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Written by Canterbury Law Group

Can You File Bankruptcy on a Car Loan and Keep the Car?

If you have a car loan and want to keep the car after filing bankruptcy, you’ll have to pay for it.

Many people are under the mistaken belief that filing bankruptcy allows you to wipe out an auto loan and keep the vehicle free and clear of any payments. It just isn’t true. Bankruptcy will unwind your obligation to pay back the loan. But if you don’t make the payment, you won’t be driving the car for long. So the short answer is no—you won’t get a free car in bankruptcy.

Even so, it isn’t a given that you’ll lose a car with a car loan, either. In this article, you’ll learn:

  • what happens to car loans in bankruptcy
  • how to keep a financed car in Chapters 7 and 13, and
  • “surrendering” a car you want to return to the lender.

We have many more helpful articles that explain what happens to cars in bankruptcy. Look for links to additional resources at the end of this article.

Bankruptcy Erases Car Loans But Not Car Liens

Bankruptcy works by breaking the contract requiring you to repay the lender for the car loan. You can file for bankruptcy, give the car back to the lender, and not pay anything further on the car loan.

However, if you want to keep a car with a car loan, there’s a catch. Filing for bankruptcy doesn’t eliminate the lien giving the bank the right to take back your car if you don’t pay as agreed. The bank can use the lien to repossess the car once the bankruptcy case is over—or sooner with the court’s permission—even though you erased the debt. So if you want to keep the car, you must pay for it.

How you pay your car loan—and whether you can keep a car if you’re behind on the car loan—will depend on whether you file for Chapter 7 or 13.

Understanding Car Loans and Car Liens Before Bankruptcy

Buying a car is costly, and most people can’t afford to pay for one outright. Instead, borrowers finance the purchase by signing a “promissory note” agreeing to pay back the debt with interest in monthly installments.

Because most car loans involve thousands of dollars, banks minimize risk by requiring the buyer to agree to put up the vehicle as collateral. The additional requirement creates a lien on the car that lets the lender repossess the car if the borrower “defaults” by failing to pay.

In bankruptcy, the lien makes the car loan a “secured debt,” unlike a Visa or Mastercard balance, which would be an “unsecured debt.”

What’s the difference? If you don’t pay an unsecured debt, you don’t have to return the property you purchased, such as the tiki torches and inflatables you charged for your annual luau.

Watch out, though—charging furniture, jewelry, mattresses, electronics, and appliances usually creates a secured debt. Check the contract or receipt to find out.

How to Keep a Car in Bankruptcy Chapters 7 and 13

What you’ll need to do to keep a vehicle with a car loan will depend on the bankruptcy chapter you file.

Keeping a Car After Filing Chapter 7 Bankruptcy on a Car Loan

In Chapter 7 bankruptcy, you have two people to please before you can keep your car—the Chapter 7 bankruptcy trustee assigned to your case and the car lender. You’ll need to do different things to satisfy each of them.

The bankruptcy trustee won’t take your car if you can protect all vehicle equity with a bankruptcy exemption. So your first step would be figuring out whether you can protect your car’s equity with a motor vehicle exemption. If the motor vehicle exemption isn’t enough to cover your equity, check for a wildcard exemption—many states let bankruptcy filers use both.

If you can protect all of the equity, you can keep the car in Chapter 7 bankruptcy—at least as far as the Chapter 7 bankruptcy trustee is concerned. The car lender and the lien associated with the car loan is another matter.

To steer clear of your car lender in Chapter 7 bankruptcy, you must be current on your car loan when you file and remain current after your Chapter 7 case ends. Otherwise, the lender will use the lien rights to repossess the vehicle.

But there are other things you can do to keep a car in Chapter 7 bankruptcy when you have a car loan, such as “redeeming” the car or paying the lender its actual value. Learn about all of your car options in Chapter 7 Bankruptcy.

Keeping a Car After Filing Chapter 13 Bankruptcy on a Car Loan

If you’re behind on your payments, consider filing for Chapter 13 bankruptcy. You can pay off the vehicle balance over three to five years in a Chapter 13 repayment plan and keep the car.

