Many people do not consider bankruptcy because they know that the bankruptcy will show up on their credit report for ten years following the discharge of their debts. However, in certain situations, it is worth taking a hit on your credit to gain control of your finances and, for many Americans, bankruptcy actually helps their credit in the long run.
Fear of effects on your credit score should not prevent you from considering bankruptcy to solve your financial problems. Call the experienced bankruptcy attorneys at the Ellett Law Offices in Phoenix at 602-235-9510 to discuss your options today.
How can bankruptcy help credit?
Often people who are considering bankruptcy are already behind on numerous debts, which have likely caused their credit scores to plummet. Unpaid defaults will continue to affect your score until they are paid. Bankruptcy will effectively resolve most of those defaulted debts (with some exceptions) and therefore your score could start to improve over time. Even if some debts are not dischargeable in your bankruptcy, such as student loans, discharging other debts will free up money to become current on the lingering debts.
Additionally, if a creditor sues you and obtains a judgment, that judgment will report on your credit and will negatively affect your score. If you are being sued, filing for bankruptcy in Phoenix, Arizona will stop the lawsuit from progressing due to the automatic stay1. This can help avoid a judgment from ever being issued and can save you many points on your credit score in the long run.
Will I be able to get new credit after bankruptcy?
Having a bankruptcy on your credit will likely limit your options for new credit for a period of time, however it will not nearly be for ten years. After a year or so, entities including FHA (Federal Housing Administration)2 and other creditors will likely be willing to lend to you. Though you may not qualify for the lowest possible interest rate, you will still be able to finance things like a house or a car. You may re-establish unsecured debt through a secured credit card or other similar account, which will also improve your credit score more quickly.
Americans face financial difficulties for many different reasons. While some financial hard times are temporary and resolve themselves, in other situations people require legal solutions to get back on their feet. The following are six of the main reasons why individuals or couples file for bankruptcy in the United States, as reported by our bankruptcy lawyers in Phoenix.
1. Medical bills. Media reports indicate that medical debt due to illness or injury is the leading cause of bankruptcy in the United States. Even if individuals have health insurance, the cost to treat serious conditions may easily exceed policy limits causing overwhelming medical debt.
2. Unemployment. It is no surprise that unexpectedly loss of a job causes people to file bankruptcy. Unemployment benefits are often not enough to cover household expenses and, if you are unable to find a new job in a timely fashion, you may have to rely on credit cards to cover expenses or may fall significantly behind on bills.
3. Credit card debt. Credit card companies have many practices that make it difficult for people to even afford a minimum payment. Fees for going over your limit or paying late can be $39.00, plus companies may raise your interest rate over 30 percent if you fail to make a payment. In such situations, your balance can grow extremely quickly and minimum payments may not even make a dent.
4. Predatory lending. If you were the victim of a predatory mortgage lender, you may be unable to make your mortgage payments. Bankruptcy is one way that victims of fraudulent or predatory lending practices can overcome this situation.
5. Collectors. Anyone who has had a bill in collections should understand how stressful the daily calls and regular letters may be. If you have several bills in collections, you may spend most of your day simply evading calls from collectors and bankruptcy is often the fastest way to make the harassment stop.
6. Garnishments2. If a creditor obtains a judgment against you, you may suddenly find your wages garnished as a result. If you had trouble paying your bills before, receiving lower wages will only make your situation worse and may lead you to file bankruptcy to stop the garnishment and discharge your judgment.
If you are considering bankruptcy for any reason, call the Ellett Law Offices in Phoenix at 602-235-9510 for assistance today.
Many people who are experiencing financial problems and make a consistent monthly income can benefit from filing for Chapter 13 bankruptcy1. Under Chapter 13, a debtor’s debts are reorganized under a court approved plan and monthly payments are made to the bankruptcy trustee who distributes the money amongst various creditors. While payments are being made, a debtor’s assets are protected from collection attempts including repossession and foreclosure. In many cases, debtors who are at imminent risk of losing their assets are able to keep them by filing Chapter 13.
The Hardship Discharge
People who enter into Chapter 13 bankruptcy must make payments to a Chapter 13 trustee. In some cases, it may become impossible for the debtor to keep making payments due to circumstances out of their control. In this circumstance, the debtor may be eligible for a Chapter 13 hardship discharge under 11 U.S.C. § 1328(b)2. Under this provision, a debtor may be entitled to a discharge of his or her debts if:
- The circumstances making the debtor unable to pay his or her debts are beyond the debtors control and exist through no fault of the debtors
- Creditors have received at least much as they would have received had the debtor filed for Chapter 7 bankruptcy
- Modification of the plan would not be practical
This type of discharge is more limited than the discharge that occurs at the end of Chapter13 and does not include any debts that would not be discharged in a Chapter 7 bankruptcy. Examples of the types of circumstances that may justify a hardship discharge include illness or injury that would make it impossible for a debtor to pay even under a modified plan.
