The U.S. Bankruptcy Court has released numbers for the first half of 2009 and Chapter 7 bankruptcy filings are up 102% in Maricopa County when compared with the same time period last year.  Likewise, Chapter 13 filings are up 52% in the Valley when compared to 2008.  Overall statewide bankruptcy filings in Arizona are up 88%.

While most consumers file either a Chapter 7 or Chapter 13 bankruptcy case, reports show that Chapter 11 filings have almost doubled since the beginning of last year.  Traditionally Chapter 11 filings were for businesses that were seeking to reorganize, while Chapter 13 was an option for individuals seeking to reorganize.  However, the Bankruptcy Code limits Chapter 13 filings to those debtors who have less than $1,010,650 in secured debts (like mortgages, car, loans, etc.) and less than $336,900 in unsecured debts (credit cards, medical bills, most judgments).  See 11 U.S.C. § 109(e).  Because of the Code limitations on a Chapter 13 filing as well as the fact that individuals are carrying heavy debt loads in the form of mortgage loans, investment loans, and deficiency judgments after a foreclosure, individuals are now seeking bankruptcy relief by filing a Chapter 11 case.

If you are facing financial difficulties or are carrying a high debt load and want to evaluate your options, Arizona Bankruptcy Attorney John Skiba offers a free bankruptcy consultation to discuss your situation and help you determine if bankruptcy is an appropriate option.

Generally speaking there are two options available to individuals seeking bankruptcy protection: a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. The 7 and 13 found in the title of these bankruptcies refers to the chapter of the bankruptcy code which governs that particular type of bankruptcy. A Chapter 7 case is generally considered a liquidation where you will be required to surrender any unencumbered, non-exempt assets for the payment of creditors. On the other hand, a Chapter 13 bankruptcy helps you reorganize your debt while remaining in possession of your assets. Chapter 13 offers many powerful tools in helping you reorganize, one of which is the “cram-down.”

In a Chapter 13 case, the Bankruptcy Code permits debtors to modify the rights of secured creditors. A debt owed to a secured creditor is one in which there is property or collateral attached to the debt as security – for example, a debt on a car or a mortgage on a house. The cram-down is typically used on cars. In applying this tool, you will only be required to pay what your car is worth, not what you currently owe. For example, if you owned a 2005 Chevy Suburban that was worth $15,000, but you owed $25,000, in a Chapter 13 case, you would only have to pay the value of the car ($15,000) and the remaining balance would be discharged. The only limitation to this rule is that you must have purchased the car at least 2.5 years before you file for bankruptcy. If you purchased your car less than 2.5 years ago, this option is not available.

In addition to cars, the cram-down can be used on almost any other secured debt including investment or rental properties. It cannot, however, be used on your personal home. If you would like to discuss the cram down option or to discuss bankruptcy and how it can help you, Arizona Bankruptcy attorney John Skiba offers a free bankruptcy consultation.

Arizona has been hit particularly hard in the real estate market with dramatic decreases in the value of people’s homes.  Are you behind on your house payments?  Is your house in foreclosure?  Do you owe more on your house than it is currently worth?  If so, then you are not alone.  Much of the population here in the Valley are in the same situation.

The decision to file bankruptcy is not to be taken lightly, and does have lasting effects.  However, bankruptcy should not be immediately ruled out without a careful examination of what the bankruptcy laws can do to help keep you in your home.  Bankruptcy, and Chapter 13 in particular, permits you to catch up on missed payments and will even stop a foreclosure – even if the sale date is fast approproaching.  Not only will a Chapter 13 give you time to make up those missed payments, you may be able to discharge the home equity line of credit (HELOC) or second mortgage on your personal residence.

If, for instance, you are several months behind on your house payment, a Chapter 13 bankrutpcy will give you three to five years to get caught up.  Also, if you owe more on your first mortgage than your house is worth, you will be able to discharge your second mortgage or HELOC.  These are powerful tools that can help you stay in your home, even if there is already a trustee’s sale set.

Arizona Bankruptcy Attorney John Skiba offers a free consultation to help you determine if bankruptcy is an appropriate remedy for your situation.