Are you struggling to make ends meet? In these situations, we recommend learning more about bankruptcy. Under federal and Arkansas law, you can go through a legal process where your debts are forgiven or reduced. By going through the bankruptcy process, you may be able to wipe your slate clean. Or, you may be able to manage your debts through a court-approved payment plan. In either case, at the end of the bankruptcy process, you are left in a better financial position than when you began.
To learn more about bankruptcy and whether you are eligible for Chapter 7 or Chapter 13, contact our Fayetteville, AR bankruptcy attorneys at The Law Group of Northwest Arkansas LLP. You can reach out to us via our online contact form or call (479) 316-3760 to schedule a consultation. While we are located in Northwest Arkansas, our Fayetteville law firm serves clients throughout the state of Arkansas, and our attorneys are also licensed in Missouri, Oklahoma, Tennessee, and Virginia.
Is Bankruptcy Right For You?
Signs bankruptcy may be right for you include:
You have a lot of debt
Most individuals and families have some amount of debt. The difference is whether you can realistically pay that debt off in a few months or years, or whether you know you cannot pay off all of your debt.
You are facing wage garnishment
If wages are being garnished from your paycheck because of an unsecured debt you owe, filing for Chapter 7 bankruptcy will stop the garnishment, in most cases.
You cannot make your minimum monthly payments
One way to determine if you have too much debt is that you cannot make all of your monthly payments after paying for necessities, such as your housing, utilities, and groceries. This includes making the minimum payments on medical debt, credit cards, student loans, auto loans, and any other personal loans you may have taken out.
Most of your debts are unsecured
You may not be sure whether your debts are secured or not, but the difference matters in bankruptcy. Most unsecured debts can be discharged. A secured debt is a debt secured by property, which can be returned to the creditor relieving you of personal liability for the debt. Unsecured debts typically include medical bills and credit card balances. Secured debts include mortgages and auto loans.
You have defaulted on at least one debt
If you have been forced to stop paying on one or more debts, and you have been sent to collections or a creditor is suing you, this is a strong sign that you should speak with a bankruptcy attorney.
You are facing home foreclosure or vehicle repossession
When the bank is pursuing foreclosure on your home because you cannot pay the mortgage, or a creditor is seeking to repossess your vehicle, you need to consider all of your options to improve your circumstances, including bankruptcy.
You do not see your situation improving
All it takes is losing your job or being in an accident for your financial situation to turn from stable to dire. If you do not see your financial situation improving anytime soon, speak with our Arkansas bankruptcy attorneys located in Fayetteville.
Potential Benefits of Bankruptcy
There are many potential benefits to bankruptcy, such as:
Delay or avoid foreclosure of your home
By filing for bankruptcy, you may obtain time to catch up on your mortgage payments. Or, you may be able to work with the bank to go through a short sale of your home. By avoiding a foreclosure on your record, you can mitigate damage to your credit history and score.
Delay or avoid repossession of your vehicle
Your auto loan is a secured debt, so it will not typically go away in bankruptcy. However, by filing for bankruptcy, you may avoid having your vehicle repossessed. You may have time to get caught up on your payments, have your loan refinanced, or be able to sell the vehicle and secure a less costly replacement.
Discharge of certain debts
Certain types of debts are dischargeable, which means they are forgiven. You will no longer be required to pay them. Depending on the type of bankruptcy, certain debts may be fully discharged, or you may only have to pay a portion of the debt through a payment plan.
Get out from under debt
Whether you choose Chapter 7 or 13 bankruptcy, you will go through a process that helps you get out from under your debt. Many of your debts may be discharged entirely. You could have a clean financial slate to move forward.
Prevent creditors from acting against you
One of the tough aspects of having debt is being contacted by creditors or being sent to collections. When you file for bankruptcy, an automatic stay is put on your debts. Creditors can no longer contact, harass, bother you or try to collect your debt.
Bankruptcy Myths and Misconceptions
At The Law Group of Northwest Arkansas, we hear about many bankruptcy myths and misconceptions. Some of these include:
- Bankruptcy seems difficult and expensive.
- Your employer will fire you if you file bankruptcy.
- Bankruptcy requires you to sell everything you own.
- You will have a bad credit score for the rest of your life.
- You will never be able to get a credit card or loan again.
- You could go to jail for filing for bankruptcy.
- Creditors may come after you even after they file for bankruptcy.
- You can only file for bankruptcy once in your life.
We are here to dispel the myths. The process is not overly difficult or expensive. It is legal and accessible. Many people go through the process each year. While it can be a challenging and emotional process, it is often worth it. You can typically keep a great deal of your belongings, and in the end, you are prepared to build a better financial future. Your credit history and score may take a hit, but that is something you can rebuild. Down the road, you may purchase a home or new car, obtain a new credit card, and be able to live without debt or the bankruptcy hanging over your head.
Most Common Types of Bankruptcy for Individuals and Families
There are multiple kinds of bankruptcy. The different types are referred to as chapters. Some chapters are only used by businesses. Other chapters are used by individuals and spouses, such as Chapter 7 and Chapter 13. If you are interested in bankruptcy, but you are not sure which chapter is right for you, do not hesitate to call our Fayetteville, AR bankruptcy attorneys.
