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 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.

Most Common Causes of Bankruptcy

Posted on June 9, 2013 by Staff Writer

Bankruptcy provides a great tool for people who are unable to dig out of financial holes. Rather than lose everything you have, bankruptcy can allow you to reclaim your life. But not all bankruptcies are brought about by crazy spending sprees. Do not let the stigma associated with bankruptcy influence your decision if your finances have gotten out of control.

According to multiple studies of the causes of bankruptcy, there are a handful of common causes of bankruptcy, one of which is excessive spending. The least common cause of bankruptcy is unexpected disasters or calamities. If a catastrophe changes your situation either by taking away your car, your job or other things you need to live, then bankruptcy can help you regain your footing on solid ground. This cause of bankruptcy only influences about seven percent of all filings.

Another cause of bankruptcy is divorce, which is how half of marriages end. From a financial standpoint, divorce can make it difficult to live the life you had before. You need to maintain two households with the income from your married life. It is also necessary to pay for legal fees, alimony, and child support if you become single again. Divorce contributes to eight percent of bankruptcy filings.

Job loss has been a very prevalent cause of bankruptcy in recent years. Almost eight percent of Americans are currently unemployed as of May 2013. These people usually pay for insurance out of pocket which can be a drain on already depleted household income. 22 percent of bankruptcies are influenced by unemployment.

By far the most usual cause of bankruptcy over the years is medical expenses. The bad news is that medical costs will continue to rise as new medicines and procedures are developed to keep us healthy. In 2013, Reuters figured that medical costs would increase by almost eight percent from 2012. When medical costs are already too expensive for most households, bankruptcies will be more prevalent. If you feel that any of these reasons is putting a strain on your finances, then consider reaching out to a skilled bankruptcy attorney from Phoenix today.

image courtesy of moggara12 / freedigitalphotos.net

Bankruptcy and Medical Bills

Posted on May 31, 2013 by Staff Writer

With the implementation of Obamacare getting closer, there are several questions about what the Affordable Care Act will do for Americans facing high medical bills due to an ongoing illness or disease. According to the Washington Post, “the nonpartisan Congressional Budget Office estimates that 30 million more Americans will have health insurance by the end of decade.” That’s a big number, but it doesn’t take into consideration those Americans who will indeed have coverage, but who “will still face big financial burdens after they gain insurance coverage,” a sub-sect that will likely exist, according to two new academic studies cited in the Washington Post.

According to Reuters News Service, “medical bills are behind more then 60 percent of U.S. personal bankruptcies.” U.S. researchers told Reuters that, “for middle-class Americans, health insurance offers little protection,” and even healthcare reform isn’t on the right track. Dr. Sidney Wolfe of the Health Research Group at Public Citizen told Reuters that “expanding private insurance and calling it health reform will fail to prevent financial catastrophe for hundreds of thousands of Americans every year.”

Arizona has long had one of the highest rates of both personal and consumer bankruptcies in the country. Though that number significantly decreased from 2011 to 2012—according to Arizona Bankruptcy Courts, by 22.2 percent—Arizona residents are still at a high risk of bankruptcy. In 2012, there were 27,298 bankruptcy filings in Arizona, the large majority of which were in Phoenix.

As Obamacare is implemented, everyone will be looking to see if the expanded coverage will reduce bankruptcies due to medical bills. Stephanie Woolhandler, a professor at the City University of New York, conducted research to determine this on a smaller scale after the state of Massachusetts expanded healthcare coverage, and found that “in 2009, two years after the insurance expansion took effect, just about half the debtors (52 percent) attributed their bankruptcy at least in part to medical bills,” according to the Washington Post. “In 2007, before the expansion, the number stood at 59 percent.”

If you or someone you know is considering bankruptcy because of medical bills or any other reason, don’t go through it alone. Contact a dedicated Arizona bankruptcy attorney today.

Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

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

Filing for Chapter 7 Bankruptcy

Posted on May 14, 2013 by Staff Writer

Personal bankruptcy is covered in the United States Constitution to protect innocent citizens from economic destruction. Personal bankruptcy is broken down into two parts in the Bankruptcy Code of the Constitution, differing by way of payment plans.

Chapter 7 bankruptcy is often referred to as straight bankruptcy because it is typically what people think of when they hear the term “bankruptcy.”

When someone qualifies for Chapter 7 bankruptcy, the majority of his or her debts will be discharged, however, some of his or her property may have to be surrendered. There is no payment plan for Chapter 7 because the debts are simply forgiven.

To qualify for Chapter 7, the filer will have to pass a Means Test. The test is very complicated, however, most people can pass. The hardest part is gathering the necessary information.

Most property that you receive after you file for Chapter 7 bankruptcy does not become part of the bankruptcy, although there are a few exceptions to this rule. These exceptions include income tax refunds for years prior to bankruptcy, divorce property awards, inheritances and life insurance that the bankrupt person becomes entitled to within 180 days of filing, which must all go to pay the debts.

Ideally, the assets of the debtor can be collected and sold for the benefit of the various creditors. All assets that are not excluded and are owned on the petition date are able to be taken for this purpose. Very often, however, the debtor has no assets, in which case there will be no property taken from him or her.

If you are considering filing for bankruptcy, contact a bankruptcy attorney for assistance. We have Arizona bankruptcy attorneys across the state who can assist you with your bankruptcy case today.

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.

New Bankruptcy Laws Possible in Arizona

Posted on April 23, 2013 by Staff Writer

New bankruptcy laws may be enacted soon in Arizona, according to VerdeNews.com. The new laws have been proposed by the head of the House Judiciary Committee in an effort to “update Arizona’s dated and sometimes anachronistic bankruptcy laws,” according to VerdeNews.com. There wouldn’t be anything in the new laws that would allow individuals to seek protection from creditors, however, because “those are set in federal law.” That same federal law, however, allows each state to determine just what assets a person filing for bankruptcy can keep, and Representative Eddie Farnsworth, the lawmaker seeking change for Arizona laws, said that the “list for Arizona is long overdue for an overhaul.”

An example of this is that if a person in Arizona files for bankruptcy, law allows him to keep “one kitchen table and one dining room table with four chairs each.” Other permissible items, according to VerdeNews.com, include “three living room lamps, one radio alarm clock, one vacuum cleaner, and a choice of one television set, radio or stereo.” Yet the total value of all these cannot exceed $4,000. This law doesn’t allow for the inclusion of family heirlooms. “One person may have a hutch from their great grandmother that they want,” Farnsworth said. His revision to the law would give more flexibility to people filing bankruptcy when it comes to deciding which specific pieces they’d like to keep when breaking up their home.

Arizona was one of the hardest-hit states in the economic recession, experiencing more personal bankruptcy filings than the average state. Yet those numbers are dropping, according to Arizona Bankruptcy Court statistics. The district including Phoenix, Tucson, and Yuma, for example, had 22 percent less bankruptcy filings in 2012 than in 2011—from 35,072 total filings in 2011 to 27,298 total filings in 2012.

That doesn’t mean, of course, that all residents in Arizona are in the clear. If you or someone you know is considering bankruptcy, the most important first step is to seek the counsel of an attorney. Don’t go through it alone. Contact a dedicated Arizona bankruptcy lawyer today.

Image courtesy of FreeDigitalPhotos.net

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.