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.

Fewer People are Filing for Bankruptcy because of New Habits

Posted on August 18, 2013 by Staff Writer

Since the beginning of 2013, consumers in the United States are not filing for bankruptcy protection as much as previous years. The way consumers are carrying debt has also improved. Credit card debt is one type of debt that can be removed or reduced through bankruptcy. Only 2.4% of credit cards were delinquent by thirty days or more, which is the lowest percentage in over 20 years.

“Sharply lower delinquency levels reflect improving consumer balance sheets, steady job creation and a continuing increase in household wealth,” said James Chessen, the American Bankers Association’s chief economist. “Many consumers have learned the hard lessons of recession and have redoubled their efforts to keep debt at manageable levels.”

This decrease in filings is a trend not only nationally, but in the Phoenix as well. Compared to the same period of last year, there was almost a 25% decrease in filings. Overall, bankruptcies have been decreasing since their peak in 2009.

Certain bankruptcy experts look to temper this good news by looking at possible causes for this decrease. They say it is not necessarily a sign that the economy is recovering, but that consumers are reluctant to sign up for new bills. The executive director of the American Bankruptcy Institute, Sam Gerdano, said that consumers have limited the chance of filing for bankruptcy by living on their base income alone.

If you have experienced a change in your life and need a fresh start financially, consider filing for bankruptcy. Large medical expenses, losing your job, and filing for divorce can all put a major strain on your bank account, even if you are frugal with your money. Don’t let an unexpected event get in the way of your future, contact an experienced bankruptcy attorney in Phoenix today. They can see if you qualify for bankruptcy and let you know what options are available to you.

How Filing Bankruptcy Will Affect Child Support

Posted on July 16, 2013 by Staff Writer

There are various reasons why a person may file bankruptcy such as illness, loss of a job, or a divorce, but getting out of paying child support should not be a reason. When a person files bankruptcy, if qualified, certain debts are forgiven. However, with child support this obligation cannot be forgiven. That means that although a person can file bankruptcy if he or she has a court order to pay child support, that obligation will not be dismissed because of the bankruptcy.

Likewise, if you receive child support and the non-custodial parent files bankruptcy, he or she will still be required to pay child support. However, having other debts forgiven may make meeting the child support obligation easier for non-custodial parents.

Although child support is never forgiven, Filing chapter 13 may provide a temporary stay, which means that collection efforts must cease during the process. In addition, filing bankruptcy could provide necessary relief if you are overcome by other debt. If you qualify, Chapter 7 would forgive the debt, whereas a chapter 13 will offer a reschedule of lower payments to your creditors. Once you have filed, your creditors will be notified and must not contact you during the process. Reestablishing credit after filing bankruptcy is also possible.

The process for filing bankruptcy can be complicated. Some people may find the process intimidating and therefore may never consider it. For some Arizona residents and others, filing is their way out from under a mountain of debt. If you or a loved one is considering bankruptcy as a means to a fresh start or if you have questions as to how doing so could affect child support and outstanding debts it may be time to contact an experienced bankruptcy lawyer today. The consultation is free.

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Financial advice for college students

Posted on June 29, 2013 by Staff Writer

With the expenses of a college education climbing higher and higher, it is important that college students know how to manage their finances. A recent article has listed a few helpful habits for students to manage their money.

Establish a budget. The best way to get started managing your money is by reviewing your spending over a period of a couple of months to figure out where all of your money is going. This will include your living expenses, credit card bills, utilities, food, and other personal expenses. Identify how much money you have coming in each month so that you can determine if you will need to make any lifestyle changes.
Review your expenses. Take a close look at your monthly expenses so you can identify where costs can be reduced. For example, if you’re going out to eat for lunch or dinner every night, consider buying a meal plan and eating on campus, which can save you money in the long run.
Bundle your costs. You can save more money when you combine some of your expenses to one account. For example, it may be cheapest to have one company provide all of your telephone, internet, and cable. Bundling your expenses allow you to reduce expenses without getting rid of anything.
Attack your debt. Make a plan to destroy your debt quickly and efficiently. Start by paying off your smallest debts first by contributing large sums of money each month. At the same time, make minimum payments on your other debt. Keep moving on to larger and larger debt.
Develop a savings plan. Before starting a savings plan, make sure you pay off all of your credit card debt. Debt interest rates are higher than savings interest rates, so debt must be erased before you can really buckle down and save money. Once credit is under control, build a savings plan. This plan should allow you to save money for short- and long-term goals.
Money matters. When it comes to managing your money, acknowledge that you may need help. Reach out for advice from financial experts or even your parents.

Managing money can be tricky and takes some serious efforts. If you are struggling with your finances and debt, contact a Phoenix bankruptcy attorney to help you get things back in order.

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To Reaffirm or Not to Reaffirm, That is the Question!

Posted on June 27, 2013 by Staff Writer

Filing for bankruptcy is a difficult decision that few individuals make lightly. Ultimately, the goal is to emerge from bankruptcy with as little debt as possible while protecting assets that would otherwise be subject to a bankruptcy disposition. The federal bankruptcy laws usually require the help of an experienced attorney. Without an attorney, there is a likelihood that a person who files for bankruptcy will remain liable for certain debts that would be eliminated if the bankruptcy is filed correctly.

