Why There Are No Jobs, But Plenty of Bankruptcy Cases to go Around!

Clients, you can skip this one; it's just an observation on the reasons that there are too few decent jobs to go around in the United States.

And this isn't a blog about macro-economics, because I'm just a bankruptcy lawyer, and I'm not smart enough for all that theory.

But my understanding is that the middle class has not gotten a raise in real income for several decades, for a lot of reasons.

One of those reasons is that production of goods has been outsourced by a large number of large corporations.

I was reminded of the plight of the middle class in the United States when I heard a satirical song when I was looking for some old guy rock and roll.

Seems to me that there are countries that have decided that they want to produce their own energy instead of importing it, and they therefore pay less for their energy. And there are countries that decided it would be good to make it easy for manufacturers of goods, and they have jobs coming out of their ears. Kinda like the United States when it was the arsenal of democracy, and when it could produce its own tanks, entirely in the United States.

And then there were very few bankruptcy cases.

So maybe we ought to figure out what makes it hard for manufacturers to produce in the United States, and make those barriers go away.

Or we can always just keep mass-producing bankruptcy cases.

Your call, of course. I just sit here chained to the desk, trying to help some poor devil who tried all his life to work as an engineer, only to find that we don't need engineers in the United States anymore.

So maybe he can go back to school and become a hair-cutter, or learn to give therapeutic massage.

And we can watch how well an economy works when we all trade haircuts for back-rubs for car washes. You know, an economy that is entirely based on services to one another, instead of production of anything whatsoever.

One nice side-effect of no production of any actual products at all is that the air will be very, very clean indeed.

Bankruptcy: The Most Important Job-Creation Tool

How do I get there?

Simple.

Jobs are created in the private sector, not the public (government) sector. If somebody has a government job, the money to pay for that position came from the private sector. No private sector at all, no jobs at all. Except under socialism and communism, and the problem with socialism, according to Margaret Thatcher, is that eventually you run out of other people's money.

Therefore, if you have a job and you can feed your family, thank an entrepreneur. And thank bankruptcy.

Because an entrepreneur, the guy who assembles the assets and the employees of a business, isn't totally stupid.

He will take risks; his risk is failure. And if you're running a business and you guess wrong, or the business environment changes, you get to FIRE a bunch of people, and many entrepreneurs would rather drink molten lava.

Our economic system is driven by a profit motive, and it provides the highest standard of living in the world for the largest number of people.

All that could change overnight, of course.

But back to the topic: an entrepreneur is the guy who decides that the world needs a better juice drink. So he assembles the lease for the juice bar location. He interviews the potential employees. He begs Aunt Martha for the seed money, and then the SBA, and puts up his house for security. He works 20 hours a day for the first year, because he can't afford enough employees during that rough, rough first year.

Then he loses the farm. He guesses wrong. The business tanks. Remember, the average self-made American millionaire goes broke FOUR TIMES before he gets to keep it.

What would happen if people went to jail if they didn't pay their debts?

That's not a crazy suggestion, since for much of history, there have been prisons for debtors, and there still are in some countries.

Those countries typically don't have a vibrant economy.

Because an entrepreneur is smart. And if the risk of building a business is that he's going to get to go to jail if it doesn't work well, that will reduce the number of businesses being built very quickly, and also the number of jobs that businesses build.

So let's track it again: while banks may believe that bankruptcy is bad, it's really very good for the economy. Because it's hard to put together a business (no school does a good job of teaching you how to start and run a tiny business; sorry, Harvard). Therefore, an entrepreneur has to learn on the job. And risk a business failure every single time.

Because there are big risks in running a business (the SBA and the bank foreclose on your house, sue you for big bucks, and you get to tell all the friends you hired over twenty years that they have to go find somebody smart to work for), your third wife leaves you because she only liked your jet ski, and a bad time is had by all.

But a clever entrepreneur understands that if he files a bankruptcy, and can then assemble the seed money, and find employees and train them better, and find a better location, and advertise on the internet this time, and work 23 hours a day instead of 20, HE CAN MAKE IT WORK THIS TIME!

And he's right. Eventually he'll get it to work, and there will be more productive jobs creating widgets, or giving better haircuts, or building better mousetraps, or serving more and better crayfish etouffee, or teaching speed reading.

But he won't do it unless there's some way to get out from under and start over. And you really, really want an entrepreneur to be able to start over, after he's learned some of the lessons about running a business that they don't teach in school.

If you want your kid to find a job.

Yes, this is still a depression; Unemployment is officially 9.7%; Bankruptcy cases will continue to increase

You heard it here first, folks.

p.s. Wait until commercial real estate tanks.

p.p.s. Wait until hyper-inflation hits.

p.p.p.s. Maybe you think this makes me happy, because I'm a bankruptcy lawyer. And nothing could be further from the truth.

What Happens When Only One Spouse Files a Bankruptcy?

It's never good to make waves in bankruptcy cases. The trustees are used to seeing a particular set of facts, and they are trained to be curious about non-standard sets of facts.