Contact a Phoenix bankruptcy attorney today to schedule a free consultation
Anyone considering Chapter 13 bankruptcy or seeking a hardship discharge should discuss their situation with an experienced bankruptcy lawyer as soon as possible. In many cases, the assistance of a lawyer can have a significant impact on the outcome of a judicial proceeding. Attorney Ronald J. Ellett has been assisting Phoenix residents file for bankruptcy and obtain a fresh start for over 20 years. To schedule a free consultation with Mr. Ellett, call our office today at (602) 235-9510.
Most American households have several different kinds of debts and unfortunately, many people struggle to make timely payments on all of them. If you are struggling financially, you should not hesitate to contact the Ellett Law Offices, P.C. in Phoenix to discuss whether Chapter 7 bankruptcy can help you. We offer free consultations, so please call us today at 602-235-9510 for assistance.
The United States Bankruptcy Courts report that Chapter 7 bankruptcy helped over 700,000 Americans in 2013 alone. While the main goal of Chapter 7 bankruptcy is to discharge debts in order to relieve liability, filing under Chapter 7 is not necessarily the best option for everyone struggling with debts. One reason for this is because not every type of debt qualifies for discharge.
Under 11 U.S. Code § 523 of the U.S. Bankruptcy Code, the following types of debts are not eligible for discharge under Chapter 7:
- Student loans (except in rare cases)
- Child support or alimony arrears
- Debts arising from judgments related to a divorce
- Attorney fees for cases involving child support or custody
- Fines or penalties owed to the government
- Federal tax liens
- Certain types of homeowners association fees for condos or coops
- Criminal fines, penalties, and restitution
- Personal injury judgments due to accidents you caused while driving under the influence
In other situations, a creditor may come forward and challenge a discharge based on certain grounds. If the court agrees with the challenge, the court may rule the debt nondischargeable. Grounds for such challenges commonly include that you obtained the debt through fraudulent actions or false pretenses, or that the debt arose from willful or malicious actions on your part.
Creditors may also challenge any large cash advances or luxury credit card purchases that you made in the 90 days prior to your bankruptcy filing as they will claim you only made the purchases in anticipation of discharging the debt. An attorney can argue on your behalf in such challenges, offering evidence that you intended to pay the money back in good faith or that the purchases did not constitute “luxury items.” This is only one of many ways an attorney can be extremely beneficial in a bankruptcy case.
Almost everyone is aware that individuals who are struggling financially can seek relief by filing for personal bankruptcy under the United States Bankruptcy Code. Additionally, headlines regularly feature huge corporations, such as General Motors or American Airlines, that have filed for bankruptcy due to significant losses. However, many small business owners often wonder how bankruptcy may apply to them if their business is in financial trouble.
There are several different options for small business owners, and the right option for you will depend on certain factors, such as the type of business entity you own, the amount of debt your business has, and whether or not you wish to continue operations or liquidate your business. The following information briefly explains some of the bankruptcy types available to small business owners.
Chapter 7 bankruptcy may be helpful no matter what type of business entity you have. If you have a sole proprietorship, you are personally liable for your business debts, so you must file for personal bankruptcy to discharge those debts. If you have a corporation, limited liability company, or partnership, you can file for Chapter 7 on behalf of the business. Chapter 7, however, is generally used to liquidate and close a business.
Business entities can file for Chapter 11 bankruptcy, and this type of filing is primarily for business owners who wish to remain in operation and reorganize the business debts into a manageable payment plan. This kind of bankruptcy may be complex and costly, though if your business has lower debts, the process may be simpler and faster.
Businesses may not file under Chapter 13, however owners of sole proprietorships and owners of corporations may file on a personal bankruptcy. This type of bankruptcy allows you to retain ownership of your business.
Contact an experienced Phoenix bankruptcy lawyer for a free consultation
Whether you are considering bankruptcy to help with your personal finances, your small business finances, or both, the committed bankruptcy team at Ellett Law Offices, PC can advise you of which debt relief option is best for your situation. Please contact our office at (602) 235-9510 to schedule your free consultation today.
Generally speaking, it is not possible for most people to discharge a student loan. Federal rules limiting the discharge of student loans in bankruptcies have grown more and more restrictive over the years. Federal student loans were made non-dischargeable in the 1970s, and in 2005, Congress passed a law exempting private loans from discharge as well. Under the current bankruptcy laws, the only way a debtor can discharge student loans in a Chapter 7 bankruptcy is if he or she can prove “undue hardship,” for which courts employ the “Brunner Test,” named for the case from which it came. The Brunner Test requires that a plaintiff show the following:
- That he or she cannot maintain a minimal standard of living if he or she is forced to repay the loans;
- That other circumstances exist that indicate that the current situation will persist for a significant part of the loan repayment period; and,
- That he or she has made good faith efforts to repay the loans.
