We know you have questions. We have your answers.
*These responses cover most but not every scenario. If you have additional questions or want to discuss your individual case, feel free to contact Curry, Pearson & Wooten P.L.C. We are here to help you.
- Page 1
I’m a 68-year-old retiree with significant debt—can I file for bankruptcy even though I have a decent amount in my retirement accounts?
Today’s seniors and retirees are facing an increasing amount of financial pressure, especially considering the current state of Social Security. For many, the imagined stigma of filing for bankruptcy to escape debt is unbearable, so many continue to chip away at their savings that took a lifetime to build.
A common fear among retirees considering bankruptcy is whether they will be forced to liquidate their retirement savings, leaving them with nothing when their case is over. Fortunately, this fear is mostly unfounded—thanks to bankruptcy law overhauls in 2005, retirement accounts and income are mostly exempt under both Chapter 7 and Chapter 13 bankruptcy, including:
- Social Security income
- IRA accounts up to $1,245,475
- Profit-sharing plans
Filing for bankruptcy does consider your retirement benefits paid as income, but in general, your retirement assets are protected under bankruptcy law. You cannot be deprived of retirement income that is used for your basic needs such as food, clothing, and shelter, but amounts beyond that can be taken to repay your debt in a Chapter 7 bankruptcy. If you choose a Chapter 13 bankruptcy, this income amount will be used to determine your repayment schedule.
As is the case with most bankruptcies, credit takes a significant hit after filing for bankruptcy. For many seniors in financial trouble, however, this is the lesser of two evils. Emerging debt-free (with the exception of federal tax debt and select other debt) from a bankruptcy may be considered preferable to leaving loved ones with leftover debt, and credit can easily be rebuilt over time with careful spending and credit use.
While bankruptcy may not be the right solution to for every retiree in debt, it can also be an extraordinarily helpful financial tool. To learn more about how filing for bankruptcy will affect you, speak to our Phoenix bankruptcy attorneys today.
What can my creditors repossess if I default on my loans?
When you start to fall behind in your loan payments, it is a slippery slope. When finances are tight, it can be very difficult to regain your footing in your payment schedule. Many people fear losing all of their belongings when creditors come to repossess your property to recoup their losses on their loan, but fortunately, there are very strict rules in place for what creditors can and cannot take.
Safe From Creditors: Your Items That Cannot Be Repossessed
One of the most important things to remember when it comes to repossession is that creditors cannot take what has not been expressly named as collateral in your loan agreement. Many people confuse repossession with bankruptcy, assuming that they have to give up anything to settle their debts with creditors.
Fortunately, this is far from the truth. Even if you have multiple loans with the same bank—say you have both of your cars and your home financed through Bank of America—the bank could only repossess the collateral for the specific loan you defaulted on. So, should you default on the loan for your second car, the bank can only repossess that car; your first car and home are immune unless you default on those loans.
Another common misconception is that your credit card company could repossess items that you bought with your credit card. Credit card debt is unsecured, which means it is not attached to collateral.
What Is at Risk for Repossession
You probably sense the trend—anything named as collateral for a loan can be repossessed if you default on that particular loan. These loans commonly involve mortgages, car loans, and car title loans; this means that cars and homes are often repossessed to recover the lender’s losses on the loan.
While defaulting on loans is not a sure-fire sign that you should file for bankruptcy, it is often a red flag for the financial conditions that may lead you into further trouble. Many times, filing for bankruptcy can help alleviate your overwhelming debt. For more information about what bankruptcy could do for you, contact our firm today for a free consultation.
I’m filing for bankruptcy because I am having serious money problems. How am I supposed to afford the filing fees? Help!
It really does seem like a cruel joke. You struggle for months or even years to stay financially afloat, and you finally admit to yourself that bankruptcy may be the best option for you. You work up the courage to file for bankruptcy and get some much-needed relief, when you are suddenly looking at an impossible choice—pay a huge fee, or give up on bankruptcy.