So, for instance, when I was at a first meeting of creditors today in Casa Grande, I got to hear the filing spouse sputter when asked 1)WHY his wife didn't file, and 2)was his wife getting a tax refund, because if so, the trustee wanted it, even if the wife wasn't filing a bankruptcy, and 3)WHAT ASSETS did his wife own, even if she wasn't filing?

You just KNOW that debtor will be sleeping on the couch for several decades after the trustee takes his wife's car and tax refund, and whatever else looks like fun, when his wife had told him she wanted nothing to do a bankruptcy.

But wait! There's more! He'll be sleeping in the doghouse when his wife gets sued for debts that he has discharged in his Chapter 7 case, because creditors do that sort of thing. Darn creditors. But his discharge won't keep creditors from suing his wife, and they will sue her, working on the very strong presumption that debts incurred during marriage are community debts.

I've filed singleton bankruptcy cases for married folks, and gotten decent results in the past.

But it's always a bumpier road than a twofer.

Also note that the trustee wants to count the spouse's income for means test purposes.

Still, guys hate the idea of putting their wives through the process of a bankruptcy.

I always tell 'em, sure, I PREFER it if your wife doesn't file right now. And that's because I'll get paid to file your bankruptcy case, and then I can get paid to file your wife's bankruptcy case when she gets sued!

Of course, I don't prefer it. I prefer a good result for the client. So nobody has to sleep in the doghouse for several decades.

Go Get 'Em, Tiger! Lawyer Sues: Unrelenting Calls on his Overdue Student Loans

This is a just for fun post.

I always like to see somebody going after those folks who make a lot of phone calls.

And student loan lenders are remarkably aggressive in collecting their money.

The ABA Journal recently ran this article:

A Seattle lawyer who says Sallie Mae harassed him with “unrelenting” automated collection calls is suing for at least $500 in damages for each unwanted contact.

Lawyer Mark Arthur is seeking class action status for the suit, filed in federal district court in Seattle, according to the Puget Sound Business Journal. The alleged calls to his cell phone were made after Arthur fell behind on loans for his education at the Seattle University School of Law.

Arthur claims the calls made on behalf of the SLM Corp., also known as Sallie Mae, violated the Telephone Consumer Protection Act. The suit (PDF posted by the Puget Sound Business Journal) estimates the number of potential class members to be in the tens of thousands. The action seeks damages of $500 for each unwanted call, trebled to $1,500 because the alleged violations were knowing and willful.

“Sallie Mae harassed me with dozens of unwanted calls on my cell phone, including calls that woke me up at all hours of the night and often within hours of each other,” Arthur said in a statement published by the Business Journal. “These unrelenting calls unfortunately corresponded with a time in my life that required great attention to family issues.”

The Super-duper Money-Back Bankruptcy Guarantee!

Puh-leeeze!

Generally, if something looks too good to be true, it is.

I've talked a little about docu-prep services previously.

But there's one step lower, or perhaps sideways, in the bankruptcy universe. That would be the online-computerized bankruptcy .

Recently I've read advertisements flogging their incredible, amazing, money-back guarantee if the Court doesn't accept the filing!

Well, duhhh.

The Court will accept a filing if it's written in crayon on butcher paper, as long as the filing fee is paid (that's an exaggeration, but not much).

On the other hand, I noticed that the super-duper money back guarantee said nothing about whether the Court (either the Clerk of the Court or the Judge, and remember to worry about the U.S. Trustee's Office and the U.S. Attorney's Office, and also the creditors themselves) would DISMISS the case after it was filed, or whether the U.S. Trustee would file a Notice of Presumption of Abuse, or whether a creditor would file to dismiss the case, or object to the discharge, or otherwise make a nuisance of itself.

It's almost as though a doctor's office would GUARANTEE that after they did a heart-bypass, the artery would be clear, and say nothing about whether the patient would live, or the frequency of infections, or the length of the recovery.

You know?

What's Going to Happen to My Time-Share in my Chapter 7 Bankruptcy in Arizona?

As with most things, that depends.

A time share is an asset. It's also not one of the assets listed as exempt under the laws of Arizona.

But it's a funny kind of asset. Maybe it's not transferable under the terms of the contract. Maybe there's a transfer fee. Maybe the timeshare agreement is fifty pages long and nobody in their right mind wants to read it!

And one timeshare is not the same as another timeshare.

Consider a timeshare in Haiti right now, you know? Or in New Orleans right after the flood.

Some timeshares are easy to sell, and debtors often sell them prior to filing in order to buy food, fuel, and provisions prior to filing a Chapter 7; that's probably just fine, as long as they sell it for close to fair market value to a non-insider. It's not a fatal problem if they sell it, for fair market value, and receive that value, prior to filing, and spend it on food, fuel, provisions, and so on.

But any transaction with an insider (which includes but is not limited to an insider) will be subject to much more scrutiny than a transaction with a non-insider.

So what happens if the time-share can't be sold by the debtor prior to filing?

Well, the trustee will probably try to sell it at auction, as trustees do, about once a month.

Or the trustee may, in the exercise of his or her business judgment, decide that it's not worth anything at all, and may abandon it out of the estate (and back to the debtor).

The debtor, if he or she wants to keep a timeshare, will sometimes make a lowball offer to the trustee; and sometimes a lowball offer will be the winning bid at the trustees auction, and then the debtor gets to keep the beloved timeshare.

