The Benefits and Disadvantages of Filing for Bankruptcy

Posted on August 22, 2013 by Staff Writer

The choice to file for bankruptcy is not an easy one. The benefits need to outweigh the negative results of bankruptcy. It is necessary to have a full understanding of the consequences of bankruptcy in order to make the best decision possible.

The following are possible outcomes of bankruptcy:

1. Weakened Credit Score

Filing for bankruptcy has a negative effect on your credit score. A bankruptcy shows up on your personal report for 7 to 10 years depending on the type of bankruptcy for which you file. Yet, bankruptcy allows for a financial fresh start. You can rebuild your credit over time and there is an opportunity for it to be better than before your bankruptcy.

2. Difficulty Getting Loans

One of the results of having a bad credit score post-bankruptcy is that it will be more difficult to get a loan. You will also have a difficult time being approved for credit cards and financing the purchase of a home. Yet, if you are considering filing for bankruptcy, it might not be the best idea to have new bills to pay.

3. Issues with Finding Employment

Potential employers occasionally review your credit report before offering you a job. Certain states have outlawed or limited such a practice because of the negative cycle it perpetuates. People who can’t pay their bills on time are not able to get jobs that would allow them to pay their bills on time. Arizona is not one of the states that currently regulates such activity.

The benefits of bankruptcy can far outweigh the negative aspects because it will allow you to start fresh. It is important to discuss your situation with an Arizona bankruptcy lawyer. Bankruptcy will eliminate either some or all of your debts depending on what chapter is selected. Filing will also stop harassment from creditors, foreclosure, wage garnishment, or repossession because filing creates an injunction called an automatic stay. In the long run, a bankruptcy will allow you to build your credit back up to a respectable level and allow you to regain your life. Contact a dedicated bankruptcy attorney in Casa Grande who can assist you in deciding if filing is the right step for you.

Chapter 13 Bankruptcy

Posted on July 29, 2013 by Staff Writer

If someone has gone into personal debt, he or she will most likely file under Chapter 7 bankruptcy, however, Chapter 13 is an option as well. Under Chapter 13, the debtor is allowed a three to five year payment plan in which time he or she can pay back all debts.

Chapter 13 bankruptcy is also called a wage earner’s plan because it is specifically for those who have a high enough monthly income to pay back the debts. If the debtor’s monthly income is less than that of the state’s median, the plan will be three years, if it is higher than the state median, the plan will be five years.

Along with creating a payment plan for the individual, the courts also forbid any debt collectors from further pursuing the debts owed to them by the debtor during the length of time that the payment plan continues.

One of the most important advantages of filing under Chapter 13 is that it will save your home from foreclosure, adding mortgage payments to the payment plan.

Chapter 13 also “acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes them to creditors,” according to the U.S. Federal Courts web page. This form of bankruptcy protects the debtors from having to deal directly with the creditors.

Debtors also have the opportunity under Chapter 13 to reschedule secured debts and extend those payment plans over the length of time for the bankruptcy payment plan set by the courts. Lengthening the payment plan may lower the individual payments as well as simply give the debtor more time to pay.

If you are considering filing for bankruptcy, but do not know which Chapter to file under or where to begin at all, contact Arizona bankruptcy attorneys for assistance. These experienced bankruptcy attorneys will assist you in making the best decisions about your money and payments to keep your home and other in important assets Arizona today.

Chapter 13 bankruptcy

Posted on June 15, 2013 by Staff Writer

If you are considering filing for personal bankruptcy, there are two different options that you have; Chapter 7 bankruptcy and Chapter 13 bankruptcy. Although they will both help you get out of your debt, each of them is unique and one is often better than the other for each individual. It is important to learn about both of them before choosing to file for either.

Chapter 13 bankruptcy is based on a payment plan in which the bankrupt person pays all or most of his or her debts back within three to five years of filing. If you file under Chapter 13, you must propose your own payment plan, which will then be approved by the court, which will hold off the debt collectors as long as you are making your payments. In this case, it is important to be realistic in making a payment plan; it should be a realistic plan that allows you to make appropriate payments on a regular schedule.

In order to file for Chapter 13 bankruptcy, you must pass two tests: The best-interest test, which ensures that debt collectors will be paid at least as much as they would from a Chapter 7 bankruptcy, and the best-efforts test, which requires you to pay all additional income that you receive to the trustee for at least the first three years of your payment plan.

Other types of bankruptcy also exist, such as Chapter 11, which is mostly for large businesses; Chapter 12, which is similar to Chapter 13 and, of course, Chapter 7, which is the other common personal bankruptcy type along with Chapter 13. Chapter 7, however, dismisses your debts in exchange for seizing your assets rather than requiring payment.

If you are considering filing for bankruptcy and do not know which way to go or how to go about it, contact a bankruptcy attorney for assistance. Arizona attorneys can help you file for the right kind of bankruptcy for you today.