But if you don’t make the payments, including catching up on any arrearages on the car loan, the lender can repossess your car in Chapter 13 bankruptcy. Learn more about your car in Chapter 13 bankruptcy.

Returning the Vehicle Bankruptcy to Get Out of a Car Loan

Sometimes the best option is returning a vehicle with a car loan to the lender. Then you’ll be out from under the car loan entirely. Many bankruptcy filers will return a fianced car to the lender when they:

  • paid too much for the vehicle
  • can’t afford the monthly payment, or
  • don’t want the vehicle or the car loan associated with it.

If you’re in this situation, you’ll check the box that states that you plan to “surrender the property” when you’re filling out the Statement of Intention for Individuals Filing Under Chapter 7 form. You can also surrender a car with a car loan in Chapter 13 bankruptcy.

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Written by Canterbury Law Group

Can I keep My Business If I File Bankruptcy?

Can I keep My Business If I File Bankruptcy?

A struggling small business that files for bankruptcy may be able to thrive. Chapter 7, Chapter 13, or Chapter 11 bankruptcy may help you maintain your business depending on:

  • what the business does
  • the organization of the company
  • assets of the business, and
  • the amount of money that can be used to finance a repayment strategy.

Continue reading to discover more about the criteria used to assess the viability of a business bankruptcy. Additionally, a lot of business owners declare personal bankruptcy. Consider finding out how eliminating personal debt can assist you in maintaining your business.

Considerations for Continuing Your Business

Before continuing or ending your business, you should think about a number of factors. Here are a few important things to keep in mind.

Is the company profitable? You set out to run a successful business. If your company is consistently losing money, shutting down might be the best course of action. But let’s say you run a profitable business that is having trouble right now because of transient factors like the economy. It might make sense in that situation to continue operating despite the storm. Being realistic about preserving openness is crucial, though. Entrepreneurs frequently have an optimistic outlook and invest money in a project long after it’s time to give up.

Do the company’s assets outweigh its liabilities? It should go without saying that your company may be worth saving if its assets outweigh its liabilities and it is still profitable. It might be possible to keep the company afloat by reorganizing debt in bankruptcy (or eliminating it if you’re a sole proprietor). If bankruptcy is the only option, consider closing the company by selling the assets and settling the debt outside of bankruptcy (unless you want the Chapter 7 bankruptcy trustee to handle it for you in a transparent manner, in which case be sure to take into account the potential drawbacks discussed below). Most of the time, you’ll generate more money for your creditors while saving money. On the other hand, you probably already know that it might be time to cut your losses if the business is severely in the red.

Are business debts personally your responsibility? It might be more advantageous to keep your business operating while negotiating with creditors if you are personally responsible for its debts. This would prevent you from taking on additional debt. If the company is forced to close because there aren’t enough assets to cover liabilities, creditors may have no choice but to pursue your personal assets. Another typical strategy is for the business owner to declare bankruptcy under individual Chapter 7 in order to get rid of the personal guarantee.

Which Bankruptcy Type Should You File?

The structure of the business organization and the worth of the company’s assets will be the main determinants of the answer.

Why Businesses Don’t Bankruptcy Under Chapter 7 Often

Chapter 7 bankruptcy filings typically result in the closure of the company. Why? because a corporation or limited liability company, two examples of separate legal entities that own property, cannot be protected (LLC). The trustee merely liquidates the company’s assets, settles its debts, and closes the company.

Chapter 7 bankruptcy isn’t typically used to shut down businesses, though that’s not the only reason. Additional issues that might arise include the following:

The majority of business owners can wind down a company without assistance, saving themselves the extra expense of a bankruptcy attorney and filing fees.

Owners frequently have the ability to negotiate a better price for the assets than the bankruptcy trustee.

The partners’ individual assets are at risk when a partnership declares Chapter 7 bankruptcy.

