Bankruptcy Attorney in El Dorado, Arkansas

When people hear the word “bankruptcy,” the first thing that comes to mind is often “loss of everything,” and the other is “failure.” Bankruptcy phobia is fairly widespread and common.

Bankruptcy, however, is a perfectly legal remedy for those who find themselves over their heads in debt. It offers a fresh start, financial relief, and rarely results in the loss of everything.

In fact, Chapter 13 of the bankruptcy code allows you generally to keep everything, and even a Chapter 7 liquidation plan provides exemptions, so you can stay in your home and keep your car.

If you’re facing overwhelming debt, constant calls from creditors, and trying to juggle finances to keep afloat in or around El Dorado, Arkansas, contact our firm today. Our attorney, Robert N. Rushing, will explain the bankruptcy options to you and advise you on the best plan to achieve the fresh start in life that you need.

The Rushing Law Firm, PLLC also proudly serves clients in Magnolia, Camden, and Crossett and throughout the counties of Union, Columbia, Ashley, and Ouachita.

Understanding Bankruptcy

Bankruptcy is a federal law that sets the parameters for individuals and families to eliminate unsecured debts and obtain financial freedom to rebuild their lives. The bankruptcy code is broken down into what are called chapters.

Chapter 13 is known as the “wage earner’s plan” and deals with debts through a repayment plan. Chapter 7 is the liquidation plan that allows the court to sell off non-exempt assets to satisfy creditors. Chapter 11 is the “debtor-in-possession” plan for businesses and for individuals whose assets and income surpass certain thresholds.

Chapter 7 is by far the quickest. You can be discharged from your debts in a few months. Both Chapter 13 and Chapter 11 can take years, but the difference is that you generally won’t have to sell off any assets.

The thing to remember is that in any filing certain debts cannot be discharged, including most student loans, alimony or child support payments, and most taxes.

Bankruptcy’s Automatic Stay

Once you file for bankruptcy under any chapter of the law, you will be issued what is called an automatic stay. This prevents creditors and bill collectors from contacting you in any way, and also puts a halt to any repossession or foreclosure actions, though secured lenders can petition the court to continue with repossession or foreclosure. The stay gives you time to deal with those obligations, especially under Chapter 13 or 11.

A Look at Chapter 7

Most people prefer Chapter 7 because it is less complicated and quicker. In a few months’ time, you can begin building your credit and living your life again. Liquidation is obviously a scary word, but Arkansas exemptions allow you to keep your home and your car in many cases.

There is, however, a means test to qualify for Chapter 7. Your income must fall below the state median for a household of your size.

Arkansas exemptions are more favorable to homeowners. You can exempt up to any amount of equity in your home, though equity in trailers or condominiums is limited to $800. You are allowed only $1,200 equity in a car, and the wildcard is only $200.

If you own a home with more than $25,150 equity in it, you’re going to need to use Arkansas exemptions to retain possession. However, if you are behind in your home or car payments unless you can satisfy the delinquent amount, the lenders can seize your property to satisfy their obligations.

Remember, in all forms of bankruptcy, your Social Security, VA disability, unemployment, and other government benefits are fully exempt regardless of their amount.

Chapter 13 Repayment Plan

If you are behind on your mortgage or car payments, Chapter 13 may be the only route for you. Under Chapter 13, you can propose a repayment plan that stretches over three to five years. 

You can include the arrears amounts owed on your home or car in the plan, so anything delinquent will be paid off over time. However, then you will have to return to paying your regular mortgage and car loan amounts during the repayment period.

Chapter 13 uses a formula to determine your disposable income after basic living expenses and that income will be used to form the basis for your repayment plan. If you have $300 left over after expenses, that will likely be the amount you will owe monthly to the bankruptcy trustee assigned to you, who will then distribute the funds among creditors.

The beauty is that, so long as you meet your payment obligations to the court and to any secured lender, you can retain everything you own.

Chapter 11 Debtor-in-Possession

Chapter 11 is more often used for businesses, which allows business owners to continue operating their businesses while they create and honor a repayment plan to creditors. In Chapter 11, you are pretty much on your own in dealing with creditors. You will have to present your repayment plan to creditors for their approval. If they don’t like the plan, they can try to force you into Chapter 7.