Bankruptcy In Arkansas: The Alternative To Consider
In 2020, there were a total of 10,020 bankruptcy filings in the state of Arkansas, according to statistics provided by the United States Courts. Of those, 8,908 were filed under Chapter 7 bankruptcy, 1,065 were filed under Chapter 13 bankruptcy, and 47 were filed under Chapter 11 bankruptcy. In 2021, the average debt in Arkansas was $46,913, according to data from the Federal Reserve Bank of New York. This includes all types of debt, such as mortgages, credit cards, auto loans, and student loans. In terms of credit card debt specifically, the average credit card debt per household in Arkansas was $7,818, according to a 2020 report by Experian.
Learn More about the 3 main types of bankruptcy
Arkansas Bankruptcy Laws
Bankruptcy in Arkansas is governed by the federal Bankruptcy Code, which applies to all states in the U.S. However, there are certain state-specific regulations and exemptions that can impact the bankruptcy process in Arkansas. Here are some key things to know about bankruptcy laws in Arkansas:
- Bankruptcy courts in Arkansas are part of the United States Bankruptcy Court for the Eastern and Western Districts of Arkansas.
- The most common types of bankruptcy for individuals in Arkansas are Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves liquidation of assets to repay creditors, while Chapter 13 bankruptcy involves a repayment plan over a period of three to five years.
- Arkansas has its own set of exemptions that determine which assets are protected from creditors in bankruptcy. These exemptions include up to $4,000 in equity in a motor vehicle, up to $500,000 in homestead exemption, and exemptions for certain personal property such as household furnishings and tools of the trade.
- There are certain eligibility requirements for filing bankruptcy in Arkansas, such as completing a credit counseling course and passing a means test to determine whether your income is low enough to qualify for Chapter 7 bankruptcy.
- Bankruptcy filings in Arkansas are subject to a filing fee, which varies depending on the type of bankruptcy you file. As of my knowledge cutoff date of 2021, the filing fee for Chapter 7 bankruptcy in Arkansas was $335, while the filing fee for Chapter 13 bankruptcy was $310.
What Types Of Bankruptcy Are There For Individuals?
In the United States, there are two primary types of bankruptcy available to individuals: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 Bankruptcy: This type of bankruptcy is also known as “liquidation bankruptcy.” In Chapter 7 bankruptcy, a court-appointed trustee sells your non-exempt assets to pay off your creditors. Many types of unsecured debts, such as credit card debt and medical bills, can be discharged in Chapter 7 bankruptcy. However, not everyone is eligible for Chapter 7 bankruptcy, as it requires passing a means test to determine whether your income is low enough to qualify. Chapter 13 Bankruptcy: This type of bankruptcy is also known as “reorganization bankruptcy.” In Chapter 13 bankruptcy, you create a repayment plan to pay off your debts over a period of three to five years. This type of bankruptcy is often used by people who have a regular income but are struggling to keep up with their debt payments. Unlike Chapter 7 bankruptcy, not all types of debt can be discharged in Chapter 13 bankruptcy, but you may be able to reduce your overall debt burden and keep your assets.
What Types Of Bankruptcy Are There For Businesses?
In the United States, there are several types of bankruptcy available to businesses:
- Chapter 7 Bankruptcy: This type of bankruptcy is available to businesses that are shutting down and want to liquidate their assets to pay off creditors. A trustee is appointed to oversee the sale of assets and the distribution of the proceeds to creditors.
- Chapter 11 Bankruptcy: This type of bankruptcy is available to businesses that want to reorganize and continue operating. The business can develop a plan to pay off creditors over a period of time and may be able to renegotiate contracts and leases. Chapter 11 bankruptcy is a complex and expensive process, and it’s often used by larger businesses.
- Chapter 12 Bankruptcy: This type of bankruptcy is similar to Chapter 13 bankruptcy for individuals but is designed specifically for family farmers and fishermen. It allows them to restructure their debts and create a repayment plan.
- Chapter 13 Bankruptcy: While Chapter 13 is primarily for individuals, it can be used by sole proprietors and self-employed individuals who have personal and business debts. The business must be owned and operated by an individual, and the debts must be primarily consumer debts.
