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3 Reasonable Alternatives to Bankruptcy

Declaring bankruptcy is a relatively extreme measure. Having said that, when used in the right way and at the right time, it can actually save you money, sustain your peace of mind, and get you back in a good place financially.  It can literally set you free.

Nonetheless, declaring bankruptcy can also be expensive and time-consuming. Furthermore, it can have an enormous impact on your credit score. As a result, this can have far-ranging effects on other aspects of your life, such as applying for an auto or home loan and even applying for jobs. You may be surprised to learn that waiting to declare bankruptcy until you are broke can actually do more harm than good.  If you’re on the path to financial ruin, you likely should consider bankruptcy sooner, not later.  You will end up with more in the end.

Because declaring for bankruptcy has long-lasting effects, bankruptcy lawyers in Scottsdale recommend the following alternatives to help you navigate through your financial situation.

Pay Bills Another Way

Working a second or third job is never a good time, nor is it a great way to spend your evenings and weekends. If it’s just for a short period of time, however, the extra income could put a real dent in your debt. What could be better? Although it may be difficult, consider working another job or two in order to make extra cash, if you can climb out of your debt hole within 12 to 24 months, this non-bankruptcy approach may make sense.

Follow a Budget

You’d be surprised to learn that many people don’t follow a budget and, as a result, don’t have a strong grasp on where their money goes (other than to pay bills, of course). In the absence of a written budget, it’s very difficult to see where or how you can make changes in your life that will free up your money.

For many people, the largest portions of our income go towards housing and transportation costs. For example, if you rent, downsizing your home and moving to a smaller place or searching for a roommate could largely impact your rent cost (it could also save you money on utilities as well). If your car is a gas guzzler, for example, selling and buying a small, fuel-efficient car could save you a lot of money that can be put towards debt payments.

Negotiate With Your Lenders

Fortunately, many lenders will lower interest rates or even consider adjusting your payment plan if you tell them you’re going to file for bankruptcy. This is particularly true of credit card companies, which stand to lose the most. Don’t be afraid to negotiate with your lenders in order to alleviate part of your situation. Or hire your bankruptcy counsel to conduct these negotiations for you.

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10 Well-Known Causes of Bankruptcy

While there are a variety of reasons as to why people end up filing for bankruptcy, there are certainly some leading causes. Based on recent studies, bankruptcy lawyers in Scottsdale break down the top 10 leading reasons. As you’ll see, the percentages represent the proportionate weight as to why an individual ultimately files for bankruptcy. Let’s take a look at them.

Medical Expenses (42%)

According to research, 42% of all personal bankruptcies are a result of complicated medical expenses. Interestingly enough, the studies also show us that 78% of those who filed had health insurance.

Job Loss (22%)

There are millions upon millions of Americans that are unemployed. As a result, this makes them much more likely to file for bankruptcy. Those who are unemployed often pay for health insurance out-of-pocket.

Unmonitored Spending (15%)

Bankruptcy can often come as a result of credit card bills, hefty mortgages, and expensive car payments. Uncontrolled spending habits can put Americans on the unfortunate path to filing.

Divorce (8%)

Legal fees, child support, and alimony can result in heightened financial stress. Unfortunately, nearly one out of every two marriages fail in America.

Unexpected Disaster (7%)

Unanticipated disasters such as earthquakes, floods, or hurricanes can be very hard to prepare for. Without insurance, this can possibly result in bankruptcy.

Avoiding Foreclosure (1.5%)

Someone can spend nearly a lifetime preparing to buy a home. In order to avoid foreclosure, some Americans will file for bankruptcy to reorganize debt in an effort to save their homes.

Poor Financial Planning (1.5%)

In the absence of a logical financial plan, bankruptcy can always occur. You should always build up your cash savings for out of the blue expenses that could lead to debt.

Preventing Loss of Utilities (1%)

With a foreclosure, you also run the risk of losing utilities. Keeping your lights and heat on too often can have severe financial consequences.

Student Loans (1%)

Fortunately, it may be possible to consolidate student loans with a bankruptcy.  Speak to your bankruptcy lawyer about your options, if any.

Preventing Repossession (1%)

If a creditor repossessed your car, bankruptcy may put you in a position to have your vehicle returned, in addition to any other personal property that may have been repossessed.