This is a notoriously difficult standard to meet and often requires that debtors have medical conditions or other serious issues that will keep them from earning a living and repaying their loans. In order to determine whether you may be eligible for a student loan discharge, you should discuss your case with a Phoenix bankruptcy attorney as soon as possible.
Even in the absence of discharge, bankruptcy may still be able to help
While most student loans will not be able to be discharged through bankruptcy, this fact does not mean that individuals with student loan debt cannot benefit from filing. Chapter 7 bankruptcy is capable of discharging many other types of debt, including the following:
- Credit card bills
- Medical bills
- Certain tax debts
- Personal loans
- Business loans
- Collection accounts
- Federal benefit overpayments
By discharging other types of debts with which you may be struggling, it may free up income and allow you to more aggressively attack or manage your student loans. In some cases, bankruptcy may even be able to help improve a debtor’s credit rating relatively quickly, allowing him or her to more fully participate in the economy.
Contact a Phoenix bankruptcy lawyer today to schedule a free consultation
There are a number of ways that bankruptcy may be able to help you, and anyone experiencing financial difficulty should discuss their situation with an attorney as soon as possible. To schedule a free consultation with Arizona bankruptcy lawyer Ronald J. Ellett at (602) 235-9510.
If you are party to a lawsuit and lose your case, the court may issue a judgment for money damages against you. Such a judgment is an order for you to pay the money you owe to the plaintiff in the lawsuit. Judgments may arise from many types of lawsuits, including for personal injury, wrongful death, credit card collections, and more.
In many situations, people have judgments so high that they believe they may never pay them off. Further, the other party may be able to obtain a lien on your property or a garnishment of your wages in order to collect on the judgment. Such actions may put a further strain on your finances and may cause you to fall behind on your usual household expenses and bills. Overall, a judgment can have a significantly negative effect on your financial situation. This leads many people to wonder whether bankruptcy can possibly help their position.
Discharge of Judgments
Chapter 7 bankruptcy may be a viable solution for many people facing legal judgments. Chapter 7 bankruptcy discharges many types of debt, and a qualifying judgment is considered to be like any other debt. The automatic stay that goes into effect when you file for bankruptcy can also work to halt any pending legal actions or wage garnishments you may be facing.
Unfortunately, not every type of judgment is dischargeable in a Chapter 7 bankruptcy, as the law does exclude certain types of judgments. Some examples of judgments that are automatically disqualified from bankruptcy discharge arise out of the following types of cases:
- Certain types of debts to the government
- Child or spousal support orders
- Student loans
- Personal injury or wrongful death arising from a DUI
Other types of judgments are not automatically disqualified, but may be deemed nondischargeable by a court if a creditor challenges the discharge. These include judgments arising out of acts of fraud, embezzlement, or malicious acts of violence, such as assault.
Contact an Arizona bankruptcy lawyer for a free consultation
In order to determine whether bankruptcy can help with your judgment, you should not hesitate to consult with experienced Arizona bankruptcy attorney at the Ellett Law Offices, PC. Call our office today at (602) 235-9510 to schedule a free consultation today.
Millions of consumers every year benefit from consumer bankruptcy. Among the most commonly filed forms of bankruptcy are Chapter 7 and Chapter 13, both can only be filed by natural persons, not by corporations. A husband and wife can file jointly in the same case or file separately.
While both Chapter 7 and chapter 13 provide consumers relief under the United States bankruptcy code, there are significant differences between the two. As a result, the type of bankruptcy appropriate for your situation will depend on your specific circumstances. An experienced Phoenix bankruptcy attorney will be able to review your finances and then advise you as to what type of bankruptcy, if any, could benefit you.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common type of bankruptcy filed in the United States. Also known as a “liquidation bankruptcy,” Chapter 7 bankruptcy involves liquidating a debtors non-exempt assets and using the proceeds to pay off outstanding debts. Most debts that are not satisfied are discharged, meaning that they are completely wiped out. Importantly, there are certain debts that are nondischargable in most circumstances, including student loans and any unpaid child support payments. Among the types of debts that are generally dischargeable include:
- Credit card debt
- Personal loans
- Civil judgments
- Business loans
- Payday loans
More information here:
Chapter 13 Bankruptcy
Chapter 13 bankruptcy differs significantly from Chapter 7 bankruptcy. In a Chapter 13, a debtor is able to keep most of his or her property, while restructuring debts and making payments of a court approved payment plan. In many chapter 13 cases only a very small fraction of unsecured dect is repaid- most of it is discharged upon completion of the case. In a Chapter 13 bankruptcy a consumer makes payment to a trustee who distributes funds to creditors. Generally, Chapter 13 bankruptcy is beneficial for people who have steady income who are having difficulty keeping up with their monthly payments. Chapter 13 can also be effectively used to avoid foreclosure in many cases as well.
