How Can Bankruptcy Help
These examples are only a few of the most common benefits of filing bankruptcy. Obviously we can not tell you how the bankruptcy laws will apply to your individual situation until our experienced and certified Arizona bankruptcy attorneys meet with you. However, this list and the rest of the information on our site will give you an overview of what you can expect.
1. Bankruptcy can discharge, or eliminate certain types of debt permanently.
Chapter 7 allows you to get rid of most of the common types of unsecured debts, like credit card debt, medical bills, bank loans, finance company loans and credit union loans. It can also get rid of unsecured debts left over from a divorce, a failed business, personal guarantees, and a variety of other sources. When you get rid of the debt, you also eliminate the obligation to pay interest on the debt. Not having to make those payments on the underlying debt and interest can save you hundreds of dollars per month.
2. Stop creditors and bill collectors from harassing you.
Filing an Arizona bankruptcy stops creditors and bill collectors from attempting to collect a debt. It prevents them from contacting you at home, work or anywhere for that matter. The “automatic stay” in bankruptcy is a very valuable tool, and if creditors or bill collectors violate the automatic stay, you may have a claim against them.
3. Stop most wage garnishments.
The filing of a Arizona bankruptcy case will stop most wage garnishments.
4. Eliminate the stress associated with debt and worry.
Eliminating debts is a powerful benefit of bankruptcy. In our experience, the more profound impact is the effect a bankruptcy can have on the stress accumulated from months or years of trying to figure out how to pay those debts. You can not underestimate the reduction in stress from receiving a fresh start in bankruptcy.
5.Keep and protect the property you want to keep.
As noted on our myths about bankruptcy page, many individuals believe that if they file bankruptcy they will lose all of their property. This is simply not true. The law provides numerous “exemptions” that allow you to retain certain property. In fact, most of our clients do not lose any of their property. There are exemptions for your house, cars, retirement accounts, personal property, tools, and a number of others. Our bankruptcy attorneys will explain how exemptions can help you keep your property at your initial consultation.
Filing bankruptcy does not mean you get to keep all your property for free and remove any repayment. If there is a lien against the property, such as a mortgage on a house, the lien still needs to be paid. There is no provision in a chapter 7 case for catching up on payments due on property that has a lien, so you have to bring the payment current before filing. If you cannot catch up, but still want to keep the property, a chapter 13 case can be considered.
6. Get out from under debt and property you want to get rid of.
Chapter 7 can help you get out from under debt attached to a piece of property that you no longer control, don’t want, or can’t afford. For example, if you owe more than a piece of property is worth, you can surrender that property to the lender. If you did this outside bankruptcy, the lender would sell the property and come after you for the difference. In bankruptcy, after you surrender the property, all that is left is an unsecured claim, and you can discharge that claim in bankruptcy.
7. Stop lawsuits.
Filing bankruptcy stops lawsuits that are pending against you. In much the same way the automatic stay prevents creditors and bill collectors from pursuing you, it prevents litigation against you from going forward as well. If the person suing you feels that it has a right to pursue you, that person must make an application to the bankruptcy Court for permission. The Court can then take steps to provide you with the protection you are entitled to.
8. Put you in a position to earn and save more.
Filing bankruptcy puts you in a position where you can meet your current obligations. By eliminating some debts, you are in a position to use the money that was going to service those debts for something else. It frees up income to take care of other things like your monthly expenses, or debts that are not discharged like certain taxes and student loans, among others. Then, as your wages increase or you get a promotion, you should be able to start saving again.
9. Start rebuilding your credit.
Clients are often concerned that filing bankruptcy will ruin their credit. While it is true that a bankruptcy filing will appear on your credit report for up to 10 years, it is your credit score that concerns lenders when making the decision whether to offer you credit, and on what terms.
If you are considering bankruptcy your credit is probably in bad shape, so your credit score is probably very low already. Filing bankruptcy eliminates certain debts instantly making your debt to income ratio better, and gives you the ability to pay whatever debts are left on time. Soon you are establishing a history of prompt payment, and your credit score improves.
Many of our clients get offers for new credit almost immediately after filing for bankruptcy. The rates are higher at first, and the down payment requirements usually larger, but filing bankruptcy will put you on the path to rebuilding your credit.