In order to avoid bankruptcy, consider steering clear of the aforementioned leading causes. Reading often and talking to people in order to education yourself will help you in the long run. Doing a few things right and maintaining those habits will put you a great place financially and will help you see through your monetary goals.

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When to File For Bankruptcy

When it comes to filing for bankruptcy, timing is everything. While everybody’s situation is different, divorce lawyers in Scottsdale suggest paying attention to the following four signs, which may mean that it’s the right time to file for bankruptcy.

Behind on Bills

Sure, life is certainly unpredictable and, generally speaking, you may not be prepared for a financial crisis. If you are in a tough position and know you won’t be able to pay your bills on time each month, (or have already fallen behind), filing for bankruptcy can really help you get back to where you need to be. For example, a Chapter 7 bankruptcy is deemed a liquidation bankruptcy that is structured to immediately eliminate your debts. Throughout this process, your Trustee will sell your property and use the funds to compensate your creditors. Unless otherwise
specified by you, your automobile can also be included in the sale of your property.

You’re in Debt Through a Collection Agency

If you have debt that’s been building up, there is a chance you may end up being sued if you continue to ignore debt collectors. Filing for bankruptcy can really help if you think you may end up in this position. Filing for bankruptcy puts what’s known as an “automatic stay” against debt collectors and can put an end to any additional collection actions.

Your Wages Are Garnished

In order to pay down a debt, creditors often take extra action to ensure the amount owed is legitimately paid. In doing so, collection agencies obtain a court order to garnish your wages. As soon as this happens, your employer is bound by law to hold back a specified amount from each paycheck, which ultimately goes towards paying down the debt that you owe. Similar to being sued, the automatic stay after filing for bankruptcy can block a company from further garnishing your wages.

You Might Lose Your House or Car

Let’s say you’re behind on payments for your house or car. Bankruptcy might be an effective way to stop repossession or even foreclosure (even if it’s temporarily). Furthermore, this will give you enough time to catch up on payments. Nonetheless, you’ll always want to speak with your lender regarding various options before you take an initial step.
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A great deal of thought should go into the decision to file for bankruptcy. As always, you should seek advice from an attorney if this is something you are considering. The sooner you consult a lawyer, the better, do not wait until the last minute when all of your money is gone and your debts are at their peak levels.

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4 Tips to Managing Your Money During a Divorce

It’s never fun, but sometimes (and unfortunately) it’s necessary.

Going through a divorce is as tough on your finances as it is on your heart. Having said that, while a divorce will certainly alter your marital status, it really doesn’t have to change who you are as a person.

Divorce lawyers in Scottsdale recommend the following four tips to managing your money during a divorce. These tips will help you push your emotions aside and grasp a stronger hold on your life.

Access Your Credit Reports

Once every year, you are able to pull a free credit report from each of the three credit reporting agencies – Equifax, Experian, and TransUnion. The agencies will show each and every credit account that is in your name, regardless of whether it is individually or jointly owned. If your spouse (or ex-spouse) doesn’t pay his/her bills on time, it can negatively impact your credit score. By watching your credit, you are also watching your spouse in many ways.

Work With Your Ex

You should really continue to utilize your individual or jointly-owned accounts as normal. If you come to a point and realize that you don’t have the proper funds to hire a divorce attorney and handle any other relevant expenses, you should come to a mutual decision with your spouse about spending a conservative and equal amount to get what you want. In the case of a relationship that isn’t amicable, consider going through your attorney for legal separation. This would specify how you both should be using your money until the divorce is complete.

Remember Health Insurance

If you were on your spouse’s insurance policy, paying for an entirely new individual policy could cost you a significant amount of money. You really want to take time to examine your insurance policy before your divorce is finalized. Open enrollment for health insurance begins at the end of the year. A change in health insurance resulting from a divorce is considered to be a “qualifying life event.” Thus, you’ll likely be eligible for a plan under a Special Enrollment Period regardless of your offical divorce decree date.

Establish a Financial Plan

Living on less income is certainly no easy task. In order to be financially stable, you need to learn the art of budgeting. You’ll need to consider things like college tuition, sports and activities, child care, lessons, retirement, transportation, taxes, and rent/mortgage payments.