But you can never tell about auctions. There are always those pesky Other Bidders!

Keeping a Business in a Chapter 7 Bankruptcy in Arizona, Part II

This issue will provide a ton of sequels, because every small business situation is totally different.

Kinda like snowflakes.

Today's lesson, however, will be brief.

In today's variation, the small business owner, still a haircutter, has a tiny sub S corporation, and owns 100% of the stock in that corporation. No employees except the debtor.

So if she wants to continue cutting hair at the same place, under the same corporate umbrella, with the same phone number, and the same name, that MIGHT be a doable project. Here's how: the minute the filing happens, the debtor, though counsel, files an application to abandon the stock in her tiny business as being burdensome and worthless to the bankruptcy estate.

Now, if there's a debt load of $10,000 in the corporation, mostly from the lease, the trustee should (no guarantee) take a look at the $300 replacement value of combs, mirrors, telephones, signage, carpets, and half-empty cans of hair spray, balance that against the $10,000 owed by the corporation, and then agree that there's no reason to object to the abandonment of the stock from the estate.

The stock then flies out of the estate, into the waiting hands of the debtor, and the debtor now gets to run the corporation just as though she (the individual debtor) never filed a bankruptcy.

Sounds simple.

If only it were.

First, this works much, much, MUCH better if the corporation has gone dark (no business being done, at all) prior to the filing of the individual bankruptcy. It muddies the water no end if the business is being run after the filing, because then the poor trustee has to consider going concern values, and who owns the money being generated inside the corporation, and a lot of other arcane legal issues.

If the corporation has cooperated by going dark, the analysis is much simpler for the trustee.

And we don't want, ever, to confuse or anger the trustee. A happy trustee is a beautiful thing.

Note: if the trustee objects to the abandonment of the stock, everybody gets to talk. Then the debtor may or may not decide to make some offer to purchase the stock.

Or the debtor will decide to set up shop down the street, with a new set of combs and clippers that she bought with dough from dad.

See? It's all simple, but it's never easy.

And worse, there's no way to predict which way the trustee will jump on the application for abandonment.

That's why there has to be a plan "B", and a plan "C", and a plan "D", fully formed and ready to go PRIOR to any bankruptcy filing.

Because all of the trustees are actual, factual humans; and as different as snowflakes. Ditto the Bankruptcy Judges.

And Judges differ in their opinions. You heard it here first.

And that brings us to my next area of interest: when Judges don't agree, what's the right answer?

Arizona Bankruptcy Judge Talks About Reaffirmations, Redemptions in Her Bankruptcy Cases in a Video Published on the Arizona Bankruptcy Court Website

Bankruptcy Judge Hollowell sits primarily in Tucson, so she presides over my cases less frequently than some other Arizona Bankruptcy Judges.

But she's always been smart, even before she got the robes.

She also gives a care about debtors moving through her Court, and she's generated a video discussing reaffirmation and redemption which is published on the Arizona Bankruptcy Court Website.

Whether your case is in Phoenix or in Tucson, it's a smart thing to listen to a Bankruptcy Judge who took the time to explain how she looks at reaffirmations.

You will all recall from my prior blog entries on the point that I share her concerns about reaffirming on automobile loans. In fact, I like reaffirmations the same way I like root canals.

If you listen to the entirety of Judge Hollowell's reaffirmation and redemption video, you'll understand why I feel that way. Or read my older posts on the subject; I was traumatized by a client who asked me to help her reaffirm, who subsequently defaulted on the expensive car loan.

That's why they call it the practice of law; you get to learn a lot of ways NOT to do things.

If You're Gonna Be a Bankrupt, Don't Be a Banker!

Ordinary people of all sorts just plain like to help.

And during a depression, it's hard to resist when a family member wants a loan, or wants you to pay back a loan. Or asks you to park money in your account, because some creditor is chasing the relative or friend.

If you have issues yourself, and might need to file a bankruptcy, find it in your heart to resist. Don't give a loan to a relative. Don't pay back a loan to a relative. And don't let a friend, relative, or lover park money in your account.

The reasons are pretty simple. If you repay an unsecured debt to an insider within a year of filing your bankruptcy, the trustee will simply rub his hands together and say, "Yummy!" You have unwittingly exposed your beloved mother, grandmother, dada, or memu to a lawsuit.

The polite trustees always ask if you want to pay them the amount of the preference, or if you'd rather they simply let slip the dogs of war on Grams.

If you loan money to a relative, and you don't receive that amount back prior to filing your bankruptcy, it's an ordinary account receivable. And the polite trustees will ask if you want them to sue your sister with cancer, or if you'd rather pony up that amount.

And DO NOT let somebody park dough in your bank account. It's just bad business. What if one of your creditors garnishes that dough out of your account?

Your friend becomes your former friend.

And what if you give that amount back to your soon-to-be-former friend just prior to filing? It looks just like a preference, or a fraudulent transfer.

So unless you want to learn the rules of tracing and co-mingling money, just say no!

Document Preparation Services (Docu-preps) and Bankruptcy in Arizona

Here in Arizona there is no unauthorized practice of law statute.

