When choosing what to do with your out of control debts, there isn’t one simple answer for all borrowers. To be sure, deciding upon bankruptcy protection should be the very last alternative for most any Arkansas debtor, but there are circumstances which may force consumers to consider petitioning for Chapter 7 assistance. Certainly, whenever you find yourself regularly unable to pay more than the minimum requested by the credit card accounts you have to think about bankruptcy. As well, if you look at the totality of your compiled bills (along with day to day budgetary expenses) and predicted salary over the coming years and cannot reasonably assume you would be able to eliminate the entire revolving balances in any fewer than seventy two months, something clearly has to be done whether or not the solution would be bankruptcy in Arkansas or another type of debt relief. Furthermore, if this even needs to be said, any borrower in Arkansas who faces vehicle repossession or home mortgage foreclosure or potential garnishment of wages from unpaid loans shall almost definitely need governmental protection in the form of a Chapter 7 bankruptcy.
While many of the borrowers we’ve talked throughout Arkansas and much of the south feel some sense of guilt or embarrassment about even investigating bankruptcy declaration as a possible option, this protection exists for a very good reason. Especially as credit availability has become exponentially more available to consumers without positive credit ratings or past employment history (and considering the state of the economy within Arkansas and the country at large), the necessary evil of bankruptcy should be exploited for all the good it can do. Particularly, for those troubled debtors who have been forced to struggle through financial problems, there’s no point to self recrimination. Did you have any family issues such as divorce? Were there work problems – these could range from actual unemployment (more and more a problem given our national economic downturn) to an ever worsening loss of business or commissions as less direct effects of the ongoing recessions – within your household? Most dramatically, medical issues and particularly a sudden need for hospitalization remain one of the leading causes of bankruptcy. Arkansas debtors who have faced genuine emergencies shouldn’t feel obliged to pick themselves out of the debt prison without help. Several different but still effective aids towards debt relief and debt elimination can now be accessed by every Arkansas consumer, and the only thing more foolish than allowing your finances to be controlled by predatory credit card companies would be feeling some shame about taking advantage of the potential solutions.
Now, bankruptcy will not automatically erase all forms of debt your household may carry. Secured loans, those debts that are connected to some tangible collateral that could be foreclosed or repossessed by the lenders, tend to be ignored by bankruptcy trustees (some collateralized debt obligations may need to be reassessed or restructured in the face of bankruptcy, however). You should not expect any obligations that either the federal or the Arkansas state courts have decided that you owe – which could cover all debts from alimony to child support to governmentally imposed fines and penalties from criminal misdeeds – to be covered under Chapter 7 bankruptcies, and, though this should again seem obvious to anyone who’s worked with the government, unpaid tax debts from the past few years should be thought similarly invulnerable to bankruptcy protections. Student loans, as well, though they should ordinarily be considered the most unsecured of all financial obligations, are not subject to Chapter 7 bankruptcy protection in Arkansas or any other state within the USA. Any purchases of non essential goods that cost more than six hundred dollars and were made within three months (or cash advances in excess of eight hundred dollars made within two months) of the bankruptcy petition should be expected to be very closely analyzed by the courts with an eye towards potential fraud charges.
As you probably know already, there are two different forms of bankruptcy for individual consumers. Chapter 7 bankruptcies actually eliminate the debts (aside from the aforementioned obligations considered untouchable by the United States bankruptcy code) while Chapter 13 bankruptcies enforce a repayment schedule that only consolidates the existing debts with lower interest rates. Chapter 7 bankruptcies – the type that you think of when you first think of bankruptcy – are the simplest to enter and inevitably discharge. However, there’s also the possibility that a court trustee will seize assets (including household property) for eventual auction with the funds collected given to your past lenders. In April of 2005, the United States congress passed the Bankruptcy Abuse Prevention And Consumer Protection Act, and, by October 2005, the federal code had changed to make it much more difficult to file for Chapter 7 debt elimination bankruptcies, interfere in judicial discretion with individual cases, and greatly limit any potential reductions from the Chapter 13 bankruptcy program as well as setting in stone the expenses that borrowers in Arkansas should employ. As things now stand, borrowers will have to prove that they earn less than the median income of households in their state of residence according to the most recent census statistics. In the state of Arkansas for 2008, that means that an individual would have to show an income under thirty five thousand dollars a year. Arkansas households with two members would need to earn under forty one thousand, three members would need to earn under forty eight thousand, four members would need to earn under fifty three thousand, and assume another seven thousand dollars for every additional individual.
If you do make more than the median income in Arkansas, there’s an additional means test that the trustee will evaluate which takes under consideration expenses for home mortgages, child support or alimony, automobile loan payments, any income or property taxes that are owed, and scholastic obligations (which cannot exceed fifteen hundred dollars per year). When all of these monthly payments are added to the living expenses as assessed by the official Internal Revenue Service guidelines for Arkansas residents, if the court finds that you would still be able to pay six thousand dollars over five years – this works out to one hundred dollars a month for the duration – to your collected unsecured lenders, you would not meet the new qualifications for Chapter 7 bankruptcy in the state of Arkansas. Not only that, but, upon failing the so called “means test”, your family would instead be forced into the Chapter 13 debt restructuring program. Given the potentially disastrous repercussions of failing to enter the Chapter 7 program – after already putting in all the time and effort that bankruptcy petitions entail; not to mention the overwhelming costs of Arkansas bankruptcy attorneys – this is something that every consumer should examine very closely before deciding whether or not you should even attempt bankruptcy protection.
