Things To Spend Money On Before Bankruptcy

Why You Should Spend Money Before Declaring Chapter 7 Bankruptcy

Our Mesa Chapter 7 bankruptcy attorneys take a look at the proper things that you should spend your money on when preparing to file for chapter 7 bankruptcy protection in Arizona. Frequently, mistakes are made by people in Arizona who are preparing to file for bankruptcy. These mistakes can be costly. Seek the assistance of an experienced debt relief attorney who can easily guide you with your bankruptcy preparing.

Maybe you just received your tax refund, an inheritance, settlement, or otherwise have money in your bank account that won’t be exempt in a Chapter 7 bankruptcy. Often, this puts you in a unique position where you actually need to spend a significant amount of money before filing your bankruptcy petition. Otherwise, it could be taken by your bankruptcy trustee to pay your creditors. But that doesn’t mean that you can, or should, spend these funds on luxury vacations and designer clothes. If you’re looking to deplete your bank account before declaring Chapter 7 bankruptcy.

Why You Should Spend Money Before Declaring Chapter 7 Bankruptcy In Mesa, AZ

 Some Reasonable Expenditures That Won’t Cause Issues With Your Bankruptcy Trustee

  • Clothing and school supplies for your children: If you have kids, you know how easy it can be to spend a tax refund or other payment while shopping for them. Purchases like notebooks, school uniforms, etc. are almost always deemed reasonable in a bankruptcy court. Keep your receipts for these kinds of items in case your trustee has questions about purchases at stores that also sell discretionary items.
  • Funeral and burial expenses: Arizona has an exemption of $1,000 that can be used for a burial plot. While thinking about your own death can be morbid, it can reduce the amount your children have to spend when you pass away.
  • Household goods: Almost everyone can go through their kitchen, laundry, or garage and find items that need to be purchased, repaired, or replaced. The exemption for this category of possessions in Arizona is $6,000. If you’ve been wanting to replace an old mattress, stock up on cleaning supplies, or buy any other reasonable household expense, now is your opportunity. Be careful with gift cards, as these can be treated as cash by the bankruptcy trustee. You should keep receipts for these kinds of purchases, so the trustee can make sure funds at certain stores weren’t spent on anything trivial.
  • Dental and health care: If you’ve been putting off dental work or health care when juggling debt payments, now may be the time to finally get it done. Regular checkups are also a reasonable expenditure before bankruptcy. So if you’ve been putting off a root canal, septoplasty, or any other reasonably necessary medical or dental procedure, this could be a good opportunity to finally get this work done. However, the bankruptcy trustee won’t approve of elective or cosmetic procedures.
  • Prepaid rent: If you rent your residence, it’s probably one of your largest recurring expenses. Unfortunately, Arizona’s bankruptcy exemptions haven’t quite kept up with Arizona’s skyrocketing rental prices, reducing how many months’ rent you can prepay as bankruptcy spending. The exemption for prepaid rent in Arizona is currently $2,000.
  • Car maintenance and repairs: If you’ve got a chunk of change you need to spend before filing bankruptcy, the mechanic can be a good place to spend it. You might just need an oil change and to replace your filters, or there could be more serious- and more expensive- issues with your vehicle. Bankruptcy trustees understand that having access to a vehicle can be crucial for employment and childcare, so car repairs before bankruptcy will usually be interpreted as reasonable spending. However, the trustee is less likely to approve of cosmetic car work like rims or a new stereo system.
  • Bankruptcy attorney’s fees: While it seems counterintuitive, filing for bankruptcy comes with significant costs. If you’ve got cash to spend before bankruptcy, you should consult with bankruptcy attorneys to learn about their payment options before spending it. A big factor will be whether you are going to file Chapter 7 bankruptcy or Chapter 13 bankruptcy. The total attorney’s fees for a Chapter 7 bankruptcy are typically lower than a Chapter 13 bankruptcy, but Chapter 7 attorneys will typically require more payment up front. This is because attorney’s fees can be worked into a Chapter 13 payment plan, allowing bankruptcy attorneys to charge a reasonable retainer and receive full payment as the case proceeds. Attorney’s fees are an unsecured debt, meaning they are wiped out in a Chapter 7 bankruptcy filing. That’s why most Chapter 7 bankruptcy attorneys require full payment before your case can be filed.