Creditors have a quick forum to air grievances after filing for bankruptcy. In particular, the filing allows for litigation involving fraud, a partnership dispute, or an attempt to pierce the corporate veil (a lawsuit seeking to hold a shareholder personally responsible for the debts of the company).

Because of all of these factors—the main one being a transparent liquidation of the company’s assets—it is imperative to carefully weigh the risks and benefits of closing the business through bankruptcy.

Chapter 7 bankruptcy and the Sole Proprietor

A Chapter 7 bankruptcy may help you keep your business open if you’re a sole proprietor offering a particular service, despite the fact that it rarely benefits business owners. You might work as an accountant, a freelance writer, or a personal trainer, for example. Because the bankruptcy trustee cannot sell your ability to provide the service, this type of bankruptcy may be successful. This is how it goes.

Both personal and business debts fall under the purview of a sole proprietor. You will include all debt and discharge both types of qualifying debt when you file for Chapter 7 bankruptcy.

The relatively insignificant assets connected with a service-oriented business can also be safeguarded using bankruptcy exemptions. Exemptions, on the other hand, are rarely enough to cover sizable quantities of goods, machinery, or other commercial property. Sole proprietors with little to no business assets may find Chapter 7 to be a desirable option. It will eliminate the company’s debts and enable the owner to carry on with the service, keeping the business afloat.

Additionally, if your business debt exceeds your consumer debt, you can file for business bankruptcy and evade the means test. Therefore, it’s less likely that your new income will prevent you from being eligible for a Chapter 7 discharge if your business closes and you’re earning well working for someone else. However, it is possible, so consult a bankruptcy attorney before making any significant adjustments.

When You’re Compelled to File for Bankruptcy

Bankruptcy is typically a voluntary decision. However, it’s not always the case. In some cases, a debtor will be coerced into declaring bankruptcy by creditors.

Involuntary cases are extremely rare. The process is primarily used by creditors to compel an organization into bankruptcy. Because it’s difficult to meet the requirements to file an involuntary bankruptcy, it’s rarely used as evidence against an individual in consumer bankruptcy. In the majority of cases, several creditors must band together and decide to file a lawsuit against a debtor. If successful, the court names a bankruptcy trustee who will take control of every aspect of the company, sell its assets, and then divide the proceeds among the creditors.

Although it might be beneficial, many creditors would rather start their own collection processes. They maintain their capacity to take a bigger chunk of the company’s assets by doing this. A creditor who files for bankruptcy is more likely to have to split the proceeds with other creditors and receive a smaller payout or, in some cases, nothing at all.

It’s crucial to realize that a creditor might not be able to retain money received just before bankruptcy, particularly if it’s viewed as a preference claim that gives one bankruptcy creditor preference over another. However, a lot of creditors are prepared to assume the risk and, if necessary, return the money.

Similar to a voluntary action, the involuntary process starts with the filing of official bankruptcy forms with the court. Read Involuntary Bankruptcy if you want to learn more.

Chapter 13 Bankruptcy and the Sole Proprietor

A Chapter 13 bankruptcy case can only be filed by an individual. So you cannot file Chapter 13 on behalf of your company if it is a partnership, corporation, or limited liability company.

If you are a sole proprietor, just like with a Chapter 7 bankruptcy, you can include both personal and business debts in your Chapter 13 bankruptcy. If the sole proprietorship generates revenue, a Chapter 13 bankruptcy may be your best option. By making lower payments on nonpriority unsecured personal and business debts like credit card bills, utility bills, and personal loans, you might be able to keep the business operating.

However, if your sole proprietorship requires you to keep a lot of supplies, items, or pricey equipment on hand, you might run into a problem. Even though Chapter 13 bankruptcy permits you to keep your possessions, you must still be able to protect them with a bankruptcy exemption (and the majority of exemptions won’t cover important business assets). If not, you must pay the three- to five-year repayment plan’s value for the nonexempt assets. For instance, you would have to pay your creditors $2,500 per month for five years along with any other necessary sums if you owned $150,000 in nonexempt construction equipment.

Keeping all the property you require may not be possible if you don’t have enough income to cover a sizeable monthly plan payment because many business owners are strapped for cash.