Here’s another thought: if your divorce settlement results in money from property sales, retirement account rollovers, or the sale of other assets, consider using a financial planner to help you create a budget and to properly navigate the taxable implications of such transactions.

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What to Do When You are Being Sued for Arizona Credit Card Debt

If a credit card owner has incurred considerable amounts of unpaid bills, the bank or the card agency has the right to sue the cardholder also known as the ‘debtor’. If you are being sued for credit card debt in Arizona, you will first be served a “summons” for a state or federal court case. When you receive the initial notification for summons, the important thing is not to panic. Credit card debt lawsuits go through several phases and there are plenty of ways you can defend yourself effectively with the right attorney. Breathe deeply and relax.

Immediate Action Following Summons

When you have received a summons to court over a credit card debt lawsuit, don’t delay taking action. Most of all, do not ignore the summons. If you do, the suing party (the bank most likely) can obtain a judgment against you in your absence. By ignoring the case, you will not be able to argue your case in front of a judge. The judgment against you could allow the creditor to infiltrate your wages or savings to use as payment towards the credit card debt. Therefore, don’t wait to respond to the summons.  Even if you owe all of the money, you should respond in writing to the court.

If you were served the summons within the state of Arizona, you will be given 20 days to respond. If the summons were served when you were out of state, then you get 30 days to respond. Hire a bankruptcy attorney in Scottsdale during this time to file your case without missing the deadline.

How to Respond to Summons

Once you have an attorney, he or she will guide you through the process of responding to the summons appropriately. There’s a misunderstanding that responding to the summons means showing up in court on the given date. In fact, Arizona law requires defendants in debt cases to file a written response. You must write to the court before the deadline to avoid a default judgment as described above.

How Long will the Case Go On?

This depends on where the lawsuit is filed. In Arizona, there are two types of courts that handle debt-related lawsuits: the Justice Court and the Superior Court. Lawsuits for disputed amounts less than $10,000 go to the Justice Court while anything more than this will be taken to the Superior Court.

Justice Court is a small claims court where the lawsuits tend to move faster. Due to this reason, some creditors file lawsuits stating a limit of $10,000 but without including the interest and other costs. Lawsuits filed in the Superior Court can be complex so trials take longer to conclude. It’s worthwhile to check whether the creditor has filed the case in the right court as part of your defense strategy.

Formulating the Defense Strategy

There are several ways an experienced defense attorney can approach a debt collection lawsuit. Even if the case goes to trial, your lawyer can negotiate with the creditor for a debt settlement. The settlement may involve trying to reduce the total amount owed. If the debt is overwhelming, you might have to file for Chapter 7 bankruptcy, in which case a court may discharge credit card debt. This is not the ideal scenario for a creditor, so the settlement is always an option.

A skilled attorney would also consider more technical aspects of the lawsuit that may offer you relief. For example, an attorney may check whether the summons for the trial was properly served. Other aspects, such as double-checking documentation the creditor provides, will be part of the defense strategy aimed at getting you the best outcome.

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Reasons for Bankruptcy and How to Avoid Them

When it comes to bankruptcy, there is both good news and bad news. In 2017, bankruptcy filings fell by 3%. Good news, right?

Having said that, there were still over 770,000 bankruptcy filings. This is something upon which we must improve.

In doing so, it’s important to examine the fundamental reasons why people end up in bankruptcy. Bankruptcy lawyers in Scottsdale have assembled the following five reasons in addition to how to avoid ending up in this dismal situation.

#1 – Job Loss

Although we are currently in a period of low unemployment, it was recently very high not too long ago. If you don’t plan correctly and fail to have a financial safe hold in place with sufficient funds, you can easily end up in bankruptcy. Things you’d have to consider in an emergency fund include food, rent, transportation, insurance, child-related expenses, and various asset expenses. Furthermore, you always want to prepare for medical expenses just to be safe.

In terms of your job, focus on being a productive employee with an amicable attitude. In addition, it’s always good to make yourself more marketable over time with additional certifications and skills.

#2 – Decreasing Income

Simply put, with less money and cash flow, the greater the chances are that you’ll end up bankrupt. While you may not be completely unemployed, a change in roles or a reduction in hours can really make it hard to stay afloat.