Purchases To Spend Money On To Avoid Before Filing Bankruptcy

While it’s best to stick to the list above when spending before bankruptcy, your case probably won’t be dismissed for a night out to dinner or a new pair of shoes. However, there are some expenditures that will immediately get your bankruptcy trustee’s attention.

Let’s say your parents loaned you a few hundred dollars for a repair or other expenses around the house. You also have significant credit card debts, and a few other miscellaneous unsecured debts. You secure the funds to repay your parents, and a few weeks later, declare bankruptcy. This is an example of a preferential payment. Here, you would be giving preference to your parents over your credit card companies and other creditors. The bankruptcy trustee will most likely ask your parents to return the funds so that they can be distributed more fairly among your creditors. Or, the trustee may require that you repay the funds yourself to the bankruptcy estate before your case can proceed.

While it probably sounds obvious, you should avoid spending on luxury items while preparing to file bankruptcy. You can’t game the system by maxing out your credit cards just to discharge them with a bankruptcy filing. The trustee will review your credit card transactions to make sure you aren’t abusing the bankruptcy system. You may not spend more than $725 on luxury purchases on your credit cards in the 90 days before your filing. You also may not use your credit cards for cash advances of more than $1,000 in the 70 days before you file.

Call Today To See If You Qualify For Our Zero Down Chapter 7 Payment Plan

Let’s face it- paying for a bankruptcy attorney up front isn’t ideal, even if you have money you need to spend before you can file. For example, if you’ve got the money for car maintenance or your attorney’s fees, you could be put in a bad position later on if your car breaks down after paying for your Arizona Chapter 7 attorney up front. Our bankruptcy attorneys have several years of experience and know just what our clients need. That’s why we implemented our Zero Down Chapter 7 bankruptcy payment plan program.

Eligible clients can use our zero down program to set up a payment plan that can last up to 12 months after your date of filing. Your payment plan includes a zero percent interest rate and credit reporting, which can help improve your credit score after your bankruptcy discharge. We make this possible by filing a skeleton petition before your full petition. Work completed before the skeleton petition is pro bono, and you can begin accruing debt again after the skeleton petition is filed. The work completed on your case after that point will be financed into an affordable payment plan.

Find Out The Difference Our Mesa Zero Down Bankruptcy Firm Can Make

See the difference our affordable, experienced Arizona bankruptcy attorneys offer for yourself by calling 602-609-7000 or filing out our online form to schedule your free consultation. Our AZ Bankruptcy Attorneys offer a Zero Down Bankruptcy option. If you have the need for an emergency bankruptcy filing, our Mesa Bankruptcy Lawyers can file your case in the same day, if necessary. As one of Arizona’s top bankruptcy filers, our bankruptcy team is very seasoned. Contact us today for a free consultation and debt evaluation with one of our experienced Phoenix bankruptcy attorneys.

 

Mesa Bankruptcy Attorneys

1731 West Baseline Rd., Suite #101
Mesa, AZ 85202

Office: (480) 448-9800

Can Filing Bankruptcy In Arizona Help After a Repossession?

How Can Bankruptcy Help You After a Vehicle Repossession

Our Chapter 7 bankruptcy attorneys and Chapter 13 bankruptcy attorneys take a look at repossession in Arizona. We also look at how a bankruptcy may be able to assist you when dealing with a repossession of a vehicle. Time is of the essence. Contact an experienced Arizona bankruptcy attorney right away. It may not be too late to save your vehicle from repossession.