Take the concept of reaffirmation, for example, which allows choosing to remain liable for certain debts despite the bankruptcy. See 11U.S.C. § 524(c). Usually, bankruptcy eliminates just about any contract that creates a debt obligation, with some exceptions. If the debt is secured by an asset, e.g. car or home, the entity that holds the debt has the power to repossess the asset, but cannot go after the person for the deficiency. For example, if a home had an outstanding mortgage of $100,000, but the home is only worth $80,000, the bank may repossess the home, but cannot sue mortgage holder for the $20,000, unless they reaffirm, that is. By choosing to reaffirm, a person is effectively reviving an obligation that the bankruptcy eliminated. Obviously, lenders would have everyone reaffirm their debt, but experienced bankruptcy attorneys would seldom advise their clients to do so.

Another benefit of not reaffirming is that one may live in the home as long as they make the monthly mortgage payments, and the title stays with the owner. Banks dislike bankruptcies, but they dislike having to pay for maintaining a vacant home even more.

The bad news – yes, there is bad news – is that credit reports will suffer despite the mortgage payments.

The good news is that an experienced Arizona bankruptcy attorney has the ability to create a bankruptcy plan that fits each client’s needs. Contact us today for assistance with your bankruptcy.

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.

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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.

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What is Reaffirmation in Bankruptcy?

Posted on May 10, 2013 by Staff Writer

Filing for bankruptcy is a way to get a legal fresh start with one’s finances. Reaffirmation is when the debtor agrees to pay off certain debts in full, even if the debt may have been discharged in bankruptcy. While discharging debts may seem like the best option, it can sometimes mean losing assets that may have been used as collateral against debts. If you have assets or property you want to keep through your bankruptcy process, reaffirmation might be beneficial for you.

In a Chapter 13 bankruptcy, debts are reorganized so that the debtor can continue making payments over a set time period. However, in Chapter 7 bankruptcy, the filers debts are discharged. A debtor has four choices in a chapter 7 bankruptcy:

Return the property to the debtor.
The asset can be sold and the profits given to the creditor.
The debtor can pay the current value of the asset to the creditor.
Reaffirmation. This is when the debtor continues to make payments as if there is no bankruptcy filing.

In the short term, it is easiest to eliminate debt. However, if the asset that the debtor cannot afford is a vehicle or a home, it may be worth it to keep the asset. Reaffirmation allows this, if the debtor can afford payments.

If there are assets you are not willing to part with, consider reaffirmation. It is important to discuss your options, including reaffirmation, with a bankruptcy attorney in Arizona who understands your situation.

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A Study of How Sadness can affect Personal Debt

Posted on April 25, 2013 by Staff Writer

People seek different ways to deal with sadness. It seems unfortunate in the grand scheme of things, but a study shows that sadness can have a negative effect on a person’s financial bottom line and also further deteriorate their mental state.

In a study run by students Jennifer Lerner of Harvard’s School of Government and Elke Weber and Ye Li of Columbia reviewed the connection between sadness and debt. The results were published in the Psychological Science journal last year.

They came up with a term called “present bias”. The unhappiness of people makes them value the present more so than the future. This leads them to put more importance on instant gratification rather than the long term consequences. So it seems natural that “retail therapy” would be an avenue that people would use to make them feel better.

The bad news is that when debt becomes a problem then the sadness can turn into depression. Especially if the debt can’t be turned around and necessitates a bankruptcy. “Many of us confuse our self-worth with our net-worth,” clinical psychologist Bradley Klontz said. “As such, financial problems can deal devastating blows to our self-esteem. Bankruptcy can lead to feelings of guilt and shame, and cause us to isolate from our family and friends out of embarrassment.”

For some people, it has to get worse before it can get better. Filing for bankruptcy can alleviate your money issues and allow you to have a fresh start If you feel like bankruptcy is your best option, then contact a legal professional who can help you through the process. An experienced bankruptcy attorney in Phoenix can show you the options for turning around your situation so contact them today.

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Avoiding the Sinkhole of Medical Debt

Posted on April 10, 2013 by Staff Writer

A recent U.S. News and World Report article reports that debts from medical expenses are one of the most common reasons for filing bankruptcy. As more and more people struggle with the ever-increasing costs of health care, there are a few steps that can be taken in order to avoid falling into insurmountable medical debt.

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First, always at least maintain catastrophic health insurance coverage. A plan with a very high deductible won’t provide you with relief for minor or routine medical expenses, but it will avoid you being stuck with tens of thousands of dollars of medical bills which you may never be able to pay off if you suffer a major illness or injury.

Next, make sure that the care that you choose to receive is the most cost-effective care possible under the terms of your medical insurance policy. For instance, many insurance policies contract with certain doctors or medical facilities that are considered to be in-network providers. In this case, going to an out-of-network provider will likely result in much higher costs than if you simply went to an in-network provider. By taking all reasonable steps to comply with the terms and conditions of your insurance policy, you can minimize your out-of-pocket costs.

Other important steps to avoiding medical debt are to pay only what you owe and negotiate those bills that you do owe. Make sure that you are only charged for the care that you received and that your bills contain no errors. Once you have determined that your bill is correct, try negotiating a payment plan or applying for financial assistance to have some of your debt forgiven, which is available through many hospitals and other medical providers.

You can also use a regular savings account, a flexible spending account, or a health savings account to build up funds that can be used in case of medical emergency. By having money available in case these kinds of expenses occur, you can avoid going into debt to pay medical bills.

Finally, if you have unavoidably racked up thousands of dollars of medical bills, bankruptcy may be a solution for you. Contact your Phoenix bankruptcy attorney today, and discover whether bankruptcy is a viable option for you.