While this may be hard to avoid, you should prepare for this in the same way that you’d prepare for losing your job. Another option might be to pursue side gigs to augment your income.

#3 – Credit Card Debt

Credit card debt can really be a slippery slope, and if you let it get out of control, you’ll be in trouble quicker than you think. While it may be tempting to simply make the minimum monthly payments, you’ll actually just be dragging things out and losing money in interest over time.

There is a simple solution here – only purchase what you can afford and pay off your credit card every month.

#4 – Medical Expenses

It’s no surprise that one of the leading causes of bankruptcy is, in fact, medical expenses. We understand that medical treatment generally is not optional and also is quite expensive.

To avoid getting into debt because of medical expenses, focus on living a healthy life through clean eating, exercising regularly, and going for annual physician screenings.

#5 – Divorce

Divorce is one of the last major causes of bankruptcy. Outside of legal fees, which can be tremendously expensive, financial assets are not always allocated equally. If and when they are, you must consider the idea of living alone versus living with a spouse. A financial system that supported two people may not successfully support one person.

It’s important to work hard to keep your marriage healthy and strong. This can be achieved through active communication, romantic gestures, and honesty.

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Rebuilding Credit After Bankruptcy

Your life doesn’t end when you file for bankruptcy. There are many positives to this, such as having unsecured credit card debt discharged. There are also some negatives, mainly a major blow to your credit score. It’s not impossible to improve a bad credit score once your bankruptcy lawsuit is final.

Here is the good news.  Once your bankruptcy case concludes, you should take a hard look at the current state of your finances. Even if the court discharged some debt, you may have to still repay secured loans under a new payment plan. There may be tax issues to discuss with your bankruptcy lawyer in Scottsdale. More importantly, you should focus on your current credit score. Here are several tips for bringing it back up to what it once was:

Don’t Make the Mistake of Avoiding Credit Cards

Once you have undergone one bankruptcy, it’s easy to think that you will never use another credit card again. But this is usually noted feasible. You will likely need a credit card to improve your credit score. Not having a credit card is similar to having bad credit. A credit score reflects your reliability as a borrower. You can earn it back by proving that you are a responsible borrower to the bank. Therefore, you should keep your credit card or open a new account. However, do make payments on time. Once you keep making payments over time, your credit score would naturally improve.

Focus on Your Credit Utilization Ratio

Credit utilization ratio (CUR) is sometimes called the balance-to-limit ratio. It refers to how much credit you use as opposed to how much is left unused at the end of the month. This little number plays a major role in how fast and effectively your credit score improves. If you have a high utilization rate, this would negatively affect your credit score. If you have a $1,000 limit on your credit card, and if you use all $1,000 to buy things each month, then your CUR would be extremely high, reflected in a bad credit score. Ideally, you should keep your CRU in the 50 to 60 percent range. For the aforementioned credit card, if you were to spend only $500 or $600 a month, you would have a roughly balanced ratio that would work to your advantage.

Pay Off Majority of Credit Card Balances Each Month

Pay at least 75 percent of credit card balances each month. Ideally, you should repay it all back. Maintain your CUR with payments on time. Keep in mind to never max out the credit limit.

Use a Secured Credit Card

A secured credit card is similar to a regular credit card, but there’s a cash collateral required to obtain one. You will receive one of these after making a security deposit. These cards are designed to help those with bad credit gain positive credit scores. Unlike with regular credit cards, banks typically make payment information about secured credit cards available to credit agencies without delay. Therefore, you can rebuild your credit faster with a secured credit card.

It’s also advisable not to borrow money, such as for a loan, until your credit score is at an ideal level. And don’t rush to increase your credit score either, as it can bac-kfire. Develop an actionable strategy that works best for you to gradually improve your credit score after bankruptcy.

Bankruptcy is a bridge to your new future.  Let Canterbury Law Group take you there and create your future!

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Do I Become Ineligible for a Home Loan After Filing for Bankruptcy?

Filing for bankruptcy could affect your life in both positive and negative ways. The main negative in declaring bankruptcy is that the debtor’s credit score will take a major hit. While it’s very much possible to restore a bad credit score, many consumers do wonder what it means for immediate financial assistance requirements. For example, if you don’t own a home and have filed for bankruptcy, does that mean you are ineligible for a mortgage now and for how long?