After missing too many payments on your auto loan, you should be concerned about your lender repossessing your vehicle. This is a way for your creditor to recoup on an unpaid loan, selling your car at auction, likely for less than its full value. A repossession will have several types of negative effects on your life. First of all, you will need to figure out how you will get to work, school, and the rest of your responsibilities without your vehicle. You may have a co-signer on your loan who will now be liable for the balance of your loan. A repossession will also damage your credit, making it harder for you to get a replacement vehicle. Depending on your specific situation, bankruptcy may be able to help you after a vehicle repossession has already occurred.

How Can Bankruptcy Help You After a Vehicle Repossession In Mesa, AZ.

You May Still Have a Balance On Your Auto Loan

It may seem counterintuitive that you would still owe your loan if your lender takes back the vehicle, but this is common in repossessions and is referred to as a repossession deficiency. Whether you have a repossession deficiency will depend on the balance of your loan at the time of the repossession (as well as any additional charges or legal fees for the repossession), and the amount your car sells for at auction. If you still owe money on the vehicle after the sale, your lender will file a lawsuit to collect the balance. If you have a co-signer and are unable to pay the deficiency balance, your co-signer will be responsible for the repossession deficiency. Either way, the creditor will keep looking for ways to collect the deficiency judgment eventually. Oftentimes, your creditors will use a judgment to obtain a garnishment on your wages. This judgment is an unsecured debt that can be discharged in an Arizona Chapter 7 bankruptcy. Depending on your disposable monthly income, it can be paid or discharged in a Chapter 13 bankruptcy payment plan.

Is It Possible To Get My Repossessed Car Back With Bankruptcy?

Depending on when your car was repossessed, you may be able to use bankruptcy to get it back- but not Chapter 7. Instead, you will need to file Chapter 13 bankruptcy within 10 days of your vehicle being repossessed. Your lender will be legally required to wait that 10 days to sell your car at auction. Once the car has been sold, a bankruptcy filing can’t do anything to get it back.

Chapter 13 bankruptcy can be complex before adding a recent repossession to overturn as a complicating factor. Chapter 13 bankruptcy is a reorganization payment plan meant to help those with steady income and struggles with debt. It is often used by people who are facing an imminent repossession or foreclosure because it provides the opportunity to catch up on payments and save the asset in the long run. A Mesa Chapter 13 bankruptcy payment plan lasts 3 years for someone whose income falls below the state median income, and 5 years for someone who makes more than that amount. Debts will be paid in order of four categories: legal fees, secured debts, unsecured priority debts, and unsecured nonpriority debts. The vehicle in question will be in the second category- it is a secured debt because the vehicle is collateral for the loan. To keep a secured asset in Chapter 13 bankruptcy, you generally must pay the full balance of your loan in your payment plan. However, there is an exception for home mortgages. The debtor can typically pay their usual monthly mortgage into their plan if they are current on payments.

Unsecured priority debts must also be paid in full in your plan. The last category, unsecured nonpriority debts, are those typically dischargeable in Chapter 7 bankruptcy and will only be paid to the extent that you can afford in a Chapter 13 payment plan. Chapter 13 can be especially useful in a repossession situation because your past-due payments will be spread out over the course of 3-5 years. The amount you pay for ongoing payments could be reduced or increased based on your balance and current loan terms.

When you file Chapter 13 bankruptcy to get back a repossessed vehicle, you will also deal with your other debts and gain protection from your other creditors. Once your petition is filed, the Automatic Stay goes into effect. Not only does the Automatic Stay stop vehicle repossessions, but home foreclosures, bank levies, wage garnishments, utility shutoffs, lawsuits, and more. Any of your creditors that wish to proceed with these actions during your bankruptcy must petition the court for relief from the Automatic Stay. With limited exceptions, the Automatic Stay will remain in place until your payment plan is completed or your case is dismissed.