If you still think that Chapter 7 declaration’s worth the trouble, you’ll find that the actual physical process of bankruptcy has itself barely been altered by the 2005 changes to the United States bankruptcy code. You will have to fill out a bankruptcy petition and statement of financial affairs and file that with the court clerk. In addition, you will want to compile a listing of each lender you currently are in debt to as well as the amount of funds owed and the specific type of loan. Further, you’ll have to write down all of your income information (when you are paid, how much, and by whom) plus a detailed selection of family property and all day to day household expenses. There are administrative fees (to be paid in cash or money order to the clerk when handing in the paperwork), but they should be less than three hundred dollars all told. The real costs (and these can be brutal, even in Arkansas) will come from the bankruptcy attorneys as well as the credit counseling courses now enforced by the government following the 2005 legislation. These are to be paid for up front out of the borrowers’ pockets before filing your Chapter 7 debt liquidation paperwork, of course, and, since only a limited number of counseling classes in the state of Arkansas are certified by the federal government, the expense for already time and cash strapped debtors can be considerable. Even after the Chapter 7 bankruptcy has been approved for discharge, the borrowers must take and complete yet another credit counseling course with virtually identical subject matter (all of which is common knowledge and more than a little condescending for consumers that likely found themselves in this predicament because of financial calamities beyond their control) before they can receive their bankruptcy discharge.
As soon as the bankruptcy has been filed (and even before the Arkansas court trustee has had a chance to review the petition), you are granted what has become known as an automatic stay which will prevent any of your lenders – and, more importantly, their bill collection departments – from further contact. This also means that the lenders would not be able to attach liens or legally try to seize your property. Once the automatic stay has been confirmed, however, the creditors are free to maintain their attempts to collect by demonstrating various reasons on why precisely the lenders should be legally allowed to continue attempts at collection – tangible depreciation of assets during the time of the bankruptcy hearings is one of the more popular causes that creditors will insist upon. Otherwise, the trustee chosen by the Arkansas courts shall make a determination on eligibility for the Chapter 7 program and, provided he deems the petition worthy, then choose which assets you will be able to maintain and which ones will be sold in auction to remunerate creditors (as well as subsidize additional administrative expenses for Arkansas and the nation). Following the 2005 BAPCA passage, borrowers must now list all possessions in terms of their replacement value rather than their resale value which – as anyone who’s ever had a garage sale will know – would be far, far less.
Fortunately, the state of Arkansas allows its own separate exemptions for borrowers who are in the throes of a Chapter 7 bankruptcy that are rather more comfortable than the federal exemptions (you will have to choose either the Arkansas or the United States exemption program and cannot pick and choose). In order to qualify for the Arkansas exemptions, you’ll have to be able to prove that you lived within Arkansas as your state of residence for at least two years prior to filing your bankruptcy petition. In that instance, you would be able to keep your primary residence under the homestead exemption provided, if it is within a municipality (city or town), it occupies less than one acre of land. If the residence isn’t within a recognized Arkansas municipality, it has to be less than one hundred and sixty acres. You are also allowed to keep tools of trade (as well as books related to the trade not to exceed seven hundred dollars), clothing, five hundred dollars worth of household possessions, an automobile under twelve hundred dollars, and two months of wages that you have earned but not collected. Everything else that you and your family own will be subject to the whims of the Arkansas court trustee.
If that last sentence made you shudder – imagining your family’s priceless heirlooms on the auction block to be sold for pennies on the dollar to strangers – then it may be time to examine some of the other alternatives for resolving your debt issues. To be sure, for some Arkansas borrowers, there may be no other option apart from Chapter 7 bankruptcy protection, but, provided you have the appropriate debts and sufficient income to pay back your collected credit card debts within five years, consumers may want to investigate the debt settlement solution. Similar to the wasteful and FICO score destroying Consumer Credit Counseling companies, debt settlement programs also consolidate unsecured debts, but they do not merely lower interest rates or waive fees. Instead, successful debt settlement firms negotiate actual reductions of the funds owed – sometimes by as much as sixty percent of the original balances! – to ensure that their clients can find themselves absolutely debt free (ignoring, of course, home mortgages and the more advantageous forms of debt or investment) in a matter of years if not months. This is still a relatively new arena of debt management and not every Arkansas town or city will have debt settlement counselors setting up storefronts as of yet, but there are a number of certified and experienced debt settlement websites on line which Arkansas consumers have employed to great success. As we have said, this won’t be the best program for every Arkansas borrower – some, especially those debtors who have been unemployed for a long stretch, will still find the most benefits to Chapter 7 debt liquidation bankruptcy – but, to all of those Arkansas borrowers who want to keep their credit ratings and their household possessions, it should certainly be worth a free initial consultation to better understand what the debt settlement maneuver could do.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