Currently, filing fees for both Chapter 7 and Chapter 13 bankruptcies are over $300, a seemingly insurmountable amount when you are facing bankruptcy. Fortunately, there are some options that may relieve your wallet and your mind.
For most people that are unable to pay the fee in full outright, there is an installment plan you can apply for that allows you to split your payments into up to four separate payments that are due in full within 120 days of your initial filing (this can occasionally be extended to 180 days if the court determine that you have a good reason for the extension). Do not be late with these payments, however—the court could dismiss your bankruptcy case entirely if you are not entirely paid up within 180 days of filing.
There is also a chance that you will be eligible to have the fee waived entirely. If you are filing for a Chapter 7 bankruptcy, you may apply for a waiver if you are unable to pay the fee up front or in installments. This option is not available to those filing for a Chapter 13 bankruptcy, however, so plan accordingly.
If you have more questions about how to apply for fee waivers or installment plans, Curry, Pearson & Wooten’s Arizona bankruptcy attorneys are here to answer them—call us today at 602-258-1000 to learn more!
I am already in debt, and now I am facing wage garnishments—can bankruptcy stop this?
It is a particularly nasty catch-22 to have a wage garnishment slapped on you when you are already financially strapped. Having less money at your disposal to pay bills is never a good sign, but your wages are being garnished to pay some of those bills—it certainly seems like a lose-lose situation any way you look at it.
Filing for bankruptcy may offer you some relief as far as your wage garnishment goes. If the court has ordered the garnishment to pay off a nonpriority debt, bankruptcy’s automatic stay will go into effect immediately, stopping any wage garnishments in their tracks for the duration of your case. If the debt that got you that pesky garnishment in the first place will be eliminated in your bankruptcy case—such as credit card debt in a Chapter 7 bankruptcy—then when your bankruptcy is over, you garnishment will be permanently banished, too.
Just as bankruptcy is not omnipotent in eliminating debt, it also has its limits with garnishments. If a wage garnishment was applied to address debt related to student loans, taxes, or child support, the news is not all good. The automatic stay will keep wage garnishment for back taxes and student loan debt at bay, but once your bankruptcy is over, collection can start up once again. For alimony or child support debt, not only will you still need to pay that debt for the entirety of your bankruptcy, you will also be saddled with any wage garnishments associated with that debt throughout your case.
At Curry, Pearson & Wooten, our Phoenix bankruptcy attorneys are happy to answer any questions you may have about wage garnishments or other bankruptcy matters—simply call us at 602-258-1000 to speak with us today!
I am an Arizona resident and considering filing for bankruptcy, but do not want to lose my rental properties—what are my options?
Here at Curry, Pearson & Wooten, our Phoenix consumer bankruptcy lawyers often speak to people who own rental property and are facing bankruptcy. While many people “on the outside” might think the easy way out is to sell your rental property, those with occupied properties would think that option is crazy. What, then, is the best thing to do?
In the valley surrounding Phoenix, a huge portion of residences are rental properties, both apartment buildings and traditional single homes. From Arizona State University to Luke Air Force base, there is a huge demographic with a demand for rentals; this means that the owners of these rental properties typically see steady income from each unit.
With reliable income from your rental property, it may not make much sense to sell your property in the face of financial trouble—so what options do you have?
Filing for a Chapter 7 bankruptcy is not likely to work out in your favor. In a liquidation-style bankruptcy, only your primary residence is protected. This means that your rental property would likely be taken by the trustee and used to pay off your creditors. This leaves you with one other option if you are still considering bankruptcy—a reorganization, or Chapter 13, bankruptcy.
In a Chapter 13 bankruptcy, you can keep your rental property, but it will be at a cost. Your payment plan will likely include larger payments over time to accommodate the additional value your rental property brings to your nonexempt property. Additionally, if you have fallen behind on mortgage payments, you may be able to include the back payments into your payment plan along with your current payments, which would increase the overall amount you would pay during your plan, but would also prevent you from facing foreclosure.
While you face a difficult decision, the decision is ultimately yours to make, but our experienced Arizona bankruptcy attorneys are available to help you navigate your options. Call us today at 602-258-1000, and let us assist you in protecting what is yours while you get a fresh financial start.