Chapter 7 bankruptcy discharges all or a great deal of your debts and gives you a fresh start. If you qualify and file, a bankruptcy trustee is assigned to your case. This person reviews your finances. They are in charge of figuring out if you can repay some of your creditors by liquidating some of your assets (valuable property). This is why Chapter 7 is also called a liquidation bankruptcy. Through this process, you may sell your home, extra vehicles, and other valuables to pay some debts, although many individuals go through Chapter 7 without needing to liquidate anything. Then, the rest of your debt may be discharged. This type of bankruptcy may take up to six months.
Because Chapter 7 offers significant debt relief, it is not available to everyone. You must pass the “means test,” which is used to determine if you have a low enough income for Chapter 7 bankruptcy. If your monthly income is less than the median income for a household of the same size in Arkansas, you will likely pass the means test. If you earn more than the median income, then whether you pass the test depends on your amount of disposable income. If you have too much disposable monthly income, you do not qualify. You may then look into Chapter 13 bankruptcy.
Chapter 13 bankruptcy is a longer and sometimes more difficult process than Chapter 7 bankruptcy, but it is available to individuals and couples who earn too much for Chapter 7. After filing for Chapter 13 bankruptcy, a trustee is assigned. You are required to propose a monthly payment plan, which you will follow for three to five years. The trustee may object and offer an alternative plan. You will then make monthly payments to the trustee who distributes the money to your creditors. Then, when you complete the plan, the rest of your debts are discharged and you are placed in a better financial position. This is known as a reorganization, as you are reorganizing your finances to be in a better financial position.
There are also eligibility requirements for Chapter 13 bankruptcy. You need to have a steady income so that you can pay your monthly necessities as well as the payment plan. Also, there are limits to how much secured and unsecured debts you may have. Those limits change annually.
Understanding Exempt Property
When you are trying to learn more about bankruptcy, figuring out which property you can keep or must liquidate can be confusing. You may wonder whether you will be able to keep your house or your cars? You may wonder whether you will have to sell your basic furniture, electronics, or jewelry.
During bankruptcy, you can keep property that is exempt under the law. In Arkansas, you can either go by state law or federal law to determine which property is exempt from liquidation. Examples of exempt property include a certain amount of real estate or equity in your home, clothing, a motor vehicle up to a certain value, wedding bands, pensions or retirement plans, and your wages.
Student Loan Debt Relief
In most bankruptcy cases, student loan debt cannot be discharged. If you obtained federal student loans while you were in college or graduate school, you will have to continue to pay those back even if you go through bankruptcy. However, this is not always true. If you are fully disabled and unable to earn income, you may be able to fight and have your student loans discharged. This requires the help of an experienced and aggressive bankruptcy lawyer. At The Law Group of Northwest Arkansas LLP, we have helped some of our clients prove a complete and permanent disability to have their student loans forgiven.
The Bankruptcy Process
Before filing for bankruptcy, you should understand the general legal process.
At The Law Group of Northwest Arkansas LLP, we can explain and guide your steps:
- Educate yourself on bankruptcy and determine if it may be right for you.
- Speak with our Arkansas bankruptcy attorneys located in Fayetteville to learn more.
- Determine which type of bankruptcy you are eligible for, such as Chapter 7 or Chapter 13.
- Go through the legally required credit counseling within six months before filing.
- File for bankruptcy in the appropriate bankruptcy court.
- A bankruptcy trustee is assigned to your case.
- Send essential financial documents to the bankruptcy trustee.
- Attend the 341 meeting of the creditors about one month after filing.
- Complete the legally required financial management course.
- For Chapter 13 bankruptcy, attend court hearing to confirm payment plan.
- Live by the bankruptcy plan for several months or years.
- Finalize your bankruptcy.
- Rebuild your credit history and score.
- Understand and know your rights regarding your current employment and bankruptcy.
There are requirements you must fulfill to go through bankruptcy. Federal law requires you to take certain educational steps to improve your finances in the future. Before you can file for bankruptcy at all, you must complete credit and debt counseling. You have to complete this class within the six months before you file. Also, after you file for bankruptcy, you must complete a course regarding debt management. This has to be finished before your bankruptcy can be fully resolved by the courts. Our Fayetteville, AR bankruptcy attorneys can help you find and complete these educational requirements when we represent you during the bankruptcy proceedings.
Rebuilding Your Credit
If you choose to go through bankruptcy, you have to be prepared to avoid such a difficult situation in the future. You are going to need to improve your financial knowledge, including in regard to budgeting and saving. By understanding and implementing financial best practices, you will rebuild your credit. And as your credit score improves, you will gain greater access to credit and better interest rates.
Call Our Fayetteville, AR Bankruptcy Attorneys for Help
If you believe Chapter 7 or Chapter 13 may be right for you as an individual or might be best for you and your spouse together, then we recommend calling us at The Law Group of Northwest Arkansas LLP. We are here to answer your bankruptcy questions and address any concerns you might have. If you are eligible for bankruptcy and believe it is the right path, then we will get you started and will represent you in court. You can call us at (479) 316-3760 or reach out through our online contact form to request a free consultation.