Emergency Bankruptcy- The Faster Way To Get Filed

Whether you’re hiding from the repo man or your car was just repossessed, you’ll need to be filed quickly if you want the Automatic Stay to protect your vehicle. A bankruptcy petition is usually 50-70 pages long, requires dozens of documents, and can take far longer than the 10 days you have to get a vehicle back after a repossession. You may find it useful to first file a skeleton petition, also known as an emergency bankruptcy filing.

When you file a skeleton petition, the list of documents you will need is far shorter than when you prepare your full petition. Besides some basic address and contact information, your attorney will only need six months’ worth of pay stubs and to take your online credit counseling course. The Automatic Stay will go into place when the skeleton petition is filed, which can get back your vehicle if you filed Chapter 13 within 10 days of the repossession. You will have two weeks to submit the rest of your bankruptcy petition.

Do I Need a Bankruptcy Attorney?

The success rate for attorney-represented bankruptcy filers is always higher than for self-represented bankruptcy filers. Those in a Chapter 7 bankruptcy fare better, but it’s almost impossible to get a Chapter 13 bankruptcy discharged without attorney representation. When you add in getting your vehicle back after a repossession to your case, and possibly an emergency filing, it’s highly recommended that you seek out an experienced Tucson bankruptcy attorney.

What exactly will a bankruptcy attorney do that makes your case so much more likely to be successful? First, you will discuss your situation in detail during a consultation. Your attorney will spot issues that could arise in your case and help you strategize your filing. Once you retain, your experienced bankruptcy attorney will take all creditor calls and assist you in gathering documents for your petition. Your attorney will prepare your petition, review and sign it with you, and file it in court for you. Your attorney will represent you at all hearings, address issues with the trustee and creditors, and keep you updated throughout the process. But you may be wondering how you could possibly afford a bankruptcy attorney retainer after a vehicle repossession. Also, the good news is that you can work your attorney’s fees for a Chapter 13 bankruptcy into your payment plan. To learn more, call or use our online form to schedule your free consultation with one of our dedicated Mesa bankruptcy attorneys today!

 

Mesa Bankruptcy Attorneys

1731 West Baseline Rd., Suite #101
Mesa, AZ 85202

Office: (480) 448-9800

Steps To Filing Chapter 7 Bankruptcy In Arizona

Our Mesa Bankruptcy Attorneys Take You Step By Step Through The Process Of Filing a Chapter 7 Bankruptcy In Arizona

No matter how carefully you plan, debt is a problem that can happen to anyone in life. When it does, your creditors will eventually begin pursuing you for your debts. Your creditors may seek repayment through methods like wage garnishments, bank levies, vehicle repossessions, home foreclosures, and more. The good news is that bankruptcy can protect someone in this type of situation from their creditors, and address the underlying debt problem in the meantime. There are several types of bankruptcy, but the most common type of consumer bankruptcy in Arizona is Chapter 7. Read on to learn more about the steps to declare Chapter 7 bankruptcy and clear away debts. If you have additional questions, schedule your free consultation with our Mesa bankruptcy law firm.

Mesa Bankruptcy Attorneys Take You Step By Step Through The Process Of Filing a Chapter 7 Bankruptcy Petition In Arizona

Confirm That You Qualify For Chapter 7 Bankruptcy

Many people are unable to file Chapter 7 bankruptcy because their income is too high. The simplest way to qualify for Chapter 7 is by having less income than the median for your state. In Arizona, the median income for a family of 4 is currently $85,714. A family with a combined income of that amount or less automatically qualifies for Chapter 7. Otherwise, the debtor will need to qualify using the Means Test. This test shows the debtor can’t afford to pay off their debts after deducting mandatory expenses from their income. There are several other factors that could disqualify you from Chapter 7, or make filing it (as opposed to Chapter 13) inconvenient and burdensome. Consult with a Mesa bankruptcy attorney to confirm that chapters of bankruptcy for which you qualify.

Gather Your Documents & Information For Your Bankruptcy Petition

You will need several types of documents in order to draft your bankruptcy petition. These can range from bank account and credit card statements, to paystubs, to insurance policy statements, and more. If you retain a Mesa bankruptcy attorney, they will let you know which documents are necessary for your case. If not, determining which documents will be necessary- and then drafting your petition- will be your own responsibility.

