How Much Debt is Needed to File Bankruptcy in Arizona?
A lot of people aren’t sure when enough is enough. When it comes to bankruptcy, how bad does the situation have to get before you decide to file a Chapter 7? The answer to that question is different for everyone. Some people have been struggling with debt for years. Others have never been in this position before. The COVID-19 pandemic has changed the financial landscape for a lot of people. Families who used to enjoy two-parent incomes are now down to one parent working part-time from home. People are using their meager savings to pay living expenses. Others are living off of their credit cards. Most of these people have no idea that a bankruptcy lawyer in Arizona can help.
What Sort of Assets Do You Have?
The trustee and the court are going to look at more than just your debt. They are going to want to see your income. They usually want tax returns for the last two or three years. This way, they can see if you’re making less or more than the previous year. They can also see if you’ve been socking money away in retirement accounts so you can file bankruptcy and get rid of your debt. The court is also going to want an itemized list of your assets. This includes all of the following things:
- Real property such as your home, vacation home and rental properties
- Personal possessions such as clothes, electronics and the like
- Art and jewelry
- Retirement, savings and checking accounts
Once they take a look at this, they can compare it to your debt. They’ll look to see if you could pay off all of your debt if you sold some or all of your assets. For example, the court isn’t going to have any sympathy for a petitioner who owns a vacation home and a boat. They’ll more than likely advise the petitioner to sell their boat or vacation home to pay their debts or to amend to a Chapter 13.
What’s Your Debt-to-Income Ratio?
Once the courts have determined your assets and income, they’ll turn to your debt. They’ll look at both secured and unsecured debt. Then they are going to calculate your debt-to-income ratio. So, if you owe $5,000 a month in debts and make $4,000 a month, your debt-to-income ratio is 5:4. In order to qualify for Chapter 7 bankruptcy, your debt-to-income ratio should be closer to 3:1. In the situation described above, there’s a good chance the court would either dismiss your case or recommend that you amend it to a Chapter 13 in which you’ll have to repay the debt.
Talk to a Skilled Bankruptcy Lawyer in Arizona
When people’s bills start piling up, they rack their brains trying to come up with a solution. Most people do whatever they can to pay their bills off. They try to consolidate their loans and credit cards and make one payment each month. They look to borrow from family and friends. They may even let their credit cards charge off and look to settle them for less money with the debt collection agencies. Rarely does someone run up thousands of dollars in credit cards only to turn around and file bankruptcy. There are people like that, but most people bankruptcy lawyers in Atlanta are good people. It’s just a matter of getting in over their heads. If you find yourself in this position, you should give our office a call. You may find that one of our experienced bankruptcy lawyers in Arizona can help.