A recent life event has permanently changed my ability to make payments on my Chapter 13 bankruptcy repayment plan here in Arizona—what can I do?
At Curry, Pearson & Wooten, we often tell clients about the huge financial commitment that is an Arizona Chapter 13 bankruptcy repayment plan. It can be very difficult to predict your financial situation for the next year, let alone the three to five required. It is not uncommon for people to hit a bump in the road that takes them off the straight-and-narrow payment plan and pushes them back into the very situation from which they worked so hard to escape.
Fortunately, there is a way to alleviate yourself of the repayment plan commitment and some of your debt, called a hardship discharge. Just as a successfully completed repayment plan has limits on debt discharge, this particular type of discharge does not forgive you of all of your debts. Debts like your secured debts, priority debts, tax debt, and student loans will not be discharged, nor will debts you entered into in bad faith.
What a hardship discharge can do is remove you from the repayment plan and forgive your unsecured debt. Being granted a hardship discharge is challenging, however, and you will need to prove three things when you file your motion, including:
- The hardship you are facing is permanent, and the burden is more than you can reasonable be held accountable for.
- The payments you have made to your unsecured creditors is equal or greater to the amount they would have received had you filed for a Chapter 7 bankruptcy.
- Your plan cannot be modified in any way to enable you to make payments.
It can be difficult to be granted a hardship discharge for your debts in an Arizona Chapter 13 bankruptcy, but with the right help, you can file your motion with confidence. Our experienced Phoenix, Arizona bankruptcy attorneys are here to help you, regardless of your circumstances—call us today at 602-258-1000 to find out what we can do for you.
I don’t make a lot of money, but I’d like to take advantage of the benefits that an Arizona Chapter 13 bankruptcy offers—can I still qualify with a lower income?
Filing for Chapter 13 bankruptcy in Arizona does offer many benefits, especially for filers who are interested in keeping their property while getting their debt reorganized into manageable payments. Because of the rigorous payment schedule that lasts for years, however, many potential filers shy away from a Chapter 13 bankruptcy, fearing that their income is not sufficient to sustain both a payment plan and standard costs of living.
What the bankruptcy court will look at to determine whether or not you qualify is your required debt to income ratio. Chapter 13 bankruptcy demands that you pay off certain debt during the repayment plan, such as child support, alimony, and back payments on secured debt like your mortgage. If you do not earn enough to cover payments on these debts over a three to five year span, odds are that you will not qualify.
Another factor that is considered is your disposable income to unsecured debt to disposable income and nonexempt property ratio. In a Chapter 13 bankruptcy repayment plan, your nonexempt property (things such as second homes and cars) will be used to pay off part of your unsecured debt, while your disposable income gets put toward the remaining debt until the repayment schedule is complete.
This makes your situation a tricky one to determine, but the general rule is that if you can afford the payments on your priority debt, you will be approved. If you have very little disposable income and nonexempt property, your payments may end up being “doable,” even on your modest income.
Before committing to an Arizona Chapter 13 bankruptcy, however, it is very important to sit down and take a solid, honest look at your finances to ensure that your financial reorganization will be successful. At Curry, Pearson & Wooten, our experienced Phoenix bankruptcy lawyers can help you determine which path is right for you—call us now at 602-258-1000 to schedule a consultation and get started today!
My husband and I are overwhelmed with our debt, and we will be receiving a few more large medical bills soon—is immediately filing for bankruptcy in Arizona an option to relieve us of this debt?
In matters of life, they say that timing is everything, and bankruptcy is no exception. When you file for bankruptcy here in Arizona (or anywhere, for that matter), the only debt that will be included in your discharge or repayment plan will be the debt that existed at the time of filing. This means that you will assume full responsibility for any medical bills you receive after you file.
Because of this, it is important to strategically plan your filing to include the bulk of the debt you can reasonable foresee accruing in the near future. While we can never know for certain what life will bring, if you know that your husband has one more surgery to undergo, you can wait to file until you are billed for that surgery.