There are, therefore, document preparation services that will word-process wills, bankruptcy petitions and schedules, and divorce packages.

The prices for those services will vary. The prices for word processing a bankruptcy package is apparently held to a ceiling of $200, because the docu-prep services are permitted to provide typing and clerical services, but not legal advice to a potential debtor.

Have I ever referred anybody over to a typing service for a bankruptcy? No.

Would I ever do so? Ever is a long time, I suppose.

But a "no advice" service would make me nervous if I were filing a bankruptcy.

There is, after all, so much to go wrong. go wrong. go wrong.

At a Flagstaff first meeting of creditors in a Chapter 7 Bankruptcy case, I watched a debtor couple lose three vehicles that were not exempt. And that made me sad.

I knew if they had gone to somebody who knew what they were doing, and who was permitted to give advice, the couple would have sold the vehicles prior to filing and at least been ahead of the game for six months worth of food, fuel and provisions, whatever provisions are.

But it made me sad.

Gambling and Bankruptcy

Every now and then somebody drops in and discusses how much they don't like themselves, because they just bet their way into the poorhouse.

Even worse, I sometimes get a chance to talk to some poor devil who's dishonored a gambling marker from Las Vegas, and now has an ARREST WARRENT out for him, and is looking at the probability of being EXTRADITED to stand trial in Vegas for what they suggest is like passing a hot check (the Vegas view of dishonoring a gambling marker).

That's the kind of corporate stupidity that comes from being run by a publicly traded company that has to report quarterly gains.

The Mob was much smarter. They wouldn't let a schlub run up a $200,000 marker, and if he didn't pay, they just WOULDN'T LET HIM PLAY AGAIN until he made good. Or just work him over a little.

Now lemmie ask you: are you more likely to use a marker (gamble on credit at the casino) if the consequence is that they might sue you, or refuse to let you keep playing, OR if the consequence is that you'll GO TO JAIL FOR TEN OR TWENTY YEARS for failure to pay?

Yeah, that's what I thought.

So I have a very strong suggestion for you.

Do not ruin your life with compulsive gambling. Find a different, less expensive compulsion with fewer bad side effects.

Compulsive swimming, maybe. Compulsive blogging. Compulsive fingerpainting.

But compulsive gambling is now plain out, especially if you're asked to sign a marker at the casino so you can keep going.

Just say no.

How Can You file a Chapter 7 Bankruptcy and Keep Your Small Business?

Well, you can't. It's absolutely impossible.

Except when you can.

I'm going to write about this topic and start with the very smallest and simplest business, and work up to more complex and larger businesses.

Our first example in this topic area is the haircutter/dog groomer. Same business, different species. But we'll stick with the haircutter to keep it simple.

She's cut hair in a tiny little place that is her pride and joy; she came here from a different country, and loves having the freedom to own a business, which she didn't have back in East Mumbledy-mumble. The government there was too big, and had too many regulations to make it possible for an ordinary person to open a business and thrive.

Like many legal immigrants from East Mumbledy-mumble, she's willing to work sixteen hour days, nine days a week, because that was common in the state run factory that was formerly her boss back in the old country.

She's had a ten-year great run cutting hair, and now she's hit a rough spot on the pavement. And that's for three reasons.

One is that she doesn't know how to advertise on the internet, so she's invisible to customers. But she still has almost all her old customers, because she does such good work.

One is that her customers, one and all, are also affected by the economic depression currently gripping the United States. Therefore, while she's lost very few customers, they now come in for cuts only every other month, rather than every month.

For the numerically challenged, that means that her gross income has been cut in HALF, through no fault of her own; BUT HER OVERHEAD IS THE SAME AS IT WAS BEFORE THE INCOME WAS CUT IN HALF.

The final reason that her income is down is simple, brute competition. There are now haircutters who'll work for very little indeed, just to keep their doors open.

So how does she get to dump the debt and keep the business?

Watch!

First, the business sort of exists, and sort of doesn't, depending on your perspective.

She didn't incorporate her business. It's a dba ("doing business as...").

Therefore the physical plant, her chairs, and her clippers, and her stuff, all belongs to her, rather than to some other legal entity, like a corporation.

Here in Arizona, there's a "tools of the trade" exemption. It's only $2,500 or so, but we can aggregate her tools of the trade exemption with her husband's (he brings in no money, and cooks well and keeps the house clean. That's to keep the example simple).

And the tools are going to be valued at replacement value, and since they're all old and used, and used tools are a drug on the market right now, all of her stuff (clippers, brooms, bins, half-empty hair spray cans, mirrors, combs, and so on) are going to be exempt, or worthless, which is almost as good.

Now, you'd think that just filing for her would be good enough. But no. Because the trustee in her case will quite reasonably ask about the good-will value of her tiny business if it's open on the day that she files a Chapter 7, and the trustee will attempt to obtain payment from her to buy back her own tiny business, where she works many hours a day, on her feet, with no help. Because a going concern has value over and above it's asset value.

Fact.

So she closes the business, because under the best of all possible worlds, she would not have money to "buy back" her own business, nor would she even be able to survive the process of evaluation of the value, or fight with the trustee's very smart and aggressive lawyer when he or she decides on a value that the trustee DEMANDS.