Considering Business Bankruptcy? Keep These Things In Mind
If you are considering business bankruptcy in Arkansas, there are several important things to keep in mind:
- Types of bankruptcy: There are two main types of bankruptcy that businesses can file for in Arkansas: Chapter 7 and Chapter 11. Chapter 7 bankruptcy involves liquidating the assets of the business to pay off creditors, while Chapter 11 allows the business to reorganize and continue operating while it pays off its debts.
- Eligibility requirements: To file for Chapter 7 bankruptcy, your business must be unable to pay its debts as they come due. To file for Chapter 11 bankruptcy, your business must be able to show that it has a viable plan for reorganization and that it will be able to pay its debts over time.
- Automatic stay: When you file for bankruptcy, an automatic stay goes into effect, which stops creditors from pursuing collection efforts against your business. This means that they cannot garnish your wages, foreclose on your property, or take other actions to collect their debts.
- Bankruptcy trustee: When you file for bankruptcy, a trustee will be appointed to oversee the process. The trustee’s job is to review your finances, make sure that your creditors are treated fairly, and ensure that you comply with all applicable bankruptcy laws.
- Impact on credit: Filing for bankruptcy will have a negative impact on your credit score and can make it more difficult to obtain credit in the future. However, it may be a necessary step to take in order to get your finances back on track.
What Debts Are Not Discharged In Bankruptcy?
While bankruptcy can provide relief from many types of debts, there are certain debts that are not typically discharged in bankruptcy. These include:
- Student loans: Most student loans are not dischargeable in bankruptcy, unless you can show that repaying the loans would cause undue hardship.
- Taxes: In general, taxes owed to the government are not dischargeable in bankruptcy, although there are some exceptions for older tax debts.
- Child support and alimony: Debts related to child support and alimony are not dischargeable in bankruptcy.
- Debts incurred through fraud or intentional wrongdoing: If you incurred debts through fraud or intentional wrongdoing, those debts may not be dischargeable in bankruptcy.
- Fines and penalties: Fines and penalties imposed by a government agency are not dischargeable in bankruptcy.
- Debts for personal injury or death caused by drunk driving: Debts arising from personal injury or death caused by drunk driving may not be dischargeable in bankruptcy.
Will Bankruptcy In Arkansas Affect Your Credit?
Bankruptcy can have a significant negative impact on your credit score, regardless of where you live, including Arkansas. In general, bankruptcy will remain on your credit report for 7 to 10 years, depending on the type of bankruptcy you filed. During this time, it can be difficult to obtain credit or loans, and you may be offered higher interest rates or lower credit limits. However, the exact impact on your credit score will depend on a variety of factors, including your credit history before the bankruptcy, the type of bankruptcy you filed, the amount of debt discharged, and your current financial situation. If you have a long and positive credit history, for example, a bankruptcy filing may have a more significant impact on your score than if you have a limited credit history or a history of missed payments.
How Can Bankruptcy In Arkansas Affect Your Ability To Take Out A Future Loan?
Filing for bankruptcy in Arkansas can make it more difficult to get a loan in the future, especially in the immediate aftermath of the filing. This is because bankruptcy can lower your credit score and signal to lenders that you have a history of financial instability.
Statute Of Limitations For Collections In Arkansas
In Arkansas, the statute of limitations for collections varies depending on the type of debt. Here are some general guidelines:
- Written contracts: 5 years from the date of the last payment or charge on the account.
- Oral contracts: 3 years from the date of the last payment or charge on the account.
- Promissory notes: 3 years from the date of the last payment or charge on the account.
- Open accounts (e.g. credit cards): 3 years from the date of the last payment or charge on the account.
- Judgments: 10 years from the date the judgment was entered, unless the judgment is renewed.
How Does Bankruptcy In Arkansas Affect Tax Debt?
Bankruptcy can affect tax debts in Arkansas, but the specific impact will depend on several factors, such as the type of tax debt, the chapter of bankruptcy being filed, and the individual’s specific financial situation. In general, tax debts may be dischargeable in bankruptcy, but only if they meet certain criteria. For example, income tax debts that are at least three years old and meet certain other requirements may be eligible for discharge in Chapter 7 bankruptcy. However, other types of tax debts, such as payroll taxes or fraud penalties, may not be dischargeable. Additionally, even if the tax debt is eligible for discharge, the individual may still have to deal with some consequences. For example, the IRS may have a tax lien on the individual’s property, which could complicate the bankruptcy process.