While it may seem impossible to wait any longer to relieve yourself of this financial burden, there is a very good reason we recommend waiting to file until you can include the bulk of your debt. If you were to file for bankruptcy today, there are very strict limits as to when you can seek another discharge through bankruptcy. This means that if you filed for a Chapter 7 bankruptcy now, you would need to wait another eight years before you can file again. If you filed for a Chapter 13 bankruptcy, your waiting period would be four years.
We know what a huge decision filing for bankruptcy can be, and we want you to get the biggest bang for your buck, both literally and figuratively. If we can help you alleviate your financial pressure in one, effective petition, it will benefit you in the long run. If you have further questions about timing your petition properly, call Curry, Pearson & Wooten’s Phoenix bankruptcy attorneys at 602-258-1000 today to learn more.
What will happen to the cosigners on my loans if I file for bankruptcy in Phoenix?
When you take out a loan, you assume full responsibility for the debt. For many Phoenix residents who have struggled with their finances after the housing market crash and unemployment struggles, lenders may have been wary of their ability to pay the loan in full.
This does not mean that potential borrowers with shaky finances are automatically turned away, however. What many lenders will do (since they do not want to lose business) is require loan applicants with little to no credit or collateral to sign a lease with a cosigner. Cosigners are usually required to have very solid credit and finances, because they will be ultimately responsible for the debt if the primary borrower defaults.
How your cosigners are treated if your file for bankruptcy depends on a few things, primarily the type of bankruptcy your file for. In a Chapter 7 bankruptcy, the automatic stay goes into effect immediately after you file, protecting you from creditors. Your cosigners will not be protected, however, and collection actions will immediately be redirected to them.
This is why many people tend to turn to Chapter 13 bankruptcies. In most cases, both you and your cosigners will be protected in a Chapter 13 bankruptcy case, since you are committing to a repayment plan that will include your cosigned loans. While a Chapter 13 bankruptcy is a huge financial commitment, if you are truly dedicated to preserving your cosigner’s credit, it could be a good option if you will be able to complete the three or five year plan successfully.
If you are struggling to find a balance between what is best for you and your finances and what is best for your cosigners, let the Phoenix bankruptcy attorneys at Curry, Pearson & Wooten help. Our experienced team of lawyers can guide you through the bankruptcy process and allow you to weigh your options before diving headfirst into a huge financial decision. Call us today at 602-258-1000 for a consultation with an attorney now.
My ex-husband pays me both alimony and child support payments each month—will this be counted as income if I file for bankruptcy here in Arizona?
As you prepare to file for bankruptcy, you will be jumping through many proverbial “hoops” to ultimately get your debts discharged. One of the earliest “hoops” to jump through is the means test for the particular bankruptcy that you are filing for.
The means test looks at six-month average of your income and expenses to determine whether your disposable monthly income is sufficient to support a Chapter 13-syle repayment plan, or if you are better suited for a Chapter 7 liquidation bankruptcy. By comparing your income and expenses to other households of your size in Arizona, you will be able to find out which bankruptcy you can file.
As you fill out the means test, your received alimony and child support payments will need to be counted as income. This is important, as the amount you receive in support payments (combined with any income from your job) can impact whether you qualify for a Chapter 7 bankruptcy, especially if this amount pushes your income about the state mean for a household of your size.
The good news is, however, that most child support payments are exempt, which means that the bankruptcy trustee cannot use any portion of these payments to pay off your creditors. This may help set your mind at ease as you navigate through your bankruptcy case, knowing that funds meant for your child or children will remain safe and secure.
Whether your combined income qualifies you for a Chapter 7 bankruptcy or you are financially secure enough to file for a Chapter 13 bankruptcy, our Phoenix, AZ bankruptcy law firm can help. The Arizona consumer bankruptcy attorneys at Curry, Pearson & Wooten can help you escape the overwhelming burden of your debt and help you protect the important funds that are meant to provide for your children. If you are considering filing, let us guide you through the process—call us today at 602-258-1000 to schedule a consultation with a lawyer now.