The question is not easy to answer. Personal circumstances and specific situations can matter. It’s best to first get advice from a qualified bankruptcy lawyer in Scottsdale. However, consumers can also get a general idea of obtaining a home loan following bankruptcy by reading this article.

Qualifying for a Home Loan Following Bankruptcy

There are no legal barriers to qualifying for a home loan following a bankruptcy declaration. A lender cannot deny you a mortgage based solely on the fact that you have filed for bankruptcy once. Lenders will use other underwriting factors to determine your eligibility.

A consumer’s ability to get a home loan following bankruptcy is determined largely by the credit score, monthly income, down payment levels and the remaining savings. Keep in mind that mortgage lenders require a down payment on the loan. If you have no trouble paying for the down payment, then you can quite often also qualify for the loan. If not, you should at least be able to pay 20 percent of the down payment right away. The higher the down-payment one can offer a lender, the higher the chance that your mortgage loan will close and fund on the date of purchase.

How Bankruptcy Affects Credit Scores and Eligibility for Home Loans

You should expect your credit to plummet by at least 120 points if you file for bankruptcy. All of the credit monitoring companies scan the bankruptcy dockets every day to watch consumers.  After you are discharged from your bankruptcy case, you will need to soon start rebuilding credit to prevent going into the negatives. If you start repaying remaining debts that survived your bankruptcy, your credit score will rise without a problem. Rehabilitating credit in this manner is the best option you have for being qualified for a subsequent home loan. Even if your credit score is low, if you can show the lenders that it has been improving, then your mortgage application may receive more favorable treatment during the loan application process.

How to Improve Your Chances of Obtaining a Home Loan Following Bankruptcy

First of all, you should take steps to get your credit score back up. If you filed for Chapter 13 bankruptcy, sticking to the monthly court-approved payment plan should do it. Otherwise, you can get a credit card and make timely payments without missing a single payment due.  Pay on time, each and every month.

Start saving. You should certainly expect to spend some time-saving money before you can apply for a mortgage. Let your savings accumulate so you have enough to at least partially cover a down payment. The more savings you have, the better your application will look.   You can get friends or family to help you accumulate down payment funds as well, so long as they are willing to sign off and release those funds to you in writing.

Don’t forget to repay existing loans such as student loans, taxes owned, or child support. Always continue to timely pay your regular bills on time as well.

What matters is that you maintain a good financial profile by not falling back into the previous circumstances that caused you to file for bankruptcy.  Time is your friend.  After a bankruptcy, the longer you have come through and demonstrated a strong credit history and ability to pay—the mortgage lenders will start to consider you again for home mortgage loan qualifications.

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How to Cope with the Stress of Fighting a Bankruptcy Case

No one really wants to be in a situation where they have to file for bankruptcy. It can be immensely stressful to go through with the proceedings. If you have trouble managing stress while you are petitioning for bankruptcy, here are several tips to help you reduce the mental burden:

Don’t Hesitate to Ask Your Lawyer the Tough Questions

Bankruptcy cases can be particularly stressful because the law involved in these cases can be quite complicated. Don’t be confused and or angered about the issues raised. If you have questions, ask your bankruptcy attorney in Scottsdale. A good lawyer will be more than happy to help you with whatever questions you have. Your attorney is also the best person to explain how the law applies to your unique situation. You will feel much better after you have spoken to your attorney regarding the tough parts of your case.

Think About Positive Aspects of Bankruptcy

Yes, it may seem impossible to look on the bright side of filing for bankruptcy, but there really is one. Bankruptcy can actually be good for you. Think about all the good things happening. For starters, your creditors can no longer harass you with never-ending phone calls. You are no longer avoiding debt issues. Some of the debt you have, like credit card debt, can be dismissed by the court depending on under which chapter you file.

Chapter 7 bankruptcy is considered the “best plan for debt elimination” because the court discharges most types of unsecured debt under this law.  The court will order a credit plan to pay back whatever remaining debt you have. So when the court proceedings are done, you will mostly be debt free!

