What is Chapter 7 Bankruptcy?
Chapter 7 is a type of consumer bankruptcy.  People who file for Chapter 7 Bankruptcy are looking to have their debts discharged so they no longer have to worry about their financial obligations to creditors.  Chapter 7 is also known as “straight bankruptcy” or “liquidation bankruptcy” because it is quick, but in some cases, involves the sale of a person’s assets.

Liquidation:  Exempt vs. Non-Exempt Property
Liquidation is a legal process that occurs during the Chapter 7 bankruptcy process.  Before liquidation occurs, a bankruptcy petitioner’s assets are categorized as exempt or non-exempt in accordance with the law.  Petitioners will remain in possession of any property that is categorized as exempt and will lose property that is non-exempt.  Non-exempt property is liquidated by the bankruptcy trustee.  This means that it is sold for profit.  The profit is turned over to the petitioner’s creditors and is applied to the balances the petitioner owes.  For most people, liquidation is the most frightening aspect of Chapter 7.  However, it is important to remember that many people are able to remain in possession of their assets, like houses and cars, when they file for Chapter 7.

Chapter 7 Pre-requisites
In order to file for Chapter 7 in the state of Arizona, people must meet pre-requisites or requirements.  They must be a resident of the state for 90 days prior to filing their petitions.  They must not have filed for bankruptcy in the last 8 years or have a bankruptcy dismissed in the last 180 days.  Additionally, they will have to complete credit counseling 6 months prior to filing their Chapter 7 petitions and pass the state’s means test.  If people meet all requirements, they will be allowed to move forward with the bankruptcy process.