Take Your First Credit Counseling Course

To discharge your debts through consumer bankruptcy, the Bankruptcy Code requires that you complete credit counseling courses. This is to help prevent bankruptcy filers from needing to file again in the future. You will need to complete one of these courses before your case is filed, and submit a course completion certificate with your petition. This course can be taken online, and can typically be completed in about an hour. You will also need to pay a nominal fee for credit counseling.

Sign & File Your Bankruptcy Petition

If you retain a bankruptcy attorney, they will schedule your petition signing once your petition is complete. Your attorney will review your petition with you to make sure everything is correct, and answer any questions you may have about your 341 Meeting of Creditors. If you file self-represented, you will draft, sign, and file your own petition. You may be required to file your petition in person at the courthouse. The filing fee for a Chapter 7 bankruptcy is currently $338. There are fee waivers available to those under financial hardship, but these typically won’t be granted if the filer has retained an attorney.

Respond To Your Trustee Letter

Approximately 10-15 days after your petition is filed, you will receive a letter from your bankruptcy trustee. The trustee is a court-appointed attorney who will oversee your case. After reviewing your petition, your trustee may have additional questions. You may be required to submit additional documentation to support your petition. This letter should also contain the date for your 341 Meeting of Creditors.

Attend Your 341 Meeting Of Creditors

This hearing is mandatory for those who declare both Chapter 7 and Chapter 13 bankruptcy. Make sure you bring your driver’s license and social security card to this hearing. Your case- and discharge of your debts- could be delayed for a failure to bring proper identification to your 341 Meeting of Creditors. You can bring a passport or other official photo identification in place of your driver’s license. If you don’t have your social security card, you must bring an original W-2 to your hearing. It will be held approximately 30-45 days from when you file your petition.

Your trustee will be at the hearing, and as the name suggests, your creditors may also be in attendance. Both may ask questions about your petition and debts. If you retain a bankruptcy attorney, they will be there with you to help you with your trustee’s and creditors’ questions. Otherwise, you will need to represent yourself at this hearing. However, this hearing is relatively short and simple compared to other court procedures. There may be several other cases on the docket at the same time as yours. If so, you and your attorney will wait for your case to be called during that time frame.

Take Your Second Credit Counseling Course

After your 341 Meeting of Creditors, you must complete a second online credit counseling course. It will take about as long and cost about as much as your first credit counseling course. You (or your attorney) will need to file the second course completion certificate with the court. This must be completed within 60 days of your 341 Meeting of Creditors.

Wait For Debt Discharge, Start Rebuilding Your Credit

If all the previous steps have been completed correctly, you will now wait for the court to discharge your case. Your case is eligible for discharge 60 days after your 341 Meeting of Creditors. It could take a few days or weeks longer than that for the court to process your discharge, depending on how busy the court is.

After you have received your discharge letter from the court, you are no longer liable for the debts in your bankruptcy. Whether or not your credit score increased or decreased (or stayed the same) upon filing, now it’s time to start rebuilding your credit. You will most likely receive new credit line offers in the mail after your case is discharged, but you can also open a secured credit card through your bank. Financing new assets, such as a vehicle, can help improve your score. Other installment payment plans- including our Zero Down Bankruptcy Payment Plan – will help improve your score as well.

Contact Our Mesa Chapter 7 Bankruptcy Attorneys For a Free consult

If you couldn’t already tell, retaining a bankruptcy attorney as early on in the process as possible will make it easier for you. However, the burden of paying for an attorney up front is impossible for some. That’s why our experienced Mesa bankruptcy attorneys offer Zero Down Bankruptcy for qualified Chapter 7 bankruptcy clients. To learn more, call or use our online form to schedule your free consultation today.

