For many years, bankruptcy has been a way for people to seek financial relief from overwhelming debt. However, it is still subject to many misunderstandings and misconceptions. In this post, we address many of the myths surrounding bankruptcy.
If you have any questions about bankruptcy, call Stone Rose Law at (480) 739-2448 for accurate information.
Sometimes this may be true. Bankruptcy will discharge many kinds of unsecured debts like credit card debt, medical bills, personal loans, utility bills, and past-due rent.
In some cases, however, there are some debts that bankruptcy will not discharge. Examples include:
Bankruptcy works under the United States Bankruptcy Code, which is federal law. Although this may sound imposing, the actual process of filing for bankruptcy is not as difficult as it may seem. In fact, you can prepare and file your own petition in bankruptcy, although having an experienced bankruptcy attorney to help you has many advantages.
A bankruptcy attorney can make sure that all schedules and statements are properly prepared when you file, that you do not miss any important property exemptions to protect all yoor property, that all deadlines are met, assist in the document production requirement, prepare you for the 341 meeting of creditors, and represent you if any creditor challenges your petition.
Most individuals file for bankruptcy under Chapter 7 liquidation bankruptcy or Chapter 13 reorganization bankruptcy. Chapter 7 uses a means test to qualify petitioners, which is based on your income and expenditures. But even if you cannot qualify under the means test, Chapter 13 is almost always an available alternative.
There is no limit on how many times you can file for bankruptcy. You cannot predict when events like the loss of employment, big medical bills, divorce, or other unexpected expenses will happen in your life, and sometimes this can make it necessary to resort to bankruptcy more than once in your life.
Some time limits do exist on when you can file for bankruptcy again if you have filed for it before. For example, if you filed a previous Chapter 7 bankruptcy and obtained a discharge, you must wait 8 years from the filing date to file another Chapter 7 bankruptcy.
The bankruptcy automatic stay will act to stop creditors from continuing with collection efforts against you, including most kinds of lawsuits, garnishments, repossessions, and foreclosures. The automatic stay remains in place throughout your bankruptcy case and continues until the discharge order is entered. The discharge order is entered about two to three months after your 341 meeting of creditors is concluded. This is the order stating your dischargeable debts are uncollectible.
There are filing fees due to the bankruptcy court upon filing a bankruptcy petition. This is $338 or $313, depending on which bankruptcy chapter you file. If you hire an attorney, you will also need to pay fees for legal services.
But when you consider the alternative of the expenses involved in making unsustainable debt payments, the potential legal costs of defending yourself against a creditor lawsuit, or having your wages garnished, the costs connected with bankruptcy can be a relative and considerable bargain.
In some cases, if you are experiencing financial hardship, the bankruptcy court can waive petition filing fees. And if you cannot afford a bankruptcy attorney some legal aid organizations offer free or low-cost bankruptcy services.
The dollar amount of your debts is not the deciding factor if you are considering bankruptcy. Rather, it is how much trouble you are having keeping ahead of your debts. Each case is unique; for some people, being $15,000 in debt is enough to warrant considering bankruptcy, while for others it may be considerably more.
A bankruptcy attorney can help you decide whether bankruptcy is the best option for you and help you weigh debt relief choices other than bankruptcy.
Most retirement accounts, like individual retirement accounts and employer 401(k) accounts, are exempt assets. This means that your creditors cannot seize them to pay debts. This applies outside of bankruptcy as well. Consider bankruptcy before cashing out your retirement account. Creditors can’t seize it, but you may feel pressure if the debts are overwhelming. You can utilize bankruptcy to preserve your retirement by eliminating most or all of your unsecured debts.
“Bankruptcy Will Permanently Kill My Credit Forever”
Bankruptcy will have a negative immediate effect on your credit rating and will appear on your credit report. But this is not a permanent state of affairs. In most cases, you will actually begin to receive offers of credit within weeks of having your debts discharged.
Although these early credit card offers will not be ideal, such as secured credit cards, or cards with a low limit or higher interest rates, if you use such sources wisely and conservatively you can soon begin to see your credit rating recover significantly.
Various studies show, for example, that it is not uncommon for people who come out of bankruptcy with credit scores in the low 500s (poor credit) to build that rating up to the mid 600s (average credit) within a year. Stone Rose Law offers all clients a credit recovery program that will teach you how to recover your credit score to a 720 within a year. If you plan to schedule a free consultation, ask about this offer.
Most people who have debts discharged by bankruptcy can qualify for an FHA loan or VA loan within one or two years after filing for bankruptcy debt relief, and for a conventional mortgage not long after that.
Depending on the type of income taxes you owe, some of them can be discharged in bankruptcy.
Generally speaking, income or sales taxes more than three years old can be waived. Real estate taxes can also be paid through a Chapter 13 debt repayment plan.
It is illegal for an employer to fire you for filing for bankruptcy. Your employer will seldom, if ever, check to see if you have filed, and even if it does, a bankruptcy on your record is not a valid reason to terminate your employment. Bankruptcy is a federally sanctioned process, you cannot be treated differently due to you choice to file.
Especially with a Chapter 7 bankruptcy, in which some of your property can be sold by a court-appointed trustee to pay your creditors in a liquidation sale, you could have to relinquish some property and assets.
However, Chapter 7 has several exemptions to protect your home, your household property, including your car, your furniture, your clothing, and other possessions. In most cases, debtors lose no property. It is recommended to consult with an Attorney to assess the risks.
If you own certain assets that do not qualify for an exemption in Chapter 7 bankruptcy, especially luxury items like a boat, a high-end sports car, or a valuable stamp or coin collection, there is a distinct possibility that these assets will be liquidated.
If you improperly transfer your property to others to avoid having to declare it in your bankruptcy petition, this could cause problems, too.
Your bankruptcy attorney will work with you to help you keep as much property and assets as possible. But there is no guarantee that you will be able to keep everything in a Chapter 7 bankruptcy.
Bankruptcy cannot be used to selectively target creditors or to conceal assets. When you file for bankruptcy, you must list all your property and all your debts. If the bankruptcy trustee discovers that you are attempting to hide assets, for example, this could get you into trouble with the bankruptcy court.
You can leave out some creditors if you intend to repay your debts to them by reaffirming your debts. In other circumstances, you can make arrangements with creditors to enter into a new agreement to pay your debts with renegotiated monthly payment terms and a lower interest rate.
Bankruptcy can discharge some secured debts, which are debts secured by collateral, like a car loan. A consideration here, though, is that extinguishing the debt will often not remove the lien a creditor has on the collateral, meaning that it can still be repossessed.
It is important to speak with an experienced bankruptcy attorney to understand what secured debts can be discharged and your possibilities to keep property subject to liens.
The bankruptcy lawyers at Stone Rose Law can answer your questions about how bankruptcy laws work in Arizona. We can help you analyze your debt situation, consider debt relief alternatives to bankruptcy, and act as your bankruptcy attorney if you choose to file for bankruptcy.
Call us at (480) 739-2448 to speak with an experienced Arizona bankruptcy attorney in a free initial consultation. You can also use our online contact form to make an inquiry or to set up a free consultation.
Don’t let myths about bankruptcy keep you from understanding your rights. Call Stone Rose Law today.