Cons Of Bankruptcy In Arkansas
Bankruptcy can provide a fresh financial start for individuals struggling with debt, but there are several potential cons to consider before filing for bankruptcy in Arkansas. Some of these cons include:
- Impact on Credit Score: Filing for bankruptcy can have a negative impact on your credit score, making it harder to obtain credit in the future or requiring you to pay higher interest rates.
- Loss of Property: Depending on the type of bankruptcy being filed, individuals may be required to surrender certain assets or property to pay off debts. This could include a home or vehicle.
- Public Record: Bankruptcy is a matter of public record, meaning that anyone can access your bankruptcy filing and potentially learn about your financial situation.
- Cost: Filing for bankruptcy can be expensive, including filing fees, attorney fees, and other associated costs.
- Emotional Toll: The process of filing for bankruptcy can be emotionally draining, and can cause feelings of shame, embarrassment, or failure.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
People may regret filing for bankruptcy for several reasons, such as:
- Impact on Credit Score: Filing for bankruptcy can have a significant impact on an individual’s credit score, which can make it challenging to obtain loans or credit in the future.
- Stigma: There is often a social stigma attached to filing for bankruptcy, which can make people feel ashamed or embarrassed.
- Loss of Assets: Depending on the type of bankruptcy filed, individuals may be required to sell off some of their assets to pay off debts, which can be emotionally difficult for some people.
- Negative impact on job prospects: Certain industries, such as finance, may view bankruptcy as a negative mark on an individual’s employment record, which can impact their job prospects.
- Emotional stress: The process of filing for bankruptcy can be emotionally stressful for some individuals, as it may feel like a failure or a personal setback.
What Happens If You Do Not Qualify For Bankruptcy In Arkansas?
If you do not qualify for bankruptcy in Arkansas, it means that you are not eligible to file for bankruptcy under either Chapter 7 or Chapter 13 of the Bankruptcy Code. There are several reasons why you may not qualify for bankruptcy, including:
- You have already filed for bankruptcy within the past few years, and you are not eligible to file again.
- Your income is too high to file for Chapter 7 bankruptcy, and you cannot afford to repay your debts under Chapter 13 bankruptcy.
- You have too much equity in your home or other assets, and you may be required to sell them to pay off your debts under Chapter 7 bankruptcy.
- You have engaged in fraudulent activity, such as hiding assets or falsifying information on your bankruptcy forms.
If you do not qualify for bankruptcy, you may need to explore other debt relief options, such as debt settlement.
Will You Lose Your Assets In Bankruptcy In Arkansas?
In Arkansas, bankruptcy filers are generally allowed to exempt certain property from the bankruptcy estate, which means that they can keep those assets even if they file for bankruptcy. The types and amounts of exemptions available vary depending on the type of bankruptcy filed, but Arkansas residents may be able to exempt property such as a homestead, motor vehicle, personal property, and retirement accounts.
Why Debt Settlement In Arkansas Is A Better Option
There are some potential benefits to debt settlement over bankruptcy that may make it a more favorable option for some individuals.
- No BK on your credit report: Filing for bankruptcy shows on your credit report for up to 10 years. On the other hand, debt settlement does not show as a bankruptcy.
- Cost: Filing for bankruptcy can be expensive, with filing fees, attorney fees, and other costs adding up quickly.
- Emotional Impact: People report horror stories of the negative emotional impact of BK.
- With a bankruptcy for the rest of their life: Employers or lenders can ask if someone has filed BK for the rest of their life. It is much less likely to be asked if one ever used debt settlement to pay back an agreed to amount.
- Control: With debt settlement, you may have more control over the process and negotiations with your creditors, whereas with bankruptcy, a court will make the final decision.
- Less severe consequences: Filing for bankruptcy can have significant consequences, such as the liquidation of your assets, whereas debt settlement may allow you to negotiate a more manageable repayment plan while keeping your assets.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt – An Alternative To Consider
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328