Should I Consider a Lien Strip?

Most liens are secured by an asset – in this case, your home – and must be paid when the asset is sold or foreclosed. If you have more than one mortgage or other liens against your house, and if the value of the house is “underwater,” then you should consider a lien strip. Lien stripping is a complicated procedure with many variables, and it is best to consult with experienced bankruptcy attorneys. In Phoenix, Arizona, you might consider The Frutkin Law Firm, PLC.

In Arizona’s volatile housing market many home values have fallen well below the balance of the first mortgage, let alone the second mortgage, and the homeowner is considered to be underwater on the mortgage. When the home is sold or foreclosed there will not be enough proceeds to pay off the first mortgage or any other liens on the property.

In a bankruptcy filing, lien strip means that the court could reclassify a secured lien to an unsecured lien. The status of a lien as secured or unsecured will make a big difference when determining the repayment of the debts during bankruptcy. In Chapter 13 bankruptcy repayment plans, secured debts are paid off first and unsecured debts are delayed. Sometimes unsecured debts are paid off in fractions over time, and may even be paid at less than the outstanding balance. Having a lien stripped in Chapter 13 bankruptcy can amount to a significant difference in the repayment.

An Overview of Chapter 13 Bankruptcy

In Arizona, chapter 13 is a broader bankruptcy filing and allows for some flexibility in retaining assets. Chapter 13 bankruptcy filing may allow a debtor to keep an asset, such as a home or other valuable, while completing a plan to make overdue payments. These assets are considered by the court to be exemptions from the bankruptcy proceedings, and must be court-approved.

In chapter 13 bankruptcy, the debtor submits a plan to repay some of the debts over 3-5 years and that plan must be approved by the court at a confirmation hearing. Any debts that are not to be repaid are not immediately discharged; the discharge will not occur until the payment plan is complete. During the repayment period, the debtor is protected from legal action by all creditors, whether included in the repayment plan or scheduled for discharge.

Filing for chapter 13 bankruptcy in Phoenix, AZ, should be done with legal counsel. There are a number of details and factors that weigh on this decision, and it is wise to consult with an experienced bankruptcy attorney such as The Frutkin Law Firm.

Filing for Chapter 13 Bankruptcy Can Improve Your Credit Score

Though it seems ironic, if you qualify for Chapter 13 bankruptcy, then filing for Chapter 13 bankruptcy might be the best thing you can do for your credit score.

While a bankruptcy filing is the most devastating blow your credit rating can take, a discharged bankruptcy has the effect of resetting your credit score. If you also have positive credit activity on your credit report – such as a reaffirmed mortgage, utility bills, etc – then your positive credit score will begin to rebuild relatively quickly.

It is always best to discuss filing for bankruptcy in Arizona with an experienced bankruptcy attorney, such as those at The Frutkin Law Firm, PLC, in Phoenix, Arizona. The bankruptcy lawyers at Frutkin Lawfirm can help you understand what effect a bankruptcy filing will have on your credit scores.

Can I file for Chapter 13 Bankruptcy if I Own a Business?

If your business is a sole proprietorship, you can file for Chapter 13 bankruptcy to reorganize and repay your outstanding debts. If your business is a corporation or partnership, you will need to consult with a qualified bankruptcy attorney, such as Frutkin Lawfirm, PLC, in Phoenix, Arizona, to determine which bankruptcy chapter is right for your situation. Typically that will be Chapter 11 bankruptcy.

There are some limits when filing for Chapter 13 bankruptcy, and again, an experienced bankruptcy lawyer is your best advisor.

What does it mean to Reorganize Debt in Chapter 13 Bankruptcy?

Chapter 13 is sometimes thought of as a middle ground in bankruptcy – a balance between you receiving some debt relief and your creditors receiving some payment. Reorganizing debt means that you will repay all or most, you will get caught up, and you will develop a plan for staying current.

In Chapter 13 bankruptcy, the court trustee helps to determine a plan by which you will continue to pay your debts. This repayment often includes getting caught up when you are behind. By analyzing your finances, the court will determine what amount you pay and to whom you will pay it. These plans typically last for three to five years.

During the Chapter 13 repayment period, you are protected from harassment, foreclosure, and repossession, and your creditors are assured of exactly what amount of repayment they can expect. It is literally a new organization of your finances that lays a solid foundation for your future success.

To make the most of Chapter 13 reorganization, be sure to consult with experienced bankruptcy attorneys such as The Frutkin Law Firm, PLC, in Phoenix, Arizona.

Reaffirming Debt in Chapter 13 Bankruptcy

While you can reaffirm debt with either a Chapter 7 bankruptcy filing or a Chapter 13 bankruptcy filing, it is most common with Chapter 13. Reaffirming debt signals that you intend to keep making payments and retain the asset, most often a home or an automobile.

Reaffirming debt when filing for bankruptcy is a serious matter, and one that should be discussed with a qualified bankruptcy attorney in Phoenix, Arizona. The bankruptcy court will require proof that continuing payments are feasible, and the total payments will be considered along with all of the details of your Chapter 13 bankruptcy filing. The reaffirmed debt itself, however, is not part of the bankruptcy filing and is not included in the bankruptcy discharge.

Reaffirmed debts are not protected from collection or repossession if future payments are missed, which is why an experienced bankruptcy lawyer should be consulted.

Debt Negotiation Could Eliminate a Chapter 13 Bankruptcy Filing

In Arizona, it is possible to have a trained bankruptcy attorney negotiate a debt reduction that allows you to avoid filing Chapter 13 bankruptcy. While you might be able to negotiate with the creditor yourself, these businesses often take an attorney more seriously, viewing them as an indication that the debtor is about to file for bankruptcy.

Many creditors in Arizona will work with your bankruptcy lawyer to reach a settlement out of court.



Since these creditors operate for-profit businesses, they might accept partial payment on fixed terms rather than risk losing any compensation in a bankruptcy. Especially in debt that is long term, receiving some repayment is preferable.

If you are considering a Chapter 13 debt repayment plan to reorganize and catch up on your outstanding debt, then debt negotiation might be a better solution for you. When considering Chapter 13 bankruptcy – unlike the “fresh start” of a Chapter 7 filing - if your debts are reduced to a manageable level, you might just be able to pay them off without having to file the bankruptcy at all.