Every Company in Chapter 11 Bankruptcy

In order to reorganize debts and continue operating, partnerships, corporations, and LLCs must file a Chapter 11 bankruptcy as opposed to a Chapter 13 bankruptcy. A Chapter 11 bankruptcy can also be filed by a sole proprietor. A repayment plan is used to pay creditors in Chapter 11 bankruptcy, which is similar to Chapter 13 bankruptcy in that the business keeps its assets. In contrast to a Chapter 13 bankruptcy, a straight Chapter 11 is typically much more difficult because the company must submit ongoing operating reports and the plan must be approved by the creditors. For the majority of small businesses, it is also prohibitively expensive.

Bankruptcy is a dreaded word by not just business owners, but families as well. It is not something that people want to go through, but it is the reality for many. With a business, sometimes you can put in all the hard work in the world but still end up filing for bankruptcy.

When starting a business, 30% will fail during the first two years. That number increases to 50% in the first five years, and 66% in the first 10 years. Only 25% will actually make it to at least 15 years.

With these stark statistics, there’s a likely chance that a new business may end up filing for bankruptcy. If that is the case, can your business survive, and if it does, can you get it back on track?

Getting the top bankruptcy attorneys in Scottsdale is one step to take. After that, consider some of the following points to help you get your business back on track.

Determine Which Type of Bankruptcy You’re Filing For

Depending on which bankruptcy you end up choosing to file, whether it be Chapter 7, Chapter 13, or Chapter 11, the case will significantly impact the outcome for your business.

For Chapter 7, your entire business is liquidated and sold off. You would then have to start over from scratch. In contrast, Chapter 13 bankruptcy will affect your company, but you will still have the debt to deal with. With Chapter 11 though, your business will continue to operate daily as your case pushes through the bankruptcy process and a reorganization plan is approved.

Understand What Went Wrong

One of the most important things to focus on after going through the bankruptcy process is to determine what went wrong. One of failure’s benefits is that it’s an opportunity to learn and grow. Take a look at your prior business plan and make essential notes of which parts went wrong that caused you to go into bankruptcy.

Build Your Credit Back Up

One of the hardest things about bankruptcy is that your credit score takes a significant hit. That number is essential if you need to file for a loan to start your business back up again.

Work towards building your credit back up. Start by paying all of your bills and credit cards on time. The more diligent you are about any remaining debt and paying it off, the more favorable outcome it will have on your credit score.

Find Another Source of Revenue

If your business can continue while you are going through bankruptcy, find additional ways to bring in more money. The reason you went into bankruptcy is that you lacked money. So, if you can find other ways to increase your monthly revenue, you’ll have more money to put towards your debt and to keep your business running.

Don’t look at bankruptcy as the end of an era. Instead, consider it as a second act— the new chance to get your company back up and running smoothly once more. It will take a lot of hard work and dedication, but a business can survive and thrive after filing for bankruptcy.

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Written by Canterbury Law Group

4 Steps to Get Your Business on Track After Filing for Bankruptcy

Bankruptcy is a dreaded word by not just business owners, but families as well. It is not something that people want to go through, but it is the reality for many. With a business, sometimes you can put in all the hard work in the world but still end up filing for bankruptcy.

When starting a business, 30% will fail during the first two years. That number increases to 50% in the first five years, and 66% in the first 10 years. Only 25% will actually make it to at least 15 years.

With these stark statistics, there’s a likely chance that a new business may end up filing for bankruptcy. If that is the case, can your business survive, and if it does, can you get it back on track?

Getting the top bankruptcy attorneys in Scottsdale is one step to take. After that, consider some of the following points to help you get your business back on track.

Determine Which Type of Bankruptcy You’re Filing For

Depending on which bankruptcy you end up choosing to file, whether it be Chapter 7, Chapter 13, or Chapter 11, the case will significantly impact the outcome for your business.