 

Mesa Bankruptcy Attorneys

1731 West Baseline Rd., Suite #101
Mesa, AZ 85202

Office: (480) 448-9800

Arizona 2021 Bankruptcy Exemptions

Our Mesa Bankruptcy Lawyers Discuss The 2021 Exemptions For Bankruptcy Filings In Arizona

Be it, a chapter 7 bankruptcy or a chapter 13 bankruptcy, there are exemptions that are unique to each state. Read on to find out what Arizona’s exemptions are for 2021.

When you file Chapter 7 bankruptcy, any assets that aren’t protected by bankruptcy exemptions can be seized by your trustee and sold to pay your creditors. Bankruptcy exemptions, or the limits on how much equity you can have in certain types of assets, vary by state and are subject to change every year. If you are considering filing bankruptcy in Arizona in 2021, check your assets to make sure they are within the applicable exemption limits.

Some of your assets may have a clear numerical value. Others aren’t so easy to ascertain. Websites like Kelley Blue Book and Zillow may give you a general idea of your property’s value. You may need to hire an appraiser for valuable possessions with unclear values.

If your assets aren’t protected in Chapter 7, you may want to consider filing Chapter 13 instead of giving up bankruptcy altogether. These exemptions don’t apply in a Chapter 13 case because you will repay the value of financed assets in your bankruptcy payment plan. You also may be able to encumber your property with a lien to reduce your equity. You should contact a Mesa bankruptcy attorney if you are unsure whether your assets are protected, or if you want to know about your options with non-exempt assets.

Our Mesa Bankruptcy Lawyers Discuss The 2021 Exemptions For Bankruptcy Filings In Arizona

Arizona Homestead Exemption

The homestead exemption in Arizona for 2021 is $150,000. You can have up to $150,000 equity in your house, condo, townhouse, etc. Your equity is the value of the home minus the balance of your mortgage.

Prepaid Rent

Rent paid in advance, as well as security deposits fall into this category. In Arizona, the exemption value for this category is $2,000.

Arizona Vehicle Exemption

In Arizona, you can have up to $6,000 equity in one vehicle if you are unmarried. If you are married, this limit is raised to $12,000 for one vehicle, or the spouses can have two vehicles with up to $6,000 equity each. The exemption for someone with a disability that requires special vehicle equipment is increased to $25,000.

Bank Account & Cash On Hand

An inconvenient part of filing bankruptcy in Arizona is the low exemption for how much cash you can have in hand and in the bank on the day your petition is filed. This limit is $300 for an unmarried filer, and $600 for a married couple. This probably means you will need to time your bankruptcy filing around your payday. Make sure your Mesa bankruptcy attorney is aware of your pay dates, especially if you file an emergency bankruptcy petition. Arizona doesn’t allow federal exemptions and doesn’t offer a wildcard exemption to use on your bank accounts as an alternative.

Household Goods & Furnishings

This can be anything in your home from your sofa and chairs, to your microwave and refrigerator. The 2021 Arizona bankruptcy exemption for this category is $6,000. You should assess the value of your belongings as their resale or market value, not the price you originally paid.

Engagement &/Or Wedding Rings

The Arizona bankruptcy courts allow you to keep wedding jewelry worth up to $2,000 in a Chapter 7.

Pets & Livestock

This exemption applies both to domestic pets, like dogs and cats, and livestock, like horses and goats. While your purebred pet likely doesn’t have a high enough resale value to be cause for concern, it could become an issue if you breed your pet.

Watch

Arizona allows Chapter 7 bankruptcy filers to have a watch worth up to $150, so don’t wear a Rolex to your 341 Meeting of Creditors.

Clothing

Arizona’s bankruptcy exemption for wearing apparel, regardless of family size, is $500. For the same reason you shouldn’t wear a Rolex in front of your trustee, don’t wear all designer clothing (even if they’re knockoffs) to your 341 Meeting of Creditors.

Food, Fuel, & Provisions

The bankruptcy trustee is highly unlikely to come to your house and raid your pantry and siphon your gas tank, but you can have up to 6 months worth of provisions when your Chapter 7 bankruptcy is filed.