Because if the debtor doesn't cough up the dough, the trustee, as a fiduciary, must sell the business, along with the client list, minus the tools of the trade.

Fact.

But now there's no business. Our heroine has decided that she needs a mental health break, because she's close to a breakdown because of creditor phone calls and letters and threats, so she closes her business.

Now she inventories her tools and all her other assets, and she lists her debts.

Now she files her bankruptcy.

And then she rents a much smaller, much nicer place down the street. For no money down. Because this is a depression.

And she puts up a sign with a different name for the business, because the old name is property of the bankruptcy estate (although it has exactly zero value).

And she has a new telephone number, because the old telephone number was property of the bankruptcy estate.

And she lets her old clients know about the new place by sending them invitations to her not-so-grand opening of the brand NEW business, and she'll also tell them about it when she goes to her five Church services on Sunday, at five different churches, because she may not know how to market using the internet, but she sure knows how to shake hands at the pancake breakfast!

And now she's back cutting hair, minus a lot of debt, and has kept everything she wanted to keep.

And my next discussion of the topic will be the same haircutter, plus the complication of a pre-existing corporate shell drenched in debt.

Stay tuned!

Apparently, the Best Bankruptcy Lawyer in Phoenix, Arizona Doesn't Work at that Pre-Paid Legal Services Firm

So there I sat, like you do when you're a bankruptcy lawyer in Phoenix, Arizona, and this nice couple sat down.

I said, "So how can I fix all your problems?" Because I always want to fix all their problems. And sometimes I can.

She said, we were a little uncomfortable with the advice we got before, so we thought we'd shop bankruptcy lawyers. I said that I was happy that I was on her shopping list.

I also asked what advice made her uncomfortable.

She said that the last bankruptcy lawyer she'd talked to hadn't been board-certified.

I said, no biggie. There are several very good lawyers in the area who are not board-certified in bankruptcy law, and I was still happy to refer them cases appropriate to their skills.

She said she had $20,000 worth of non-exempt real property, and his advice had been "Sell the non-exempt piece of real property to your daughter for $1,000, then wait for six months and file your Chapter 7 Bankruptcy."

I said that was a remarkably, incredibly, seriously bad piece of advice for everybody in sight. Your daughter would get in trouble. You'd get in trouble. You might actually go to jail. At a very minimum it would have been a fraudulent transfer, just as though you had sold a car to your daughter for a dollar prior to filing.

And I also pointed out that I was mystified by the suggestion that waiting to file for six months would somehow help. There are two relevant fraudulent transfer statutes that jumped out of my head when I heard the story, and one has a one-year reach back, and one has a four-year reach back.

So no matter what the nice couple decides to do, at least they aren't going to be committing bankruptcy fraud on my watch, because they're waay too nice for orange jumpsuits.

And I still need to find out what pre-paid plan that was, and what amazingly bad Arizona bankruptcy lawyer that was, so I never refer a client to him by mistake.

Auctioning a Debtor's Dreams, Hopes, and Beanie Babies in Bankruptcy Cases

In Arizona, about once a month, there's a sale by the trustees of property that the trustee believes is not exempt in that trustee's Chapter 7 Bankruptcy cases.

The trustees have slightly different ways of approaching the sales.

The physical plant for the sales is Room 102 at the District of Arizona Bankruptcy Court, and it's an ordinary room with a phone in the middle of a folding table. There are perhaps fifty chairs in the room.

The trustees differ in their approaches in many ways, but not in one: they don't take cash. Normally it'll be a cashier's check within three days of the sale.

There is normally a lowball bid first made by the debtor.

There are people present on the telephone, often including the debtor, and the folks on the phone, and the folks in Room 102, can bid.

The increments of price differ a bit depending on the trustee and the value of the asset being disposed of at the sale. The increments might be $1,000 for real property (20 acres in Casa Grande, for instance), or $10, for the exercise bike.

The assets being sold are broken out individually by some of the trustees, so that trustee might show a sale of five different cars, all with different initial bids made by the debtor.

Another trustee might have a sale of "one pool table, three guns, two exercise bikes, and a pearl necklace and earrings" all lumped together, with a starting bid of $500.

Yet another trustee will list the items for sale with great particularity, showing a Glock 9mm pistol with case and two 16 round magazines and two 50 round boxes of ammunition with a starting bid of $100 (note: the Glock, sight unseen, was bid up to $300; nobody wanted the 22 pistol, which was bought back by the debtor for $100. The 22 pistol was therefore "Sold As Bid", which happened about half the time.

The debtor, especially with wedding rings and cars, had the privilege of bidding in the exemption to which the debtor was entitled.

Note: I didn't notice any particular bargains for anybody.

Also note: auction fever caused some items to go for more than a careful buyer might have paid.

The Best Bankruptcy Lawyer in Arizona!

For what purpose?

Lawyers are like golf clubs; there are clubs for sand, there are clubs for distance. There is no best club for every situation.

There are lawyers I think of as the best in Arizona for specific purposes. There are clients I won't take for various reasons. I try to send them to a good home.