For Chapter 7, your entire business is liquidated and sold off. You would then have to start over from scratch. In contrast, Chapter 13 bankruptcy will affect your company, but you will still have the debt to deal with. With Chapter 11 though, your business will continue to operate daily as your case pushes through the bankruptcy process and a reorganization plan is approved.

Understand What Went Wrong

One of the most important things to focus on after going through the bankruptcy process is to determine what went wrong. One of failure’s benefits is that it’s an opportunity to learn and grow. Take a look at your prior business plan and make essential notes of which parts went wrong that caused you to go into bankruptcy.

Build Your Credit Back Up

One of the hardest things about bankruptcy is that your credit score takes a significant hit. That number is essential if you need to file for a loan to start your business back up again.

Work towards building your credit back up. Start by paying all of your bills and credit cards on time. The more diligent you are about any remaining debt and paying it off, the more favorable outcome it will have on your credit score.

Find Another Source of Revenue

If your business can continue while you are going through bankruptcy, find additional ways to bring in more money. The reason you went into bankruptcy is that you lacked money. So, if you can find other ways to increase your monthly revenue, you’ll have more money to put towards your debt and to keep your business running.

Don’t look at bankruptcy as the end of an era. Instead, consider it as a second act— the new chance to get your company back up and running smoothly once more. It will take a lot of hard work and dedication, but a business can survive and thrive after filing for bankruptcy.

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Moving Forward After Filing for Bankruptcy

Filing for bankruptcy is not something families want to do. Unfortunately, though, it is something many American’s have to do.

Filing for bankruptcy is not the end of the world. In reality, it is actually the opposite for many people. It can be looked at as a fresh start with finances, and a way to plan your path to financial freedom. However, it isn’t as easy as it sounds. After filing for bankruptcy, it takes a lot of time and dedication to continue moving forward. Bankruptcy is not a quick fix and is a decision that must be taken seriously.

For some, when the possibility of bankruptcy is an option, the question of how to move forward afterward will come up. With our bankruptcy help in Scottsdale, and along with some of the following tips, we will help you move on with your life after claiming bankruptcy.

Keep Paying Any Reaffirmed Debts

Some debts can survive bankruptcy, which means you will still have to pay them down. There are loans which are entitled to the value of the collateral. This means you will still be required to make the payments agreed upon in the original loan documents.

It would help if you didn’t look at these reaffirmed debts at as something negative. As long as you continue to make your payments on time, the reaffirmed debts can help you rebuild your future credit score.

Use a Secured Credit Card

Continuing with life without a credit card can be challenging. Many companies require a credit card before making a reservation, renting something, or even trying to purchase an item.

Using a credit card is what also helps build and improve your credit rating. A good credit score will allow you to apply for loans and mortgages, whereas a negative credit score is likely to get you denied. However, if you have a poor credit score or went through the bankruptcy process, it could be difficult to obtain one.

A secured credit card is something you should consider using after going through bankruptcy. These credit cards a basically pre-paid cards. You must deposit money into the card account before making any purchases with the card. The money is used as collateral; therefore you can only spend up to what you deposited. You can, though, deposit more to increase your credit, or even be rewarded an increased credit line from the bank.

Avoid Building Debt

One of the best things to do after applying for bankruptcy is avoiding what got you there in the first place. Try not to accumulate any new debt. Keep paying all of your bills on time. Create a budget to help you keep your spending in check, as to not spend more than what you’re earning. The more you can do to keep your cash flow higher than your expenses, the better chance you have of avoiding any more debt.

Don’t let bankruptcy be the end of your finances and your life. Although it will require work on your part, you should think of it as a fresh start to help you get your finances under control. By committing to it, you’ll be able to repair your credit score, pay off all of your loans, and work your way towards financial freedom.

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Removing the Bankruptcy Stigmas

When you’re talking about bankruptcy, it can be a scary conversation. Unfortunately, there is still a negative stigma around filing for bankruptcy, even if it the best solution for those considering this solution.

The bankruptcy stigma comes in a variety of themes. You may be worried about how your friends and family will react when they hear you talk about bankruptcy. It can also be challenging to get a credit card, or even get one at all, which can give you an unsettling feeling.

