Is Filing for Bankruptcy Worse on my Credit Than Foreclosure?

Yes, bankruptcy is worse than foreclosure. Both a bankruptcy filing and a foreclosure will damage your credit score and credit worthiness, but you should not be unduly concerned about this. Because the truth is that your credit rating is probably damaged already if you qualify for bankruptcy protection through Chapter 7 bankruptcy or Chapter 13 bankruptcy.

After bankruptcy or foreclosure you can begin to rebuild your credit worthiness with positive steps by the time your Chapter 7 bankruptcy, Chapter 13 bankruptcy or foreclosure is resolved. Without the bankruptcy filing, your damaged credit could continue for years without an opportunity to begin rebuilding.



An experienced bankruptcy law firm is necessary to help you choose between bankruptcy and foreclosure and to help guide you through the bankruptcy process. It is possible to minimize the damage and begin to put the financial hardships behind you. Filing for bankruptcy in Arizona is less frightening with an experienced bankruptcy law firm, such as The Frutkin Law Firm, PLC, in Phoenix, AZ, by your side.

HOA Dues Do NOT End with Bankruptcy

In Arizona, filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy will discharge your overdue homeowners association dues, but it will NOT stop your obligation to pay future HOA dues. Even if you no longer live in the home.

The HOA dues are your legal obligation until the home is legally owned by someone other than you – be it bank or new family. In today’s complicated housing market and financial mess, completing a foreclosure or short sale can take months or even years after a bankruptcy has been discharged.

If your fees are several hundred dollars each month or each quarter, the amount can quickly become significant debt. Most HOAs will negotiate with former homeowners and the first step is to contact your HOA directly to determine their policies. If negotiation is not successful, the experienced bankruptcy lawyers at Frutkin Law Firm, PLC, in Phoenix, Arizona, may be able to help you.

Are Asset Exemptions the Same for Chapter 7 Bankruptcy and Chapter 13 Bankruptcy?

Generally speaking, yes. The limits for homestead and personal asset exemptions during bankruptcy are the same whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy in Phoenix, Arizona. These exemptions allow most debtors to maintain a simple household with reasonable transportation and means of work, and you will not be destitute.

The homestead exemption has a limit that is shared between spouses. The limits on personal assets are for each adult – so the amount can be doubled if you are married. The exemptions allow you to keep a modest home, necessary fuel and food for health, necessary furniture and appliances, reasonable clothing and personal items, reliable transportation, tools of work or trade, necessary medical equipment, personal items such as pets, instruments, recreational equipment and even more.

For a full listing of asset exemptions in the state of AZ, consult with an experienced bankruptcy attorney, such as those at The Discreet Bankruptcy in Phoenix, Arizona.

What it Feels Like to File for Bankruptcy

Filing for bankruptcy takes an emotional toll that is difficult to quantify. There are so many different reasons why bankruptcy might be necessary, but the emotions are almost always the same: shame, fear, and anger. Most people experience all of those feelings individually, overlapping, and repeatedly.

One of the best ways to help quell the emotion is to actively work on the problem. Contacting an experienced bankruptcy attorney in Phoenix, Arizona, is the perfect first step. With knowledge, reason, and patience, your bankruptcy attorneys can help you decide the type of bankruptcy to file, the timing of filing for bankruptcy, and the important steps to take before and after your bankruptcy filing. A bankruptcy attorney with decades of experience can help determine if you should file chapter 7 bankruptcy, chapter 11 bankruptcy, or chapter 13 bankruptcy. Your bankruptcy lawyer will help you understand and navigate the bankruptcy process.

Experienced and caring bankruptcy lawyers in AZ, such as The Frutkin Law Firm, understand the strong emotions involved. By taking an active role in your bankruptcy case, you will not only feel better, but you will be protected from creditor harassment and you will begin to get back on your feet with a fresh financial start.

How Can I Get New Credit After Filing for Bankruptcy?

After filing for bankruptcy in Arizona and having the bankruptcy discharged, you will need to reestablish banking relationships. Begin by finding a local bank or credit union that will allow you to open both checking and savings accounts.

After some months have passed, apply for credit with your local bank. Often local banks are more open to establishing new credit for their banking customers. You may find that the interest rates are high and there may be monthly fees, but you will still want to accept the card. Use it responsibly and your credit score will improve. With the improved score, you will be able to get credit at more favorable rates.

Filing for bankruptcy is a devastating decision and should not be taken lightly. Before you file, consult experienced bankruptcy attorneys such as those at The Frutkin Law Firm, in Phoenix, Arizona.

Are Bankruptcy Judges and Bankruptcy Trustees the Same?

They are not.

Judges are appointed to federal bankruptcy courts for a term of 14 years, often at the recommendation of committees, political officials, or congress.

Bankruptcy trustees are appointed by the US Department of Justice. They are typically attorneys with knowledge of financial matters or are accountants. The US Trustee Office is a separate entity from the courts. The trustees serve as impartial administrators for the bankruptcy petition, overseeing the best interests of both the debtor and the creditor. The trustee arrangement is considered a “watchdog” agency that monitors all bankruptcy cases and identifies fraud.

If you are considering filing for bankruptcy, it is not advisable for you to speak directly with a bankruptcy trustee, and not permitted for you to speak with a bankruptcy judge. Seek the assistance of an experienced bankruptcy attorney such as those at the Frutkin Law Firm, PLC in Phoenix, Arizona.

Your Sole Proprietorship and Bankruptcy

Filing for Chapter 13 bankruptcy or Chapter 7 bankruptcy will affect your business. How, though, depends on the type of bankruptcy filing.

When you file for Chapter 13 bankruptcy, any business that produces income can be considered a means to make the Chapter 13 plan payments. Your business would likely remain untouched if it is viable (not laden with debt).