For instance, there are folks who must file a "big box bankruptcy". They are, either because of a failure of education or emotional issues or personal preferences, folks who want to bring in a big ol' box of jumbled, crumpled paper and never talk to their lawyer again until the First Meeting of Creditors at the Bankruptcy Court for the District of Arizona.

I have a friend I'll refer 'em to. Dangling participle and all.

Generally, before I'll refer a case out to another lawyer, I want to know that they are board certified as a Specialist in Bankruptcy Law by the Board of Legal Specialization in Arizona. I would also like them to be peer-review rated AV by Martindale.com. I would also consult with their AVVO.com rating.

There is also the issue of personality and experience, and since I've been doing this so long, I have a pretty good idea what many knowledgeable lawyers in Arizona are all about, at least in the bankruptcy arena. I have only worked closely with a few divorce lawyers, for instance, and a large double-handful of high-end litigators.

One guy, for instance, will take anybody as a client if they have the retainer; this distinguishes him from most of my buddies, but it's a useful characteristic. He's the bankruptcy opposite of the little kid in the cereal commercial who hates everything (Mikey, remember?). He's a resourceful lawyer, and I respect him; but he's taken clients who would turn your hair white!

I have a few friends who wouldn't dare touch a complex case, and that's good; you MUST know your limitations.

And I never get angry (okay, a little frustrated, maybe) when I call a buddy and find out that they can't take a complex matter now, because they're swamped. Okay, got it. Next!

But there are very good lawyers for Chapter 13s, for Chapter 7s, for Chapter 11s, and even the seldom-used Chapter 12 cases. And if the case isn't a good fit for me, I look at my laundry list of lawyers who are former Chairs of the Bankruptcy Section of the State Bar, or board-certified as specialists in bankruptcy law, or "pre-eminent" 5.0 AV rated by Martindale.com, or rated a "superb" 10.0 by AVVO.

Here's something else.

I don't ever refer to a law firm. There are no good law firms. There are only good lawyers.

There are law firms that have a deserved good reputation, and bankruptcy law firms that have two dozen ethics violations where you wouldn't send your worst enemy (okay, maybe your WORST enemy, but not your second-worst!).

But I once made a recommendation to a great law firm, and watched as a guy in the bankruptcy department did a lousy job because he was the wrong lawyer for that situation; mind you, the right lawyer was down the hall, in the same department. I was frustrated, but the gentleman I referred over really liked that lawyer, so he rode the case all the way down.

And a great lawyer may be having a bad week, because of the intervention of life-events. Nobody is at their best immediately after a massive heart attack, not even lawyers. Note: I want all my lawyer buddies and all of my clients and all of my friends to talk plenty of Vitamin C, because of the study published in the Lancet in 2001, and everything that Linus Pauling wrote. According to the Lancet-published study, the folks who have the largest amount of Vitamin C circulating in their blood live, on average, about nine years longer than those in the lowest quartile.

So when I look for the best bankruptcy lawyer in Arizona for a case that isn't a good fit for me, I think about a lot of different variables.

Bankruptcy debtors no longer say, "I really don't want to do this."

Over the course of the last thirty years or so of working in bankruptcy law, I've found goofy ways to amuse myself. One was waiting for my consumer clients (who are utterly different than my business clients) to say, "I really don't want to do this."

Some took until the very last moment of the interview to get it out; and some said it before they said their names. But 99.9 per cent of all potential consumer bankruptcy debtors said it eventually during their first talk with me. Although some would wait until I was walking them back out to the entry area to utter the inevitable phrase.

But I recently noticed a sea change.

Potential debtors no longer say it.

I think I know why.

Whether they're the half of the debtor population who sees the bankruptcy as blessed relief, or the half that sees bankruptcy as a damned failure, debtors now know that we are in the middle of a depression, and that they have no other way out but to file a bankruptcy of one sort or another.

I think that my potential clients are a good deal smarter and better educated, as well; since I want them all to read and do the homework on my blog before they come in to visit with me for the first time, they may well have concluded that they pass the means test AND the Joseph C. McDaniel Rule of Inevitable Bankruptcy Filing, and that there is a bankruptcy in their future, regardless.

And for the record, even though I'm seeing a remarkable number of clients these days, I usually see a lot of clients just because I've done this so long, and during an economic upturn, there are plenty of debtors who tried to start a goofy business, or who found a "can't lose" investment vehicle, and those provide me with a lot of clients no matter the economy.

So for my part, enough already! Knock it off with the depression!

Will My Creditors Be Angry if I (fill in the blank)?

First, most of your creditors are gigantic institutional entities, and they have no emotions whatsoever.

They do, however, like primitive organisms, have responses.

When you don't pay creditors, they will, depending on the type of creditor and the stage of collections, either sue, garnish, foreclose, set up a debtor's exam, or write mean letters. And sell your debt downstream so the creditor can get a federal bailout or a bad-debt tax benefit, which is roughly the same thing.

Now, the creditor doesn't care if you have cancer, if your mother just died, or if you are unemployed. It's just not something the institution is equipped to register, like color to a blind man. It's not that the creditor institution rejoices in your sorrow; it only sees your economic profile, not the details of your life or your dreams or your aspirations.