If the stigma is what is holding you back from claiming bankruptcy and you know it is the best decision for you, disregard these issues. Remember that thousands of people have gone through the same thing and they come out on top after it all.  As mom and dad said, “this too, shall end.”

Social Bankruptcy Stigmas

One of the hardest stigmas to overcome with bankruptcy is the concern of what people will think of you. Chances are there are people you know that have gone through the same situation you are in right now. Although bankruptcy cases are a “public” courthouse matter, typically people do not go out searching to see who filed for bankruptcy. Plus, you can keep it as private as you want.  Don’t ask, don’t tell—virtually nobody will even know you went through this cleansing and liberating process.

Emotional Stigma

If you find yourself feeling guilty for filing for bankruptcy, again, it is more than okay. The federal government offers bankruptcy for a reason—people deserve a second chance.  Big time.  Lots of the time, people who claim bankruptcy had no other choice and did everything they could. Many factors are outside of your control contribute, including the local and national economy. So, if you have guilt for not paying your bills as you should be, that doesn’t make you any less responsible.  You have done your best, you will do your best again.

Financial Stigma

The social and emotional stigma with bankruptcy is something that you can and will keep private, or seek counseling to help you through. Unfortunately, the financial stigma around bankruptcy is one that need not be inevitable. When you claim bankruptcy, your credit score goes down for only a short time—it will skyrocket later. It will be initially more difficult to get credit for things like a home or car loan. The good news, though, is that you can work your way back to a high credit score and remove the stigma altogether.  Most post-discharge consumers find themselves normalized on credit and their lives within a few years.

It’s the Best Option

In the end, it’s important to remember the benefits of claiming bankruptcy in your situation over the stigmas around it. Bankruptcy came to be as a safety net for those who need help getting back to a level of life they can survive in.

If you are thinking about bankruptcy, speak with the top bankruptcy attorney in Scottsdale to help you through the process.

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Five Must-Know Money-Saving and Success Tips

As you know, people rarely find success by accident. It’s important to set yourself up for financial gains by adhering to some of the best advice out there. Let’s take a look at five indispensable money-saving and success tips for your personal benefit.

Be Passionate

For most individuals, finding exactly what they love and monetizing it is one of life’s biggest challenges. Those tips are exactly what tycoon Warren Buffet says drove him to success in investing and finding great deals. Ultimately, being successful in almost anything means having a passion for it. If you see someone with even fair intelligence and a burning passion for what they do, they will almost undoubtedly find success.

Write Everything Down

Some of the most successful people make lists of all kinds. These can vary from lists of people to call, ideas, and/or companies to set up. Furthermore, you can create lists of topics to blog about, tweets to send, and even about upcoming plans. It’s important to write down every single idea you have, no matter how big or small, and then to challenge yourself to follow through. In doing so, you’ll be able to set financial priorities and reach your goals.

It’s Not All Luck

It’s easy to chalk up your success to being in the right place at the right time, but at the end of the day, no legitimate achievement can come without hard work. At times, success can be a lousy teacher; it seduces smart people into thinking they can’t lose. Don’t ever stop hustling or learning. As logic tells us, past success doesn’t ensure future success. Even the smartest and most talented people can lose.

Be Disciplined

The first step to getting rich requires a tremendous amount of discipline. Bankruptcy lawyers in Scottsdale note that if you really want to be rich, you need to find that discipline. If you’re looking to make money, you always need cash available. You aren’t saving for retirement. You are saving for the moment you need cash. Buy and hold is a relic. Ultimately, the first step to becoming rich is being a smart shopper and following through on that.

Find Online Resources

It is wise to check for discounts before you make a purchase. Websites like couponcabin.com and apps like Pic2Shop can help save you a lot of money. Furthermore, don’t forget to always check sites that give you cash back for your purchases, like ebates.com.

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Why Waiting to File for Bankruptcy Can Hurt You

Filing for bankruptcy is generally viewed as an admission of personal and financial failure. While many individuals try hard to avoid it, they end up paying the price for waiting.