Sleep Properly

Do not stay up late worrying about your case; let your attorney handle that part. Try to get at least 7 hours of sleep each night when the case is proceeding. If you are sleep deprived, you will feel even more stressed out. A good night’s sleep can clear your head and prepare you mentally to navigate your case.

Educate Yourself about Issues Involved

Your attorney may not have time to explain every little thing about your case to you. In this situation, you can always go online and read about the basics of filing for bankruptcy litigation. If you don’t understand what Chapter 7 or Chapter 11 bankruptcy is, there are plenty of resources online (and also on this blog) that will help you understand the process involved. Don’t hesitate to do your research. When you are educated about the laws involved, the case will seem a lot less complicated to you. That should relieve most of your stress issues.

You can also read blogs about people who have overcome debt after filing for bankruptcy. Reading about the experiences of others will help you overcome yours better.

What’s more stressful than going through with a bankruptcy case? Crushing debt. Once the case is over, your debt will be largely be gone too. So think about the positives and don’t dwell on the negatives until your case concludes and you are fully discharged.  This too shall pass.  

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The Benefits of Filing for Bankruptcy

Most people perceive bankruptcy as a dreadful thing, like a complete end to financial stability and future prospects. This is a rather misguided notion of bankruptcy. Filing for personal bankruptcy does have its benefits other than reaching a legal solution to overwhelming debt. Don’t believe it? Read below to find out:

Stop the Never-Ending Collection Calls

One of the major positive aspects that follow declaring personal bankruptcy is the definitive end to collection calls. In Arizona, creditors are legally obligated to stop attempting to collect the debt when a debtor has filed for personal bankruptcy. Your creditor won’t be able to call you, try to foreclose your home, notify your employers, or do anything else to attempt to collect your prior debt. If the creditor harassment continues, you will have a good case for your bankruptcy proceedings. You should contact a bankruptcy lawyer in Scottsdale to find out what your options are if credit harassment continues.

Keep Your Home

Arizona law allows exemptions for homesteads or the primary residence owned by a debtor. The court will not make you homeless and take away your shelter when you file for personal bankruptcy. So it’s a sensible way to try to save your home from debtors. This exemption has a dollar and equity limits and certain exceptions that you should clarify with a lawyer. But filing for bankruptcy will stop a creditor from foreclosing your home.

Protect Personal Assets

The Arizona bankruptcy law allows many personal property exemptions when filing for bankruptcy. That means you would be able to keep valuable assets like books, furniture, cheap motor vehicles, various electronic gadgets, family antiques, clothing, pets and so on in your possession. Creditors will not be able to claim these as collateral.  They are prohibited from taking your things.

Stay in Control of Business

Chapter 11 bankruptcy allows business owners control of their company even after filing for business bankruptcy. So it’s a good way to keep a business afloat when the debts threaten to run your company to the ground. The Chapter 11 bankruptcy also facilitates business owners to reduce debt gradually over time.  Chapter 11 can also aid in getting rid of high-stakes litigation by discharging the pending litigation claims that were previously being waged against your company.

Retain Your Pension Fund and Retirement Assets

You can retain your considerable IRA or other types of qualified retirement plans or pensions when you file for bankruptcy. It’s one another valuable personal asset that will be kept away from the debtors. Put another way, you will exit bankruptcy with virtually identical retirement assets as when you went into bankruptcy.

Start Improving Your Financial Status

When you file for bankruptcy, your credit score would hit rock bottom. But afterward, it will start to climb up again, sometimes rapidly. Filing for bankruptcy is sort of the last step towards regaining financial footing and security. After that, it only gets better. When you start to make debt payments, your credit score would start rising again.  Many creditors are attracted to persons coming out of bankruptcy and offer them credit because they know that the person cannot file another bankruptcy for many many years.

Have a Trustee Oversee Your Monetary Affairs

During your bankruptcy, the court appoints a Trustee between you and the creditors to oversee how the discharge on your bankruptcy filing is being carried out. This spells only good things for your future financial dealings. If pursuing a chapter 11 or 13, you will get a handcrafted debt repayment plan to get back on your feet after the declaring.   If pursuing Chapter 7, most if not all of your debts will be canceled.

Above all, you will feel less stressed. Your money matters will be taken care of, and the creditors will finally go away.  Consider speaking with competent bankruptcy legal counsel today.

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