So don't pine for the love of your creditors; you never had it, ever. When you paid your bills on time, they might have sent you a calendar at Christmas, but that didn't mean they loved you. They just sent you a calendar because that was their response to the stimulus of current payments on a 12-month cycle.

And they don't hate you; they're just sending debtors who are current one type of paper (a calendar at Christmas) and debtors who are not current a different type of paper (a lawsuit).

Creditors are a simple life-form, with limited and simple responses to stimuli. Kinda like the things you studied in high-school biology class.

So don't worry about whether they like you or hate you. They don't. They live in the eternal now and send out calendars and lawsuits with no reference to any emotion whatsoever. If they were Buddhists, they'd be very good Buddhists indeed; they act with no attachment to the fruits of their actions.

On the other hand, certain employees of creditor entities are perfectly capable of being the south end of a donkey going north.

That's what bankruptcy is for.

p.s. note that there are things that you wouldn't do anyway, because you're neither a bad person, nor dumb as a stump. But institutional creditors will be a little cranky with you if you steal from them (run up your credit cards like a fiend just prior to filing) or if you destroy their collateral for fun (smash the toilet and sink and bathtub in the house you must leave because of the foreclosure).

Don't steal from creditors, and do not intentionally destroy a creditor's collateral. Even if the institutional creditor will not be angry in the same sense that you might get angry, the institutional response will seem a lot like an angry response.

What's a Good Result in a Chapter 7 Bankruptcy?

Well, that depends.

Generally, what an Arizona bankruptcy lawyer wants to see in a case (at least, what I like to see) is a case in which the debtor (the "bankrupt") passes the means test, or is an exception to the means test, and gets to get rid of all the debt, and to keep all the assets. Pretty simple.

Except that everybody is different. Everyone has a different matrix of assets, liabilities, income, and preferences. And some people really need to wait to file, until the insider preference falls off, or the tax refund comes in.

Some folks don't care about optimizing a result; they just want to file NOW, regardless of the precise outcome. That's okay, but my experience is that if somebody pushes me to file for them regardless of the consequences, because they want emotional relief NOW, they still don't like the outcomes. Because they wanted the whole thing to be over, you know?

So I prefer trying to get as close to a good result as I can, since I know that emotions shift in fairly predictable ways before, during, and after a bankruptcy filing.

The other element I hope we can achieve in a bankruptcy case, which I have the least control over, is a debtor who becomes clean of all debt, who then has more dough than needed to live on a day to day basis, who is now able to contribute to some sort of retirement vehicle, so that someday they'll have the one-in-each-hand Margarita experience on white sands with the waves rolling in, after retiring.

Now, that's just me.

The client is the dog, and I'm the tail, you know?

So if a client really, really wants to stay in a house that's two hundred grand upside down, and really, really wants to keep paying on a car that's waaaay to much car, or just much too expensive, the client is right, and I'm wrong.

Because life is short, and you have to take happiness where you find it. Some people love their houses so very much, or their cars, that they will cling to them under any and all economic circumstances.

And who am I to stand in the way of love?

Is Getting to Your Bankruptcy Discharge Heaven or Hell? Your Choice!

There's a movie called Jacob's Ladder. The interesting part of the movie (which is one long hallucinatory flashback) has to do with a philosophical analysis that is delivered by Danny Aiello, quoting the 14th century Christian mystic Meister Eckhart:"Eckhart saw Hell too; he said: 'the only thing that burns in Hell is the part of you that won't let go of life, your memories, your attachments. They burn them all away. But they're not punishing you,' he said. 'They're freeing your soul. So, if you're frightened of dying and... you're holding on, you'll see devils tearing your life away. But if you've made your peace, then the devils are really angels, freeing you from the earth.'"

The concept that attachment, excessive holding on, can cause suffering, isn't merely a part of Christian theological tradition. It shows up as the central concept of Buddhism, that desire causes suffering.

So a part of bankruptcy may involve letting go in order to experience the bliss that is the bankruptcy discharge. Now, a bankruptcy discharge isn't heaven, nor is it nirvana.

But if you're squashed flat by debt, and you spend sleepless nights worrying about how you can possibly pay your debts AND feed your family, then letting go of your dignity, and your credit rating, and your non-exempt assets when you can't sell them prior to filing, and your pride, can sometimes give people a good deal of psychological rest and comfort.

And I am constantly surprised, for no good reason, that some folks make a decision to suffer through each and every moment of the bankruptcy process, and some folks decide to rejoice.

Fortunately for me, I'm perfectly willing to lead a band of bankruptcy tourists through bankruptcyland whether they are crying or laughing. As long as they listen to me, and don't step into the quicksand.

Filling Out the Dreaded Lists and Schedules!! Daaa-daaa-daaa-DUM!!!!!!!!!

This is designed to help my clients fill input information in their forms. This is not legal advice for somebody in New York, because the local rules, folkways, and practices, as well as the exemptions, are going to be different in New York. If you're not my client, for heaven's sake, don't read this and think you can be your own lawyer. My clients have the dubious benefit of talking to me and asking questions of me and of Heidi, the Bankruptcy Angel.