The Bankruptcy Means Test

Posted on May 23, 2013 by Staff Writer

Back in 2005, President George W. Bush signed a new bill into law on October 17^th. It was the Bankruptcy Abuse Prevention and Consumer Protection Act and changed the ways that bankruptcies are managed in the United States. One way is by compelling filers to receive certified credit counseling as a step to securing a bankruptcy. Another way that the bankruptcy process has been changed is by creating a “means test” to qualify for bankruptcy.

This “means test” is necessary because of differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is also known as a liquidation bankruptcy because it discharges most debts through the sale of a debtor’s assets. Chapter 13, on the other hand, is a reorganization of debts. It allows you to keep most of your assets but sets up a repayment plan which lasts up to 5 years.

To qualify for a Chapter 7 bankruptcy, one important form that must be filled out is the “means test”. It is one of the ways to qualify for a liquidation bankruptcy. The “means test” reviews your current monthly income to see if you are able to repay your creditors in a Chapter 13 bankruptcy. If you can’t, then you are eligible to file for a Chapter 7 bankruptcy.

Current monthly income is an average of the six months leading up to your filing consisting of complete calendar months. This is all income from work, insurance, unemployment compensation, interest, and other forms of money earned. It is not including payments that were earned from previous months but paid in the six month period.

This will provide an accurate picture of your household income, which will be reviewed in two different ways. If your monthly income is below the median income for the same size household in your state, you qualify for a Chapter 7 bankruptcy. If it does exceed the median income, the rest of the “means test” will see if you have enough “disposable income” to repay your bills. For more information about bankruptcy or to file, contact an experienced bankruptcy attorney in Phoenix today.

image courtesy of freedigitalphotos.net

Reasons to Convert your Bankruptcy Case

Posted on April 30, 2013 by Staff Writer

When you file a case for bankruptcy, your attorney will advise you whether you should file a Chapter, 7, 11 or 13 under the federal Bankruptcy Code. There are different advantages and rules to each type of bankruptcy plan. However, even after you have filed the case, it doesn’t have to be set in stone.

If your bankruptcy attorney advises you that you should convert your current bankruptcy case to an alternate plan, you can do so simply by filing a notice of conversion with the court as well as following up with the other changes that will be necessary.

One of the reasons that you may be advised to convert your case is if you are unable to keep up with your Chapter 13 payments. Then you may be advised to change it to a Chapter 7 debt relief case. The great thing about converting your case is that any new debt that you have accumulated may be able to be included in the new filing.

Your case can also be involuntarily converted from a Chapter 7 plan to a Chapter 13 plan if you are determined to have enough income to repay your debts through a Chapter 13 plan. This is one of the reasons that it is imperative that you divulge all of your assets and income to your attorney when you are considering filing a bankruptcy case.

Going through a bankruptcy can be very emotional and stressful. Remember, you do not have to go through the process alone, nor should you. You need to consult with an experienced and knowledgeable Arizona bankruptcy attorney who can walk you through the entire process as well address any questions that you may have about your options or the process itself. Your attorney will make sure that your best interests are represented at all times.

What is a Bankruptcy Discharge? | Arizona Bankruptcy Lawyer

Posted on March 9, 2013 by Staff Writer

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

A Ch. 7 bankruptcy discharge normally occurs approximately 90 days after the bankruptcy case was filed, assuming the debtor satisfied all of his or her requirements for receiving a discharge. A Ch. 13 bankruptcy discharge will not occur until debtor satisfies all of his or her requirements set forth in the filed reorganization plan. Normally, this should take between 3 or 5 years.

Please take notice that not all debts are allowed to be discharged in a bankruptcy. While there are many specified debts that are deemed non-dischargeable, the most common types of these include the following:

Recent back taxes
Alimony or child support arrearages
Student loans
Governmental fines/debts
Recent usage/fraud
Non-listed debts

You should always consult with an experienced bankruptcy attorney to determine what your options entail. Knowing which chapter in bankruptcy to file due to the types of debts you have is very crucial to maximizing your eventual bankruptcy discharge. Call my office today to discuss.

Who is the Bankruptcy Trustee?

Posted on March 6, 2013 by Staff Writer

When a personal bankruptcy case is filed (whether a Ch. 7 or Ch. 13 case), an individual named a “trustee” is randomly assigned to the case. The trustee is either an attorney or an accountant, and his or her main function is to administer the estate of the bankruptcy case. The trustee reviews the bankruptcy petition and documents filed by the debtor(s) for accuracy and to detect any possible fraud.

In a Chapter 7 bankruptcy, the trustee also is charged with collecting any non-exempt assets (these are either personal property or belongings that cannot be protected under existing state exemption laws). The trustee then liquidates the assets and uses the proceeds collected to pay the debtor’s creditors. The trustee also is charged with detecting fraud. Possible acts of fraud are as follows:

Fraudulent Transfer: if a debtor transfers property (for less than fair market value) to another in an attempt to shield his or her creditors from obtaining the property through Ch. 7 liquidation.
Preferential Payment: if a debtor pays a defined set of money (over $600) to a family member or friend within one (1) year of filing for bankruptcy.

The trustee then has the power to recover the property or money for the benefit of the bankruptcy estate.

