Home Blog Bankruptcy Last Resort Or Secret Weapon

Bankruptcy Last Resort Or Secret Weapon

The word bankruptcy for many people elicits thoughts in the direction of financial doom or just plain failure. Many people wrongly view filing for bankruptcy as a decision that will not augur well on their future finances, probably due to its negative effect on credit ratings. However, the reality is that bankruptcy laws were not meant to castigate or shun people or businesses on their inability to settle expenses but to give them a second shot for a successful comeback. Bankruptcy offers you relief from creditors constantly breathing down your neck and a chance to reflect on your previously rough financial journey, the decisions that led to it, and a permanent solution. We always endeavor to guide our clients through the bankruptcy process and recovery journey in our bankruptcy law firm in Arizona.

In the event of dire financial constraints, bankruptcy considerations should never be the last resort but a viable and working option to streamline your finances by working your way back up and checking on your spending habits. It acts as a reset button by cushioning you for a time as you sort yourself or your business out. It may initially feel like a wrong move due to the adjustments you might need to make, like scaling down your lifestyle as you rebuild your credit score. Below are a few ways filing for bankruptcy will work in your favor;

Automatic Stay

There is nothing more stressful than owing money that you are obligated to pay but can’t due to financial limitations. Any call jolts you up as you think of a list of excuses to give your creditors in a desperate bid to keep forestalling payments. Some creditors may even go to the embarrassing lengths of calling your friends and family. A successful bankruptcy filing will offer you space to breathe easy once again through the automatic stay call. This provision within the US bankruptcy law deters creditors from making incessant contact with debtors who have been declared bankrupt by the federal district court.

Besides contacting you through calls or letters, the creditors will also be barred from instigating lawsuits and property repossessions related to unpaid debt. A creditor who disregards this and keeps contacting and bugging you over the debt can be sued for contempt of court and even pay you damages. You should note that this law doesn’t protect you from government taxes, child support or alimony, and co-debtors. A court can extend an automatic stay after the lapse of the one-year bankruptcy period following a successful petition by the debtor.

Your House Is Exempted

Disposing assets to pay piling expenses is often the standard route for many people caught up in debt. Downgrading to a cheaper house and selling the previous one may be an option when all others run out. If you want to keep your home, filing for bankruptcy may be the answer. After being declared bankrupt, some of your properties may be seized and sold to settle some of your debts. Chapter 7 bankruptcy law in Arizona exempts some of your properties from seizure; they include your home, cash, car, and others depending on your state’s laws.

If you’re behind in your mortgage repayment and risk foreclosure, you can file chapter 13, Arizona bankruptcy law, to include the amount you owe in the mortgage as part of your repayment plan. However, to qualify for this exemption, your home’s equity value needs to be below or at par with the set exemption amount.

Eliminate Dischargeable Debts

Dischargeable debts are those that can be eliminated after a successful bankruptcy case. Debts that come up before you file for bankruptcy may qualify to be discharged after a bankruptcy ruling. However, you should note that not all debts are dischargeable, and not all debtors may be eligible for it. This offer is limited to individuals, corporations, and other business entities who do not qualify for a discharge. Certain debts are also not dischargeable; they include; student loans disbursed by the government, alimony and child support, fraud-based claims, fines and penalties, and some government taxes.

In case a creditor may want to object to a particular debt discharge, they should do so within the stipulated time allowed by the court. Failure to object will automatically lead to a discharge of all the debtor’s eligible debts. The court’s discretion may deny a debtor discharge privileges if it is found out that they were involved in questionable transactions like; falsifying or concealing records, failure to explain property loss, or failure to complete a financial management course as directed by the court.

Protect Your Pension And Retirement Accounts

Chapter 7 bankruptcy provision, also known as liquidation bankruptcy, allows a court-appointed trustee to place all your non-exempt property into a bankruptcy estate and sell it off to pay your creditors. Luckily, your pensions (both IRA and 401k) are exempted from bankruptcy law provisions, and you can keep them without worrying about any legal action from creditors. The only exception to this is if your IRA exceeds the cap limit set, which is roughly 1.3 million dollars as of now. Keep in mind that if you have several IRAs, they’ll be grouped and valued as one when the exemption is being determined.

Withdrawing your pension and retirement plan monies to pay off your debts is not worth it. You should note that the moment you initiate the withdrawal, they cease to be savings and are considered income, which is not exempted in your bankruptcy. It’s prudent to leave the bankruptcy process to take its course since your pension plans and IRAs below the capped limit are protected.

Bankruptcy is a personal decision that should be arrived at when you realize you no longer have control over your finances due to upward spiraling debt. Dilly dallying as you wait on other options may only lead you deeper into the debt hole. Bankruptcy offers a way to stop digging and figure your way out.

At Arizona Bankruptcy and Debt Solutions, we not only offer expert guidance for a bankruptcy filing, but we are also concerned with our clients’ life post-bankruptcy. That’s why we offer tips on how to manage finances post-bankruptcy to avoid falling back. Visit us today at our website at and schedule a completely free consultation with us.

Arizona Bankruptcy and Debt Solutions
1013 S Stapley Dr Mesa AZ 85204

Do You Qualify for Bankruptcy?

Filing for bankruptcy isn’t the right solution for everyone. The determination of whether or not bankruptcy is an appropriate debt relief solution for your will be made based on a number of factors including the type and total level of your debt. Use this form to schedule an appointment with one of our bankruptcy attorneys. The consultation is completely free and there is no obligation.