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Monday, March 30, 2015

Bankruptcy

Unlike many of the local lawyers, I do not have a bank as a client. Because of that I started doing bankruptcies for individuals many years ago.

No one wants to file bankruptcy, but for those who are burdened by heavy debt including credit card debt and medical bills it is a way to get a fresh start. Very often my bankruptcy clients have suffered a divorce, an on the job injury or catastrophic illness. In some cases prolonged unemployment is the cause.

For those who may be considering bankruptcy as an option there are a few things to consider. First of all anyone filing must have first completed a credit counseling course. These can be done online or over the telephone. I have the names of several companies that provide this service. Several of them provide tear off sheets that I hand out to clients.

In a Chapter 7 bankruptcy you will be required to list all of your assets and all of your debts. In most cases your assets will be exempt meaning that you will be able to keep your property. If you are purchasing a house or automobile or some other item that you want to keep, you will need to keep that debt current; otherwise, your debts will be discharged. Taxes, child support and divorce property settlements are generally not dischargeable; however, taxes may be in some cases.

You will need to list your income and expenses. You will be required to furnish proof of income and a copy of your most recent income tax returns. You will be required to attend a Meeting of Creditors. At that meeting you will be questioned by a Trustee and perhaps creditors who have the right to do so.

You will be required to complete a financial management course. Sixty days after the Meeting of Creditor and after completion of the financial management class, you will receive a discharge of your debts. Creditors whose debts are discharged will be permanently enjoined from any effort to collect their debts.

In some circumstances Chapter 7 is either not a viable option or perhaps not allowed by the law. In those cases one may file a Chapter 13 bankruptcy. In Chapter 13 debtors proposed a plan for repayment of their debts and make monthly payments to a standing trustee. Debtors are required to pay to the trustee their disposable income (income after living expenses) to the trustee. Unsecured debt may be paid only a percentage of the total. The money paid to the trustee is distributed by the trustee to creditors as proposed in the debtor’s Chapter 13 plan. If a potential debtor has household income that exceeds the median income in Arkansas for a family of the size of the debtor’s, there is a presumption that the debtor should file Chapter 13 rather than Chapter 7. Chapter 13 is also available to individuals or families that may have gotten behind on house payments or car payments. In Chapter 13 those debts can be brought current over time. This will prevent foreclosure or repossession.

Chapter 13 debtors are required to complete the same credit counseling and financial management courses as Chapter 7 debtors. Chapter 13 plans may be between 36 months and 60 months. At the end of the debtor’s plan, the debtor will receive the same discharge as in Chapter 7. Unsecured debt is discharged just as in Chapter 7.

For anyone who may be considering bankruptcy I will be glad to answer your questions. There is no fee for the initial conference.

 





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