About Bankruptcy Law
Bankruptcy is an extremely powerful tool that can be used to help good, honest people get their lives back on track. It allows you to halt foreclosure, discharge debts, stop garnishment, and often allows you to keep everything you already own.
An American Value
Our founding fathers believed that the ability to discharge debts and get a fresh start was so important, they included bankruptcy in the Constitution - Article 1, Section 8 indicates that Congress can enact "uniform Laws on the subject of Bankruptcies."
The US Supreme Court said, in 1934, that bankruptcy "gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."
There is nothing wrong with filing for bankruptcy. Like any tool, when used for the right reasons in the right way, it can be of great use to good people. Further, our economic system relies on bankruptcy to achieve balance between lenders and borrowers. Without it, people would be locked into ruinous interest rates on amounts that they could never repay, leading to incredible harm to their families and futures.
Why File for Bankruptcy?
Here are a few of the many benefits to filing:
Credit cards, payday loans, medical debts, and other unsecured debts are generally dischargeable through the bankruptcy process. This means that you only pay a fraction of the amount you would normally owe, while also getting a fresh start.
Filing for bankruptcy can allow you to halt foreclosure or seizure efforts on your property, including wage garnishment, giving you the time and tools you need to catch up on payments of secured debts, remove unsecured debts, and waive excess fees.
Get Your Life Back
Filing bankruptcy often improves your credit score, allows you time to get back on your feet financially, reduces stress, and prevents harassment from creditors and debt collectors.
Bankruptcy also allows you to surrender vehicles or property that are no longer worth keeping, freeing you from those debts.
Types of Bankruptcy
Bankruptcies are generally classified by "Chapters" - each type is defined in a different chapter in the bankruptcy code. At the Strother Firm, we offer Chapter 7 and Chapter 13 bankruptcies, which are appropriate for individuals and couples seeking to file bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy represents a modern, appropriate way for individuals in debt to start fresh while repaying a portion of what they owe.
Designed for people with regular income, such as those with a job, pension, or those receiving Social Security payments, Chapter 13 bankruptcies allow individuals to repay a portion of their debts over a period of three or five years. The total amount they pay is less than the total amount they would otherwise owe.
This restructuring of existing debt allows individuals to make lower monthly payments on things like cars and homes. Further, the amount you pay to unsecured creditors (credit cards, medical debts, payday loans, etc.) is based upon your income compared to your normal expenses. This means that, if your income is low enough, you could pay very little while still receiving a discharge of your debts.
Here are some other benefits of Chapter 13:
Lower fee ($400.00) to file.
Available to everyone with any sort of regular income.
Allows you to take advantage of many of the benefits of Chapter 7, without the risks.
Monthly payments based on what you can afford.
Add in future bills to your bankruptcy during the 5-year period, without changing your monthly payment.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is what most people traditionally think of when they hear mention of bankruptcy.
Appropriate only for people with little or no income and few or no assets, Chapter 7 is generally only available for people making less than the "median" income for their state, based partly on the number of children or other dependents they have.
Chapter 7 involves a direct, immediate discharge of debts. However, an attorney known as the trustee is responsible for representing the interests of creditors, and may seek to pursue and take assets that are not exempt. For this reason, it is very important to disclose all assets you have before considering Chapter 7 - unreported assets can often be taken.
Chapter 7 can have some advantages, however. The process is shorter, taking around six months, and if you have no secured debts, such as loans on houses or vehicles, it can be easier than a Chapter 13 to file.
Here are some other facts about Chapter 7:
Higher initial fee ($1500.00) to file.
Available only to those with below-median income for Arkansas.
Can have more risk than Chapter 13.
No additional payments after the initial filing fee.
You can't add future bills after you file.