Ultimately, the longer people wait to file bankruptcy, the more they struggle. By the time these people declare bankruptcy, their well-being and financial life are negatively impacted, undermining the fresh start the bankruptcy legal tool provides them.

Bankruptcy lawyers in Scottsdale explain the following reasons as to why waiting to file bankruptcy can be so damaging in addition to precisely when you should consider filing.

Why waiting is draining

The time frame prior to a person filing for bankruptcy is sometimes referred to as the financial “sweatbox.” This is the period when people are facing legitimate asset depletion, debt collection lawsuits, and avoiding necessities like food to avoid filing bankruptcy.

Unfortunately, most people sweat it out for years before truly coming to terms with their debt. The misery of the sweatbox is an increasingly common American experience.

“Long strugglers” are denoted as those who endure the sweatbox for two years or longer. Shockingly, around 30% of people wait five years or longer to file for bankruptcy.

It’s imperative to know that the longer people linger in the sweatbox, the worst their overall financial situation becomes. For example:

  • Long strugglers have 50% of the median assets compared with other debtors, or those who didn’t wait two or more years to file bankruptcy.
  • The median debt-to-income ratio of long strugglers is over 40% higher than other debtors.
  • Around half of long strugglers face debt collection lawsuits.

The stigma against filing and dedication to paying debts are part of what keep people from filing bankruptcy. Having said that, bankruptcy law gives the honest but unfortunate debtor a fresh and new start. This is important to understand.

When to consider bankruptcy

Many people who are in danger of filing for bankruptcy note that they wish they had reached out for help sooner. You should reach out to a credit counseling agency as soon as you begin to feel stress.

Let’s take a look at some factors that can help you determine if bankruptcy is right for you:

  • Your debts are more than 40% of your income
  • You’re using debt to pay for other debts
  • Your debts are ones that could be wiped out in bankruptcy
  • You’re forgoing core life essentials

As you might know, the two most common forms of consumer bankruptcy are Chapter 7 and Chapter 13. Which is best for you depends on your specific financial situation. Speak with a bankruptcy lawyer and nonprofit credit counselor if you are considering filing. If you do file for bankruptcy, however, it is certainly not the end of your financial life. To the contrary, it’s a way to generate a fresh start.

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Busting Common Myths about Arizona Bankruptcies

Filing for bankruptcy anywhere can be stressful. However, if you are neck deep in debt, and if bankruptcy seems like the best path to take, you shouldn’t hesitate to do so. Some people hold back on filing for bankruptcy and sorting out debt because of many misconceptions. Here is a brief list of common myths surrounding bankruptcy and the actual truth which dispels them.

Chapter 7 Bankruptcy Erases All Debt

Under both Chapter 7 and Chapter 13 bankruptcy rules, some debt will be discharged by the court. This does not mean that all debt will be “erased” by the courts. For example, discharge is not granted for certain debt like owed child support, spousal maintenance, penalties owed for criminal or civil cases, certain tax debt, and for all secured debt. What will actually happen when you file for Chapter 7 bankruptcy is that the court will review your case, and the judge will discharge a certain amount of unsecured debt. Then, the court will oversee a payment plan for you to pay back all remaining secured or exempt debt.  Will you walk away from bankruptcy with substantially less debt—yes, all debt gone—not always?

The Creditors Can Claim My Car and House

This is a common myth surrounding filing for bankruptcy and it’s largely not accurate. The courts allow bankruptcy petitioners to keep family homes and main modes of transportation under exemption rules. Even if your house is tied up in debt, you can claim an exemption of up to $150,000 out of the total equity value of your home. You can also get up to $6,000 worth of exemptions for each motor vehicle you own. Also, Arizona’s homestead laws further protect family homes. There are no recent known cases where an Arizonian bankruptcy court uprooted a family from their home over an unpaid debt. The courts are largely in favor of debtors keeping their shelter. To find out more about exemptions your property or vehicles might qualify for, contact a local bankruptcy lawyer in Scottsdale.

