, because this young family had been such loyal customers, who had always paid on time. Unfortunately, to their surprise, the Bank didn’t help. Neither did any of their other creditors. Then they asked me the question I hear often, “What if I stop paying my credit card bills and then we don’t qualify for Bankruptcy? What do we do then?” It’s a common question I am asked.
What happens if I don’t qualify for bankruptcy?
Generally speaking, there is usually some sort of relief through bankruptcy for everyone. Bankruptcy is created to protect people just like you from debts that have become too overwhelming. When filing bankruptcy the question isn’t whether or not you qualify, the real questions are 1) which chapter should you file; and 2) when should your case be filed? The answers to these questions depend on your specific circumstances. Your income and type of debts will help determine which chapter is best for you.
Even though filing bankruptcy is usually an option for everyone, certain debts are non-dischargeable in bankruptcy. These include student loans, most taxes, child support, alimony, criminal fines/restitution, and debts incurred through fraud. Part of the pre-bankruptcy process is to assess your financial situation and the types of debts you have to make sure bankruptcy is truly beneficial to you.
Now, while most everyone “qualifies” for bankruptcy in Arizona, it is true that a case could be dismissed – leaving you without a discharge of your debts. This could happen if, for example: you fail to provide documentation to the trustee when requested; fail to appear at your hearing (Meeting of Creditors); you fail to make your Chapter 13 payments on time; or failing to file tax returns on time. Another possibility is that a particular creditor can object and say that his debt should not be discharged. However, this is rare. This could happen if the creditor claims that a debt was incurred through fraud. The creditor would have to file a lawsuit in bankruptcy court (called an Adversary Proceeding) and prove that it was, in fact and in law, fraud.
During the free consultation we talk about your true financial picture. I want to know everything - the good, the bad, and the ugly – to make certain your case runs smoothly and so you know what to expect.