Personal Library

The resale value of your book collection must not exceed $250 in a Chapter 7 bankruptcy. However, these books may be protected by other exemptions if they are used for school or work.

Tools & Other Equipment

This category encompasses many items from saws and drills, to instruments, website domains, and more. Anything the bankruptcy filer uses for their profession has an exemption value of $5,000.

Life Insurance Proceeds

If you receive insurance funds after the death of a spouse, child, or other relative, only $20,000 of this will be protected in Chapter 7 bankruptcy.

Wheelchair, Prosthetics, etc.

There is no limit to the value of these types of items in a Chapter 7 bankruptcy. If they are prescribed by a doctor, it isn’t up to the bankruptcy court to decide how much these can be worth. However, you should still apply the exemption to have your bases covered.

Musical Instruments

For someone who plays as a hobby, musical instruments have a bankruptcy exemption of $400. A career musician can use the tools of the trade exemption to protect their musical instruments, which is $5,000.

Computer, Bicycle, Firearm, Burial Plot, Family Bible

This exemption applies to an interesting range of belongings, and is capped at $1,000 in Arizona for 2021.

Domestic Support

Child support and alimony payments are exempt from Chapter 7 bankruptcy, and there is no limit for the domestic support exemption.

Benefits & Public Assistance

Like child and spousal support, these payments are fully exempt from bankruptcy. Unemployment benefits, disability, worker’s compensation, social security income, and more, are safe in Chapter 7 bankruptcy. Consult with a Mesa bankruptcy attorney if you want to make sure your source of income is exempt in Chapter 7 bankruptcy.

Contact Our Mesa Bankruptcy Attorneys

Exemptions are just one of the many parts of a bankruptcy petition that must be completed correctly, or risk negative consequences like losing your assets or your case being dismissed. That’s why you should trust your case with a skilled Mesa bankruptcy attorney. To learn more about how our dedicated staff and attorneys can assist you through the bankruptcy process, call today to schedule your free consultation. You may qualify for a post-filing payment plan starting as low as $0 down bankruptcy, and we have same day consultations available! Call (480) 833-8000 to get started.

 

Mesa Bankruptcy Attorneys

1731 West Baseline Rd., Suite #101
Mesa, AZ 85202

Office: (480) 448-9800

Arizona Bankruptcy:  Redemption in a Bankruptcy in AZ

Our Mesa Bankruptcy Lawyers discuss bankruptcy in Arizona. Moreover, we dive into redemptions in a bankruptcy. Our AZ BK Attorneys discuss the advantages and disadvantages of redemptions as well as the process of redemptions. Also, we will look at items that are financed for more than their value and how to get redemption on said items.

Arizona debt relief blogIf you are considering bankruptcy or some other form of Mesa debt relief, please give out Mesa Debt Relief team a call. Our consultations are free of charge and 100% confidential.

If you are considering bankruptcy, you might be wondering what effect filing will have on personal property you have financed. You may be making monthly payments, on your vehicle, furniture, appliances, and even your cell phone. If you declare Chapter 7 bankruptcy, you will be presented with two options of how to keep these assets: redemption and reaffirmation. Otherwise, you will have the option to surrender them as part of your bankruptcy.

What is the Redemption Option in a Chapter 7 Bankruptcy in Arizona?

If you owe more on your financed property than it is worth, you may want to consider redeeming it in Chapter 7 bankruptcy. In Chapter 7 bankruptcy, redemption allows you to pay the current value for your financed property, as opposed to what you owe on the loan.

You will have redemption available as an option for items financed for more than they’re worth if they meet the following criteria:

(1) The property is secured to a debt as collateral;

(2) It is tangible personal property, not real estate;

(3) Your trustee abandons it;

(4) It is a consumer debt, not business;

(5) You can pay the amount in one lump sum. 