A Ch. 7 trustee receives a small fee per assigned case (approximately $60) as compensation. However, the bankruptcy code provides the trustee with further incentive to locate non-exempt assets by offering a percentage commission on any assets obtained from the debtor.

In Chapter 13 bankruptcies, the debtor is responsible for making monthly payments to a trustee to pay towards his or her debts. The Ch. 13 trustee receives a 6.5% fee from the overall payments made as compensation.

Contact our Phoenix Bankruptcy Attorneys today to discuss your situation.

Can Anyone File Bankruptcy?

Posted on February 27, 2013 by Staff Writer

In a manner of speaking, yes, anyone can file for bankruptcy. What chapter of bankruptcy you qualify for depends on your specific situation. In October 2005, a massive change took place in the U.S. bankruptcy code. Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) as a response to the belief that too many people were taking advantage of Chapter 7 bankruptcy. The result of this new law is to force people who can afford to repay some of their debt to file for bankruptcy under Chapter 13 instead of Chapter 7.

Chapter 7:

In a sense, anyone—even businesses—can file for Chapter 7 bankruptcy protection. There are no minimum or maximum debt limits to be concerned with. However, before you can file a Chapter 7 bankruptcy you must be able to pass the infamous Means Test. The Means Test is used to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the bankruptcy code. If there is a presumed abuse, the case must either be converted to a Chapter 13 or it will be dismissed. Most people who cannot file a Chapter 7 bankruptcy because their income is too high end up filing for Chapter 13.

Chapter 13:

There are a few key limitations about who can file for Chapter 13 bankruptcy. For one, businesses are not able to file a Chapter 13 bankruptcy. Additionally, neither can people with too much debt. Currently the debt limits are $1,081,400 in secured debt plus $360,475 in unsecured debt (taxes whether dischargeable or non-dischargeable are included in the unsecured debt limit calculation). If you make too much money to pass the means test and have too much debt to file a Chapter 13 there are still some options for you.

Chapter 11:

In rare cases a person must file a Chapter 11 because they cannot file either a Chapter 7 or Chapter 13 bankruptcy. If a person does not pass the means test because they make too much money and they have too much debt to file a Chapter 13 then they must file a Chapter 11. Because a corporation cannot file a Chapter 13 bankruptcy if they are looking to reorganize their debt they must file a Chapter 11.

Contact our law firm to see what chapter of bankruptcy will best help you.

How do I know if I qualify for a Chapter 7 Bankruptcy?

Posted on February 24, 2013 by Staff Writer

Determining whether or not a person can qualify for a Chapter 7 bankruptcy is one of the most complex areas of consumer bankruptcy. The means test is used to determine who can file for Chapter 7 bankruptcy and who must file a Chapter 13. The means test was introduced to the Bankruptcy Code in 2005 and is designed to limit those individuals eligible to file for Chapter 7 bankruptcy.

The Chapter 7 bankruptcy means test compares your current monthly income against the median income for households similar in size to those in your same state. The means test looks at the average household income over the six months prior to filing. If your income is below that of the average household income for your state then you will automatically qualify for a Chapter 7 bankruptcy.

Now if your household income exceeds the median income for households of a similar size in your state you still may be able to qualify for a Chapter 7. This is because certain expenses are deducted from your current monthly income in order to determine your net monthly income. Now not all expenses are qualifying expenses, however, the following kinds of costs can be deducted: child support, alimony, tax withholding costs, health savings account, garnishments, certain utilities and several other types of expenses.

However, if you still do not qualify for a Chapter 7 even after deducting the qualified expenses you can still file bankruptcy. For most people who do not qualify for Chapter 7 bankruptcy because of their high income file Chapter 13 bankruptcy. Chapter 13 bankruptcy is a reorganization of your debts. The bankruptcy last for 3 to 5 years during which time you make payments to your creditors. At the end of the bankruptcy whatever balances are left over will be discharged.

The means test is one of the most complex areas of consumer bankruptcy so please speak with one of our bankruptcy attorneys to look at your individual situation. Don’t subject yourself to a Chapter 13 bankruptcy without first speaking to our experienced attorneys.

What is an Adversary Proceeding?

Posted on February 20, 2013 by Staff Writer

An Adversary proceeding is a lawsuit that takes place within a bankruptcy. The adversary proceeding begins by when a complaint is filed with the bankruptcy court. A “trial” then takes place within the context of the bankruptcy. Typically an adversary proceeding is filed by a creditor; however, your trustee may also file one on behalf of the bankruptcy estate.

When a creditor files an adversary proceeding, it is typically because the creditor believes that a specific debt owed to them should not be discharged in the bankruptcy. The creditor may argue that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.

Additionally, a trustee may file an adversary proceeding if he or she believes that you intentionally tried to hide assets. The trustee would then liquidate any non-exempt assets to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to undo a transfer of real property. The U.S. Trustee may file an adversarial proceeding to try and force a debtor to move from Chapter 7 to Chapter 13 if he or she believes that the filing of the bankruptcy petition was done in bad faith.

Adversary proceedings are very rare; they are filed in less than 1% of all bankruptcy filings. So unless you are trying to commit some type of fraud the chances of an adversary proceeding being filed in your case are very small.