It is different when filing Chapter 7 bankruptcy. In Chapter 7 bankruptcy, any asset can be seized and used for debt repayment, and your business would probably be considered an asset. It might be exempted from the Chapter 7 bankruptcy filing, but you need an experienced bankruptcy lawyer to help you determine that. Arizona allows exemption of some tools and equipment related to a business up to $2500.

Filing bankruptcy when you own a business is complicated. You should consult with experienced bankruptcy attorneys such as The Frutkin Law Firm, PLC, in Phoenix, Arizona to review all of your options for business and personal bankruptcy filing when you own a business.

The Bankruptcy Trustee Will Not Come to Your House

When filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, many debtors in the Phoenix, Arizona, area worry that the bankruptcy trustee will make a visit to their home. The trustee in any bankruptcy filing would need court approval or your permission to visit your residence, and must have a compelling reason to do so.

That being said, most bankruptcy attorneys will tell you that the people most concerned about being visited are often the debtors who have not been completely honest in their bankruptcy filing paperwork. Experienced bankruptcy lawyers in good standing would not want to represent such a client.

When you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will be compelled to swear to the truthfulness of the documents in a court of law. Knowingly swearing to false information is a felony that will be prosecuted. But if your bankruptcy claim has been completely and honestly reviewed by a qualified bankruptcy attorney, then you have no reason to fear a trustee visit.

Self-Service Bankruptcy in Arizona

The US Bankruptcy Court for the District of Arizona provides self-help assistance to anyone wishing to file their own bankruptcy without a bankruptcy lawyer.

They provide an explanatory video, several bankruptcy checklists, and the opportunity to consult with a volunteer bankruptcy attorney. However, the attorney is limited to specific times and may only advise you on the bankruptcy process, not questions that you may have about your individual bankruptcy circumstances. In fact, the bankruptcy self-help center posts this disclaimer:

DISCLAIMER: The following information is provided compliments of the Bankruptcy Section of the Arizona State Bar. The United States Bankruptcy Court does not supervise or monitor the volunteer lawyers. The information you receive cannot replace individual attorney representation and is only intended to assist individuals in gathering information about the bankruptcy process.

Since filing for bankruptcy is such a serious undertaking, it is wise to consult with a serious bankruptcy law firm. You might consider The Frutkin Law Firm, PLC, in Phoenix, AZ. An experienced bankruptcy lawfirm will help you determine whether to file for bankruptcy at all, whether to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, and whether to file sooner or later.

Though filing without an attorney may seem like a savings, it may not produce the favorable outcome that a regular bankruptcy attorney can gain for you. It could prove to be penny wise but pound foolish.

What is Undue Hardship?

To have student loan debt discharged in a Chapter 7 bankruptcy or Chapter 13 bankruptcy filing, your bankruptcy attorney will have to prove that paying the debt causes an undue hardship. Not just a hardship now, but likely a hardship that is lasting and will never cease. This is done by filing an adversary proceeding in addition to filing for bankruptcy. If your bankruptcy case in Phoenix, Arizona, requires an adversary proceeding, you will want to hire an experienced bankruptcy law firm, such as Discreet Bankruptcy.

Since student loans – even private loans – are typically backed by the federal government or a government agency, the debt is owed to the US government. The student loan debt is similar to an IRS tax debt, and is difficult to discharge in bankruptcy.

To prove undue hardship, your bankruptcy lawyer will need to prove that you cannot possibly make the loan payments now and are unlikely to ever be able to make payments. Further, the Arizona bankruptcy attorney will need to show that you did not, are not, and probably never will benefit enough to repay the student loan from the education you received. This is an extensive test: that you cannot physically perform the work, and also that you cannot write or teach about the work, and that the education cannot be applied to any other field from which you would gain income.

What Is the Difference Between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy?

Chapter 7 bankruptcy is a liquidation bankruptcy option, often referred to as a fresh start. In a Chapter 7 bankruptcy filing, the individual, partnership or corporation has no way to repay their debt or salvage their dismal financial situation.

The bankruptcy court trustee will liquidate – completely sell off – all of the assets belonging to the Chapter 7 bankruptcy filer and use all of the proceeds to pay back creditors.

In Chapter 7 liquidation there are some types of property or assets that will be exempt from sale. Consult with an experienced bankruptcy lawyer, such as the bankruptcy attorneys at The Frutkin Lawfirm, PLC, in Phoenix, Arizona, to determine which of your property may be exempt.

Chapter 13 bankruptcy is for an individual to enter into court protection while they repay some or all of their debts. The Chapter 13 bankruptcy filing is for individuals that are overwhelmed by debt, but may not meet the standards for a Chapter 7 filing.

In a Chapter 13 repayment plan, the debtor works with the court to determine which debts will be repaid, what amounts will be repaid, and over what period of time. In exchange for the court supervision, the Chapter 13 bankruptcy filer receives court protection from creditors and cannot be further harassed or sued.

Will Filing for Bankruptcy Damage My Credit?

The truth is that your credit rating is already damaged if you are seriously seeking and can qualify for bankruptcy protection through Chapter 7 bankruptcyor Chapter 13 bankruptcy. Yes, the bankruptcy filing process will have implications for your credit score and credit worthiness, but you should not be unduly concerned about this.

Another truth is that you can begin to rebuild your credit worthiness with positive steps by the time your Chapter 7 bankruptcy or Chapter 13 bankruptcy is resolved. Without the bankruptcy filing, your damaged credit could continue for years without an opportunity to begin rebuilding.

And the third truth is that an experienced bankruptcy law firm is necessary to help guide you through the bankruptcy process and minimize the damage as much as possible. There is simply no substitute for experience. And with filing for bankruptcy in Arizona, the more experienced the bankruptcy lawfirm, the better for you.