If is fairly common for clients to sit down in my office with two distinct running lists: the debts they want to eliminate in bankruptcy, and those they are hoping to repay. The thought process goes something like this:
If I could just eliminate my medical bills, I would be in a much better position every month. I would likely avoid the upcoming garnishment, and would no longer be subject to harassing calls from my creditors. However, I still want to keep my credit card – I need to have a safety net in case my car breaks down or my kiddo gets sick. And that loan I took from Uncle Lenny, I would like to pay that off. He is my favorite Uncle so it is the right thing to do.
Not so fast, slick – bankruptcy doesn’t work that way. Unfortunately (or fortunately if you are a creditor), bankruptcy debtors are simply not allowed to pick and choose which debts are included in bankruptcy. You must list all of your assets and all of your liabilities, plain and simple.
I did say it was simple; however, if you have done much research on bankruptcy law you will realize that even the simple things need a few disclaimers. One caveat is that you are not required to list zero balance creditors on your schedules. With that said, if you pay off a credit card within a close proximity of filing, the trustee can recover the funds from the creditor and you will no longer have a zero balance.
I am not even going to touch on reaffirming credit card debt except to say this: what are you, Crazy?
So what about emergencies? If you are already living paycheck to paycheck, giving up the security of your credit card (provided it is not maxed out, that is) can be a daunting prospect. Before you get too worked up, I will let you in on a little secret. You will get a good number of credit card applications subsequent to filing for bankruptcy protection.
It is actually pretty clever, when you think of it. Not only is your debt to income ratio dramatically improved by discharge, but you are barred from filing a second bankruptcy for some time after. As always, if you are looking for additional advice on filing for Arizona bankruptcy, don’t hesitate to contact me today. I am an experienced bankruptcy lawyer that routinely files consumer bankruptcy petitions in Phoenix, Tucson and Casa Grande. The best part? I will answer my own phone!