The Bankruptcy Court will Inspect My House

The bankruptcy court does not demand that anyone go to the debtor’s house and go through his or her possessions. The petitioner is expected to voluntarily list all possessions (under oath) when presenting the necessary paperwork. If the debtor has lied, the creditor’s lawyer will point it out to the court. There are no inspections of any sort involved absenting a willful fraud on the court by the applicant.

Filing for Bankruptcy Disqualifies Me from Applying for Credit Cards and Loans

Debtors that file for bankruptcy are not automatically disqualified from obtaining credit cards or loans like car loans. Certain types of bankruptcy, like Chapter 7 bankruptcy, discharges unsecured debt like unpaid credit card bills and personal loans. Once you have been declared bankrupt, your credit score will be lowered. Some loans will not be available for you based on this low credit score. However, as soon as you start repaying remaining debts, your credit score will come back up again quickly. In the meantime, you will be able to qualify for secured credit cards or loans even after you have filed for bankruptcy.

Also, when you have filed for personal bankruptcy once, you have to wait at least 6 years to file for personal bankruptcy in the state again. Creditors know this, and some actually prefer to lend to formerly bankrupt clients because of this knowing that they will not return to the bankruptcy court for years to come.

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How to Protect Yourself against Creditor Harassment in Arizona

If you are far behind on a loan payment, you can expect the collection calls to start. However, if the collection calls are very frequent and disrupt your life, or the calls are threatening in any manner, then it can be considered harassment. Many indebted Arizonians face harassing calls and other harmful collection efforts from creditors. Here are several steps you can take to stop the abuse.

Try to Negotiate with the Creditor

The easiest and cost-free solution you can take is to try to negotiate with the creditor to settle the debt. Instead of not picking up the phone, in which case the creditor will find other ways to reach you, or ignoring calls, talk to the creditor directly. If your finances are too tight to pay back your loans, discuss it with your creditor and you may be able to come to new terms. Depending on your negotiating skills, and the creditor’s willingness, you may be able to get a payment extension, a reduced interest rate or a waiver or both.

If the creditor is particularly abusive, it is probably best not to engage should the behavior gets worse on the part of the creditor.

Call a Lawyer Immediately

It’s highly recommended to call a bankruptcy lawyer in Scottsdale or your local area to put a legal stop to harmful third party collection efforts. There are attorneys who specialize in providing relief to those who suffer from abusive creditors. No matter how much you owe, creditors cannot harass you as a part of their collection efforts. There are both federal and Arizona state laws to protect debtors against harassing creditors.

Protection is granted to consumers under the Fair Debt Collection Practices Act (FDCPA). The law outlines personal rights when it comes to debt collection practices. You can consult with a lawyer to find out whether any of your rights under FDCPA has been violated. The lawyer will be able to tell you if the behavior you have endured from the creditor can be considered a legitimate collection effort and what remedies you may have under the FDCPA.

You Can Sue if You are a Victim of Abusive Practices

If you know that you have been subjected to illegitimate collection efforts or practices that can be considered harassment, you can sue the creditor in question with the help of an attorney. The collection practices in question may be considered a violation of either state or federal law.

Harassment, in general,  that involves constant phone calls, multiple phone calls on the same day, auto dialing calls and calling without leaving messages can be considered unfair practices. If the debtor calls your friends, family, employer or another third party regarding your finances, then it is a violation of the law.  Other common creditor harassment practices include the use of threats, such as a threat to call the police on you, charging even more in addition to the debt such as late fees, not validating the debt or continuing to contact you after you have clearly stated your intent to refute the debt. If you have been subjected to any of these, you can take your case to court.

Additionally, filing for personal bankruptcy can relieve you of harassing debt collection efforts literally overnight.  Speak with a seasoned bankruptcy attorney to evaluate your many options. Call us at 480-744-7711 for more help on these issues.

Debt, Debt buyers, debt collectors, Fair Debt Collection Practices Act, Filing Bankruptcy in Scottsdale, filing for personal bankruptcy, harassing debt collection, Scottsdale Legal Help
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