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Do I Qualify For Bankruptcy?

Qualifying for Chapter 13 or Chapter 7 Bankruptcy in Arkansas

Are creditors calling you day and night? Is your debt causing stress and anxiety? Are you worried you’ll never be financially free?

If so, it may be time to consider bankruptcy. Bankruptcy is often needed to help individuals break free from excessive medical bills, personal loans, or credit card debt. No matter what’s happened in your life, you should not have to live in constant fear of losing your home, your assets and your future. Through bankruptcy and debt consolidation, Arkansas families are often able to regain the financial freedom they’ve always dreamed of. It’s not a dead end, but rather, it’s a second chance to start over and rebuild your life.

Filing for bankruptcy under Chapter 7 or Chapter 13 can give you the breathing room you need to eliminate or pay back your debt. At Rainwater, Holt & Sexton, our Arkansas bankruptcy attorneys are here to help determine the type of consumer bankruptcy that works best for your financial situation.

 

Do I Qualify for Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is essentially a liquidation of your debts and assets. It will eliminate all unsecured debts, such as medical bills, credit card debt, and loans. In order to eliminate this debt, however, some of your assets will need to be liquidated and sold. While this may be a scary concept for many, it can be a great solution for those individuals with large credit card debt but very little assets. You can even choose to keep some of your property secure and protected, such as part of your home, your clothing, or automobiles. Certain debt, however, cannot be relieved under Arkansas law, such as alimony, child support, or student loans.

Chapter 7 and Presumption of Abuse

Not everyone initially qualifies for Chapter 7 bankruptcy. However, in order to qualify, your household income cannot exceed the state’s median income for a family of the same size. Filers with larger than average income can still qualify for Chapter 7 by passing a “means test.” When a person chooses to file Chapter 7 bankruptcy, but they’ve failed the means test, there may be a finding of presumption of abuse.

Presumption of abuse does not prevent filing Chapter 7 bankruptcy. The bankruptcy court ultimately has the discretion to allow your case to continue, even if you have disposable income that could be used to make Chapter 13 payments. They will, however, require you to provide an explanation of your special circumstances that prevents you from filing Chapter 13. You have the burden of proof to show that you are not abusing the bankruptcy system.

Some of the special circumstances that could allow you to beat the presumption of abuse include:

  • Serious medical conditions
  • Called to active military duty
  • Recent job loss
  • Recent divorce or separation
  • Paying excessive student loans

Chapter 7 and Presumption of Abuse

Not everyone initially qualifies for Chapter 7 bankruptcy. However, in order to qualify, your household income cannot exceed the state’s median income for a family of the same size. Filers with larger than average income can still qualify for Chapter 7 by passing a “means test.” When a person chooses to file Chapter 7 bankruptcy, but they’ve failed the means test, there may be a finding of presumption of abuse.

Presumption of abuse does not prevent filing Chapter 7 bankruptcy. The bankruptcy court ultimately has the discretion to allow your case to continue, even if you have disposable income that could be used to make Chapter 13 payments. They will, however, require you to provide an explanation of your special circumstances that prevents you from filing Chapter 13. You have the burden of proof to show that you are not abusing the bankruptcy system. Some of the special circumstances that could allow you to beat the presumption of abuse include:

  • Serious medical conditions
  • Called to active military duty
  • Recent job loss
  • Recent divorce or separation
  • Paying excessive student loans

Chapter 7 Bankruptcy Time Limits

Most Chapter 7 bankruptcy cases take approximately four to six months to complete. Once your debt is wiped out, you will be free from the crushing debt you were in. There are time limits on when you are eligible to file for bankruptcy again. If you previously filed for Chapter 7 bankruptcy, you must wait eight years from the date you filed before you are eligible to file for another Chapter 7 bankruptcy. If you filed Chapter 7 bankruptcy, you must wait at least four years before being eligible to file for Chapter 13 bankruptcy.

The law places strict limits on how often you can file Chapter 7 or Chapter 13 bankruptcy—regardless of which type of bankruptcy you file first. If you’ve filed bankruptcy before, our Arkansas bankruptcy lawyers can help determine if enough time has passed for you to be eligible to file again. We’ve created this Bankruptcy and Your Property PDF to help you learn more about filing multiple bankruptcies.

*We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code.
*The No Fee Guarantee® does not apply to bankruptcy cases

Do I Qualify for Chapter 13 Bankruptcy

Anyone who doesn’t qualify for Chapter 7 bankruptcy will need to qualify for Chapter 13 bankruptcy in order to get relief from their debts. Through Chapter 13 bankruptcy, your debt will be reorganized into a payment plan you can work with. Chapter 13 bankruptcy is a better choice for high earning individuals who do not qualify for Chapter 7 bankruptcy because of their assets and their income. It can help prevent foreclosure or repossession and individuals work with a lawyer to restructure their debt into a three to five-year repayment plan. The minimum amount you must pay back depends largely on how much you earn, how much you owe to your debtors and the value of any nonexempt property in your possession. Any unsecured debt that is remaining after you finish your repayment plan is automatically discharged.

To Qualify for Chapter 13 Bankruptcy:

You—or you and your spouse, if you file joint bankruptcy—must:
  • Show adequate income to meet the terms of a court-ordered payment plan
  • Demonstrate that your total secured and unsecured debt falls within limits set by the Bankruptcy Code
  • Prove that you’ve filed state and federal income taxes for the past four years
  • Have no more than $394,725 in unsecured debts, such as credit cards or personal loans
  • Have no more than $1,184,200 in secured debts, such as mortgages and car loans

Chapter 13 Time Limits

If you previously discharged your debts through Chapter 13 bankruptcy, you cannot file for another Chapter 13 bankruptcy for at least two years. In addition, you must wait six years before you are eligible to file for Chapter 7 bankruptcy. You may be eligible to file sooner if you paid back at least 70% of your unsecured debt and your plan was in good faith. If you commit bankruptcy fraud by hiding some of your assets, the courts may prevent you from filing bankruptcy for an even longer period of time.

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We’re There When You Need Us

The bankruptcy process is often difficult, frustrating, and overwhelming. Dealing with creditors and protecting your assets through bankruptcy is complicated and without an experienced Arkansas bankruptcy attorney on your side, you could make mistakes that could jeopardize your future

If you’re considering bankruptcy in Arkansas, or you simply want to learn more about your options, we can help. With four offices in Arkansas—Little Rock, Fayetteville, Conway, and Hot Springs—our Arkansas bankruptcy lawyers are right where you need us from the moment you need us. Fill out a free contact request form, which only takes a minute, or simply dial (800) 767-4815 and we can get to work for you.

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