Nice, Simple Explanation of Chapter 7 Bankruptcy

The only thing about this explanation of a Chapter 7 Bankruptcy case that won't apply to you is that it discusses exemptions in a State that isn't Arizona.

So ignore that, and let the lucid, linear discussion of a Chapter 7 Bankruptcy wash over you as you read this online article.

Stay Current if You Want to Keep It!

If You Want to Keep It, Make the Darn Payments!

There are many reasons I hate reaffirmations a lot.

Here's one of the small ones.

No matter how smart people are, if there's a little extra money in the bank at the end of the month, they don't usually see that as an emergency.

So what about the situation where they know that they want to keep a car in their Chapter 7, and they know they have to stay current on the car, and the automatic deductions have stopped?

And the automatic payments weren't being made, so the debtor just twiddles thumbs because, after all, there's money in the bank, right?

Well, that ultimately turns into an emergency, when the discharge is entered, and the automatic stay relating to property of the debtor evaporates.

Because then, the debtor says "I didn't notice that the automatic payments weren't coming out of the account, but I really intended to say current, like I told you!"

Sadly, the creditor has no particular sense of humor of which the creditor is aware.

So the creditor will either repo the car, or tell the debtor that they are going to repo the car (less frequent, but some vultures have good table manners).

Remember, the entire area of reaffirmations is fraught with peril.

I have a strong bias: a smart debtor will walk away from the car that has negative equity, NOT reaffirm (even if the judge would permit it, and that's dicey), and then buy a BETTER car at an auction after the filing. A smart debtor will also walk away from a car, even if it has a little equity, if he owes ten or twenty thou on it.

And the smart debtor will find an auction or a private party sale.

Where will the debtor find the five thousand or ten thousand to take to the auction?

Well, that's what parents are for, isn't it?

Note: this one has the potential to be a REALLY big problem. Say the debtor actually reaffirms, and doesn't make the payments. Then the creditor repos the car, sells it at the auction where the debtor should have bought his new car, and comes after the debtor with the dreaded deficiency judgment.

Does that sound like a good idea to anybody?

And while we're on the topic, drive safe, everybody. This is almost New Year, and they actually AIM to hit your car on the roads right now!

p.s. before you borrow money from mom, dad, boyfriend, girlfriend, or an alien from the planet Neptune, become an expert on buying used cars. Go to Amazon.com, and get ten books on how to buy a used car, or how to buy a used car at an auction. Read them. Then borrow. Then buy.

I am not an expert on buying used cars. Eventually, my clients will bring me industrial espionage on the best car auctions out there. Until then, you're on your own.

p.p.s. What happens if you buy a lemon at an auction? Hey, I just work here. All the advice in the world will not protect against the reality that it's better to be lucky than smart.

 

Life After Bankruptcy in Arizona!

If You HAVE to File, Is There Life After Bankruptcy?

Recently a client sent me a lovely email discussing how well things had worked for them a short time after they had filed a bankruptcy.

This is not to say that bankruptcy is a cure-all for what ails ya, or that it's fun, or easy. It's not.

But sometimes it's the right tool for the job.

So if you're scared to death about bankruptcy, good! You're paying attention!

But some people get a very good result, if they work hard after they file.

p.s. I talked to a mortgage broker recently, who told me that it took two years after a bankruptcy, assuming all the other factors were there, to obtain a new mortgage and buy a new house. And she also said it varied a bit from lender to lender to lender; I said I'd pass the life-after-bankruptcy information on to my readers.

The First Meeting of Creditors, Explained!

Your First Meeting of Creditors (the 341 Meeting) is one of the standard, garden-variety procedural events in your Chapter 7 Bankruptcy Case in Arizona.

It will be easy, or troublesome, or a major disaster, depending to a large extent on how you have prepared for that hearing, and the preparation begins with filling out your schedules accurately and completely.

After your Arizona Bankruptcy Lawyer has filed your Bankruptcy Petition for you, based on the information you have given him, you will receive a "Trustee's Letter", which may be written on paper, and may be electronic. Generally, it will ask you to send copies of three years of tax returns, copies of titles, and similar materials by mail to your Arizona Bankruptcy Trustee.

