It’s hard to know where to turn when you can’t make ends meet. Fortunately for U.S. residents there are options to get rid of most or all of your debt by filing for bankruptcy. If you feel you are overwhelmed with credit card and other debts, consider what a Chapter 7 bankruptcy can do for you and your family to relieve you of your financial stress.
There are certain stipulations and procedures to follow when you file for bankruptcy in Arkansas. Residents who have filed for bankruptcy will tell you that it is highly recommended to contact an attorney on guidance with a bankruptcy filing to access the right exemptions while getting rid of the most amount of debt.
How Do I Qualify for Chapter 7?
A Chapter 7 bankruptcy is also known as straight, or liquidation bankruptcy. When an Arkansas resident files for a Chapter 7, he or she is attempting to waive or discharge the debts brought on by credit cards and other debts. However, not all individuals who have credit debt in Arkansas will qualify.
In order to qualify for a Chapter 7, residents must pass a mean’s test. This formula is used to protect the bankruptcy courts from fraud. A bankruptcy attorney will help you find out whether you pass the mean’s test. For those living in Arkansas, the amount of cumulative income per family determines whether you qualify for bankruptcy. Those filing after March 15th, 2011 must fall at or below the income levels stated below.
- 1 Individual: $32,834
- 2 Individuals: $44,081
- 3 Individuals: $49,599
- 4 Individuals: $54, 401
- Additional family members: Add $7,500 per individual.
If you exceed the income amount listed for Arkansas, you may still be able to qualify for Chapter 7. Consult an attorney with details of your income level and debt ratio. If you find that you cannot meet the expectations of the means test for a Chapter 7, a Chapter 13 filing might help you reorganize your debt. This type of filing can discharge a part of your debt and allow you to pay back the rest in a scheduled and cost-effective manner.
Will I Lose Everything?
No, you won’t lose everything, but you may have to give up a few assets in order to get rid of your mounting debt. In the state of Arkansas, each filer is allowed to choose whether they want to file using federal exemptions (laws that govern the entire U.S.) or state law exemptions, which only apply to Arkansas.
Some state exemptions include the following:
- Urban home that does not exceed $2500 in value (1/4 acre lot size)
- Rural home that does not exceed $2500 in value (no less than 80 acres in size)
- Household Furnishings not to exceed $11,525 (this includes books, appliances, animals, musical instruments, etc.)
- 100% Disability
- 100% Life or Accident Insurance
- 100% Worker’s Compensation
- Up to $1,000 in mutual assessment life insurance benefits
- Personal Property
- Burial plots up to 5 acres
- 1 Automobile valued at $1,200
- Personal affects
- Up to 75% of disposable earnings after taxes
Some federal exemptions can be used in conjunction with your state exemptions. A local bankruptcy attorney can help you assess which type of exemptions work the best for your financial situation. Also, Arkansas residents are allowed to claim a “wild card” exemption up to $200 for single individuals or $500 for married couples.
Where Do I Start?
A wage garnishment, hassling phone calls, and a lack of money make life stressful and at times unbearable. The first step is to come up with a plan to determine if bankruptcy, Chapter 7 or otherwise is right for you.
Gather Financial Documents
Put together a file folder containing all pertinent financials documents. Your attorney will ask you to bring these things before your appointment:
- 6-12 months of past pay stubs
- Last filed tax return
- A complete list of creditors
Once you have everything together, make an appointment to discuss your financial situation with your attorney.
At the Attorney’s Office
Your attorney will use your information to calculate whether or not you qualify for a Chapter 7. If you do, your attorney will then advise of the necessary financial counseling you will have to take. As required by law, each filer must take a 90 minute course before and after your file your bankruptcy case. Your attorney will provide you with suggestions of reputable companies that are authorized to provide this type of counseling.
Closing Your Chapter 7 Bankruptcy Case
The entire process of filing takes three-six months to complete your Chapter 7 case. Before you file, your attorney will tell you how much it will cost in order to file your case (his rates along with the necessary fees to file your case in Bankruptcy Court). After you have paid the fees, your attorney will then act as a representative on your behalf, stopping creditor calls, lifting wage garnishments, and dismissing your credit debt. You will have to appear in court, but usually it’s not more than a few minutes, and your attorney will do most of the talking.
Bankruptcy might feel like the end, but for many Arkansas residents, it is the start of a new financial beginning.
Arkansas Bankruptcy Courts
John Paul Hammerschmidt Federal Building
35 East Mountain Street, Suite 316
Fayetteville, Arkansas 72701
Phone: (479) 582-9800
Old United States Post Office and Courthouse
300 West Second Street
Little Rock, Arkansas 72201