Steve Westerfield Attorney At Law is a full-service bankruptcy law firm. We offer a variety of cost-effective bankruptcy services to both individuals and business owners.
For years, Chapter 7 bankruptcies outnumbered Chapter 13 bankruptcies by a wide margin. With the flood of foreclosures in recent years, however, the number of Chapter 13 bankruptcies in Arkansas has increased.
A Chapter 13 is an escape valve for people who are working and earning money, but have fallen behind on a mortgage or car payments. A Chapter 13 permits a debtor to restructure their payment schedules in a plan of payments that will bring home mortgage and/or auto payments current over a period of 3 to 5 years. Most importantly, a Chapter 13 proceeding will immediately stop any foreclosures or repossessions for as long as Chapter 13 payments are being made.
A Chapter 13 bankruptcy will also discharge unsecured debts, including credit card debts, medical bills and some taxes, in the same way that a Chapter 7 discharges such debts.
You may know that Chapter 7 and Chapter 13 petitions can discharge some tax obligations, if they meet certain standards. However, did you know that under a Chapter 13 petition, the IRS can be prevented from assessing penalties or interest on taxes which are being paid in a Chapter 13 plan?
Both a Chapter 7 and a Chapter 13 Bankruptcy will:
There is a common misconception that laws passed in 2005 made it harder for people to qualify for bankruptcy relief and that relief is not available to most individuals or families.
The truth is however, that in Arkansas, most applicants are eligible for bankruptcy relief.
Eligibility is determined on a case by case basis and depends upon an applicant’s income and the value of an applicant’s property after deducting the amount of loans owed upon the property.
As an example, a family of 4 with a household income of $56,591 a year or less, would be eligible for Chapter 7 or Chapter 13 relief. If a family has a mortgage payment, or auto payments, or other secured payments, or sizable monthly medical expenses, the amount of allowable household income will be even more than $56,591.
The primary focus of the law office of Steve Westerfield is the practice of bankruptcy law. This office is located in Hot Springs, and serves people throughout Arkansas. Although we primarily draw clients from Garland County, Saline County, Hot Spring County, Clark County, Dallas County, Pike County, Howard County, Montgomery County, Sevier County and Polk County, we have represented bankruptcy clients in almost every county in the state including Washington County (Fayetteville) Crittenden County (West Memphis/Marion), Ashley County (Crossett and Hamburg) Union County (El Dorado) and other counties and communities.
Often creditors will file a civil lawsuit in order to collect debts they believe are owed and will receive a judgment from the court. The creditor then will be able to issue a writ of garnishment against a debtor’s wages and/or bank account.
Such a disruption of a person’s source of income and/or seizure of funds from a bank account can obviously have serious consequences. As a result of a garnishment; utilities can go unpaid, checks can bounce, and financial problems can become much worse.
Be aware that garnishments of all types are immediately stopped when a Chapter 7 or a Chapter 13 case is filed. In fact, a bankruptcy filing will prevent lawsuits from being started if the bankruptcy is filed before the lawsuit starts. If a lawsuit has already started, a bankruptcy filing will stop a lawsuit in its tracks and not permit it to go forward. Even if a judgment on a creditor’s lawsuit has already been entered by a court, a bankruptcy will stop such a judgment from taking effect and, as stated above, will immediately stop garnishments and other collection activity.
There are times when all unsecured debts are in the name of one spouse and there are no, or very few, unsecured debts in the name of the other spouse. In those circumstances it is often advantageous, and recommended, that the spouse with debt problems file a bankruptcy alone. Therefore the spouse with little or no unsecured debt can remain out of bankruptcy and protect their individual existing credit history, which may be beneficial to the family.
Some agencies promote use of their services to obtain a debt reduction agreement with unsecured creditors. However, often these agencies charge service fees which equal about half of the amount of debt reduction achieved. Also, debt reduction agreements damage a debtor’s credit history, which cannot be repaired until the debt reduction payment agreement is complete. These agreements usually run from 3 to 5 years.
Lastly, it is important to understand that debt which is written off by creditors under a debt reduction agreement results in a taxable benefit. To illustrate by example, a debt reduction agreement which lowers debt by $20,000 will result in the debtor receiving a 1099 report of income form from the creditor. The creditor will also send a copy of the 1099 report of income form to the IRS. In the above example, the debtor would be required to report $20,000 to the IRS as taxable income.
To evaluate the advantages or disadvantages of bankruptcy, the cost of that process should always be considered. In general:
Filing a Chapter 7 or a Chapter 13 petition imposes an automatic stay barring creditors from contacting you about your debts. At that point creditors are contacted by the Bankruptcy Court and advised that all garnishments and collection efforts must be stopped.
A creditor who violates the “Bankruptcy Stay Order” is subject to stiff fines and penalties.
At the conclusion of your case, you receive a discharge of all your unsecured dischargeable debts.
Few people know or understand that tax debts can often be eliminated or at least reduced by bankruptcy proceedings.
It is the practice of this office to meet with every applicant, personally, for an in-depth interview.
While many lawyers have clients fill out numerous forms, we do not do that at this office. We find that by individually discussing all important facts with our client, we can achieve a better result for our client.
Talk to us, and we will listen. We treat all our clients as individuals, and recognize that each person’s problems are unique.
Even if bankruptcy cannot discharge all taxes (as determined by the facts of each individual case), a Chapter 13 bankruptcy can still completely stop the assessment of further tax penalties and or interest. The elimination of continuing penalties and interest can result in substantial savings.
In some cases tax debt can be eliminated or reduced through an offer in compromise procedure negotiated by your attorney directly with the IRS, without filing bankruptcy.
Steve Westerfield, Attorney at Law, has been providing legal representation to clients in bankruptcy matters and on tax debt issues since 1978. This office is committed to the economic well-being of our clients and to quality representation, research and analysis.