If you do that, within the time frames required by the trustee, your First Meeting will be easier for you. I suggest that you keep two copies of everything you sent to your trustee, one for your records, and one to bring with you to your first meeting, in case the post office goofed.

Remember that you must bring a social security card and driver's license to your First Meeting, and that you may not bring weapons or dogs into the Federal Building (although yesterday I was told by the Federal Marshals who operated the scanners and x-ray machines that they do permit seeing-eye dogs).

I have talked at length about the First Meeting in Bankruptcy Cases in Arizona. Here I am, doing just that!

Considering a Bankruptcy? How Would You Make A Decision to File a Bankruptcy in Arizona?

There are a lot of ways to reach a decision to file a bankruptcy, and since it's your life, it's your decision.  I may have more credentials as a bankruptcy lawyer than a dog has fleas, but you have to make the decision on your own, because I won't sell you on the idea of filing a bankruptcy.

I might tell you not to file a bankruptcy, if you had a three hundred dollars in debt, and a hundred thousand dollars of income a year; that just wouldn't make any sense!

Now, there are some guidelines to help you make your decision.

One is the Joseph C. McDaniel Rule of Bankruptcy Inevitability, which says that if you have unsecured debt (like credit card debt and medical bills) that are the same amount as your yearly income, you're a walking bankruptcy case, whether you know it or not.


The reason is that you can make minimum payments, and work extra jobs, and burn through your retirement funds (I hate it when you do that!!!) for a while, but eventually, you'll get sick, tired, depressed, divorced, sued, or run over by a truck.

And then you get to file a bankruptcy, even though you've struggled against it for years.

Most of my clients tell me that they experience a fair amount of peace after resigning themselves to a bankruptcy. My high-income professional clients often tell me it was the best decision they ever made for their mental health.

Some people like to watch videos instead of reading, which is simply a personal preference, so if you like videos best, watch these and then give us a call.

But if you are confused about filing a bankruptcy, consider the following issues, which should help make the decision easier for you:

1) do you pass the means test, or can you pass the means test by the time we file for you? For that analysis, you'll need a median income calculator and maybe a means test calculator.

2) do you have more unsecured debt than your yearly income? For that, you just need a pocket calculator!

3) could you ever, if you lived forever, pay off your unsecured debt? You probably want to consult a free, online credit card payoff calculator.

4) do you ever want to retire? Ask yourself, if you ever want to retire, and you can't put money in a retirement vehicle, do you need to file a bankruptcy? And how long will it take you to save money to retire? For that, you'll need a free, online retirement calculator, I think.

5) The above issues will probably help a lot, but if you are still teetering, consider this: will you, with your current debt load, ever be able to put your kids through college? And if not, will they thrive asking the question of the ages: "Would you like fries with that, sir?"

6) And for those of you who still can't decide if they should file a bankruptcy, you might want to check and see how much underwater your house is right now, because some people have a foggy idea that they can just sell their houses when it's time to retire. That's probably wrong, for the next twenty years. But check Zillow.com to see how much your house is worth today.

7) After that, if you want to talk about filing a bankruptcy, do your bankruptcy homework, and then, well....

What Are Bankruptcy Exemptions? What Can I Keep If I File a Chapter 7 Bankruptcy in Arizona?

Well, it's not as bad as you think.

In fact, the news is pretty good; most people who file a Chapter 7 Bankruptcy don't lose anything to the bankruptcy trustee in the case. Those are called "no-asset" bankruptcy cases, and they make up about 97 per cent of all Chapter 7 cases in Arizona, the last time I checked.

So do all people who file a bankruptcy in Arizona get to rely on the Arizona Exemptions?

Nope!

So have to use their prior state's exemptions, and some get to use the Federal Bankruptcy Exemptions, even though Arizona is an "opt-out" state. I'll talk more about this issue in the future.

There is a lovely PDF of the Arizona Bankruptcy Exemption Statutes provided by the U.S. Bankruptcy Court for the District of Arizona, and if you are contemplating bankruptcy in Phoenix, Scottsdale, Glendale, Chandler, Tempe, Mesa or anyplace else in Arizona, you should take a look at them; in fact, print them out and read them again and again!

Remember that in a married couple case, each member of the couple get the benefit of the entire exemption list, except the homestead (that is, each gets to keep the clothing exemption, right? But a married couple doesn't get a $300,000 homestead exemption!).