The Advantages and Disadvantages of Redemption in a Bankruptcy in Mesa, Arizona

The most obvious benefit of redemption is that you will get to keep your property, and pay its actual value instead of your inflated loan amount. If you are able to take advantage of this option, you could potentially save thousands of dollars. If you are able to come up with the funds, the creditor may not object to your redemption. You may be able to find a lender to finance your redemption. However, there are limitations to the benefits of redemption. You can’t redeem real estate or business property. Redemption may not be available as an option for you, or the trustee may choose not to abandon it. You also may not be able to make the lump sum payment, or find redemption financing without an astronomical interest rate.

What is the difference between Redemption and Reaffirmation in a bankruptcy?

In a redemption, you will pay the financed asset’s actual market value in one lump sum payment, while in a reaffirmation, you will retain the debt through your bankruptcy and continue your usual monthly payments for the term of the loan.

You will likely need to sign a reaffirmation agreement with your lender to retain your loan through bankruptcy. Your lender may allow you to simply continue your payments as usual after your bankruptcy, without an official reaffirmation agreement. However, your lender can opt to repossess the vehicle, and will act more quickly if you are late on payments than before your bankruptcy. The bankruptcy court will also need to approve your reaffirmation, which will be addressed in a hearing that is separate from your 341 Meeting of Creditors.

How to Keep your Car while Lowering Your Payments in a Bankruptcy

Most reaffirmation agreements keep all the same terms of the original agreement, but you may be able to negotiate a new lower interest rate or principal balance. The bankruptcy court likely won’t sign off on an obviously unfair agreement, so it may be in your lender’s best interests to cut you a small break from your original agreement so that the court will approve the reaffirmation. Having a bankruptcy attorney as your representative may help you be more successful in negotiating a favorable reaffirmation agreement.

Reaffirmations are most likely to be approved when you owe less or close to the actual market value of the asset. Since courts are unlikely to reaffirm an agreement where the debtor will pay far more than the asset’s value over time, you should pursue redemption if your loan amount exceeds your asset’s value.

Just because you want to seek the advantages of a redemption through bankruptcy doesn’t mean you won’t be able to pay your vehicle or other financed asset off in monthly installments as opposed to a lump sum payment. You may be fortunate enough to have friends or relatives who can pay off your lump sum payment for you and accept monthly installments after your bankruptcy. Otherwise, some financial institutions specialize in offering loans to bankruptcy filers. These lenders pay the full balance of your vehicle or other property, and you pay back that lender in monthly installments instead of your original lender. Because you will file a motion with the court to proceed with the redemption, this debt won’t be discharged along with your other debts in your bankruptcy.

How to Redeem Your Property in a Bankruptcy in Mesa, Arizona

The first step to redeeming your property in bankruptcy is determining the asset’s correct value. The courts will generally approve a value that is somewhere between its purchase price and its market value. Some items may have a generally approved appraisal method, such as Kelley Blue Book for motor vehicles.

Next, you or your attorney should stipulate this value with your redemption lender. The lender may not agree with your initial proposal, so you may need to negotiate for a different term, principal balance, or interest rate.

Then, you or your attorney will need to file a motion in the bankruptcy court. The filing fees for this motion may be included in your redemption loan. You will then continue payments per your agreement until the balance is paid.

Contact Us to Keep Your Car through a Redemption

If you are struggling with debts but want to keep your financed vehicle, or any other financed asset, our dedicated bankruptcy staff and attorneys are here to assist you. Whether you  need help navigating a reaffirmation or a redemption, our bankruptcy lawyers are well-versed in applicable laws, best bankruptcy practices, trustee preferences, and lender negotiation tactics. The best part is that hiring a bankruptcy attorney is probably far more affordable than you think.

My AZ Lawyers Mesa bankruptcy attorneys offer competitive rates and Zero Down payment plans for qualified Chapter 7 bankruptcy clients. Get started towards your financial clean slate, while keeping your car- possibly with lower payments! Our bankruptcy lawyers are standing by and offer free initial consultations.