Contact a Phoenix bankruptcy lawyer today to schedule a free consultation
If you are experiencing financial difficulty, bankruptcy may be an option you may want to consider. Bankruptcy is not right for everyone, and an experienced Phoenix bankruptcy lawyer will be able to go your situation and advise you if he or she believes that bankruptcy could benefit you. Attorney Ronald J. Ellett has over 20 years of experience helping Phoenix consumers obtain a fresh start through bankruptcy. To schedule a free consultation, call Ellett Law Offices today at (602) 235-9510.
Many people who are experiencing financial distress may consider working with a debt settlement company in order to try and reduce the amount of money they owe. Debt settlement companies work with a person’s creditors and attempt to negotiate a settlement for less than the total amount owed, and typically charge consumers fees based on the amount of debt that is forgiven. In addition, they typically advise consumers to stop paying their bills, often resulting in the accrual of significant late fees and other penalties. Additionally, these practices have the potential to have a substantial adverse impact on your credit score.
Because of these and other issue, the United States Consumer Financial Protection Bureau (CFPB) calls working with a debt settlement company “risky,” and advises consumers to be aware of the following facts:
- Debt settlement companies often charge high fees
- In many cases, a debt settlement company will not be able to settle all of your debts
- Creditors may refuse to work with debt settlement company
- The money that a debt settlement company may save you could be offset by fees and penalties that occur as a result of not paying your bills
- There may be tax consequences for debt forgiveness
In many cases, people who are considering working with a debt settlement may be better off filing for bankruptcy. Bankruptcy often can completely eliminate many types of debts, including credit card debt, personal loans, certain tax debts, and vehicle loans. Additionally, unlike debt settlement companies, a bankruptcy attorney is ethically required to act in your best interest, so you can rest assured that the advice you are receiving will benefit you and not leave you worse off. Filing bankruptcy can improve your situation immediately, as the moment you file you come under the protection of the “automatic stay” which halts all collection attempts and prevents creditors from filing suit in order to collect a debt.
Contact a Phoenix bankruptcy attorney today for a free consultation
People who are experiencing financial difficulty should discuss their situation with an experienced Phoenix bankruptcy lawyer as soon as possible. To schedule a free consultation, call Ellett Law Offices today at (602) 235-9510.4
Ellett Law Offices , P.C.
2999 N. 44th Street,
Phoenix, AZ 85018
When you file for Chapter 7 bankruptcy (http://www.ellettlaw.com/chapter-7-bankruptcy), a bankruptcy trustee will take some of your property, liquidate it, and use the proceeds to pay off some of your debts. Though losing property may deter you at first from filing for bankruptcy, you should know that Arizona law provides numerous exemptions that allow you to keep certain kinds of assets, income, and property. Arizona Bankruptcy Exemptions While some states allow bankruptcy filers to use the exemptions set out in federal law, Arizona requires you to apply the exemptions in state legislation. Under state law, filers may keep the following property:
- Up to $150,000 of equity in your home
- Up to $6,000 of motor vehicle equity
- Up to $6,000 of home appliances and furniture
- Up to $2,000 of wedding or engagement rings
- Life insurance benefits up to $20,000
- Up to $300 in bank account deposits
- Up to $500 in clothes
- Up to $400 in musical instruments
- Up to $1,000 in goods including guns, computers, bibles, bicycles, or sewing machines
- Up to $800 worth of pets
- Up to $250 in books
- Up to $150 in wrist watches
- All prescribed home health aids
- All materials used to teach children
- Up to $5,000 of tools used for a trade or profession
- Generally, worker’s compensation and unemployment compensation payments
- 75% of your disposable income or up to 30 times $7.25 per hour, the federal minimum wage
In addition to these basic exemptions, married couples may be able to double the amount of many of the above, including home goods and motor vehicles. A couple may not, however, double the amount of equity they get to keep in their home.
Contact a Phoenix Chapter 7 Bankruptcy Lawyer for a free consultation
An experienced bankruptcy attorney knows how to make the best use of the Chapter 7 bankruptcy exemptions in Arizona to make sure you keep the maximum amount of property and assets possible. At the Ellett Law Offices, our attorneys are committed to achieving the best possible results for every individual client. If you are facing financial struggles, do not hesitate to contact our office at (602) 235-9510 for a free consultation. Ellett Law Offices , P.C. 2999 N. 44th Street, Suite 330 Phoenix, AZ 85018 Phone: 602-235-9510 Fax: 602-235-9098