BEFORE YOU START TO FILL OUT YOUR FORMS FOR MY OFFICE, READ THIS ENTIRE POST COMPLETELY! THEN HAVE A CUP OF COFFEE, AND READ IT AGAIN. THEN ASSEMBLE THE INFORMATION YOU'LL NEED, AND THEN and only then YOU CAN START TO FILL OUT THE FORMS.

At my office, we use a commercial package to facilitate getting the information needed to file your bankruptcy from your brain and records and fingers into a set of schedules and lists and statements that can be filed with the Bankruptcy Court in Arizona.

That system is called Rapid Imports, and it also goes by the name "Stopmybills.com".

As my first instruction to you, DON'T HIT "SEND" UNTIL YOU HAVE FINISHED PUTTING ALL YOUR INFORMATION INTO THE SYSTEM. THAT WILL DELAY YOUR FILING AND CAUSE ALL SORTS OF PROBLEMS.

Here's the good news about it; your schedules will not contain a typo put there by a typist in the pool, working at minimum wage.

Here's the bad news: your schedules will have the information that you provide. No more. And since it's a crime (no kidding) to fail to list assets, or to fail to list creditors, you need to list 'em all. Now, if you don't list an asset or a transaction like the sale of a car, or you fail to list a creditor, you may very well not go to jail. You might get lucky and only lose your discharge, or have your case dismissed.

We don't want that, and neither do you. So get serious about the project. Note that you can save what you've input into stopmybills.com, and come back to it in another session, until you hit the dreaded "SEND", which you WON'T do until the information is complete and correct.

Let's talk first about why you need to get serious about filling out your forms accurately. On the one hand, if you want debt relief in Bankruptcy Court, that relief comes only after the filing of your petition with the accompanying lists and statements and schedules.

So if you want the automatic stay, and then the discharge, which are the usual reasons that people want to file a Bankruptcy Petition, then you'll want to fill out the forms.

Start by collecting all your information so you have it next to you. Put together your list of assets and your list of debts and all the financial information you can find, so it'll be easy for you to find. I strongly suggest and advise that you pull three credit reports on yourself or selves, so you have a data "safety net". The credit report won't have all your debts, but once you have listed all the debts you remember, and that show up in your records, the credit report may alert you to debts you have forgotten. GET THREE CREDIT REPORTS BEFORE YOU START TO FILL OUT YOUR FORMS, GO IT?

AND DO NOT PRESS SEND UNTIL THE INFORMATION IN YOUR SCHEDULES IS COMPLETE. COMPLETE. ENTIRE. COMPLETE. REALLY!!!!

That means that you're going to list all your stuff, with values, and all your debts, with account numbers, and a lot more things than that, as well, including transactions, like the sale of your non-exempt car to Jimmy Smith and the amount you were paid for that car. Remember that your trustee will want to know where money coming in to you for the last year or so came from, and where it was spent.

When you start the process, you'll see fields for questions about general information; that will include name (include all names you've used over the past eight years), phone numbers, address, and mailing address if that's different from your residence.

Then you'll start filling in data concerning real estate (real estate includes bare land, and houses, and apartment houses, and any other property attached to the dirt) in which you have an interest. Note that you need to include the month and year you purchased your interest in the property.

You'll also need to enter your estimate of the value of the real property. One site you can use to get a guesstimate (they call it a Zestimate; I couldn't make this stuff up) is Zillow.com. It's free. Other sites you can use are housevalues.com, azmarketanalysis.com, or smartervalue.com. I don't care what estimate you use, as long as you have some reasonable basis for the value on your schedules. I suggest you print out the sources you used to find your values and stick 'em in a three-ring binder, so you can show them to the trustee if she asks. In fact, I don't just suggest it. I demand it.

You'll then need to input information about your personal property. The values there are going to be replacement values. Go look at e-Bay, or craigslist, or yard sales to see what it would cost to replace your 9-year old couch (the one that has helped five kittens grow up, and the St. Bernard). Look for replacement values that are similar to the items you have.

Specifically, if your end table was a personal possession of King Louis IVX and has a market value of $9,000,000.00, don't get cute and list it as though it's an end table from Wal-Mart and worth $3.67 because of the stains left by the, you know, kittens.

HOW SPECIFIC MUST YOU BE? Well, that depends on the category of asset.

I'll try to provide guidance as we move through the list of categories. In some categories (checking, savings, or other financial accounts, excluding IRAs), you'll be completely detailed. Ditto with cars and motorcycles. But clothing generally gets lumped ("used clothes and costume jewelry, value $500", because unless you're the singer known as Cher, your used clothes are not worth more than $500 maximum, and the trustees all know that). Furniture gets listed piece by piece, because the exemption gives you $4,000 for furniture, but it has to be specific pieces of furniture.

The categories:

1) Checking, savings, and other financial accounts (excluding IRAs): like I said, the more detail, the better. On the date of filing, you'll probably only have $300 (the exempt amount for a couple in Arizona) in one savings account). You will have used the rest of the money that was in there to buy food, for instance, or make a payment on your mortgage, using debit cards, prior to filing.

2) Security deposits that have not been returned to you.

3) Household furnishings; this is the category where I want you to list all your furniture, PIECE BY PIECE, because the trustee needs to see whether the items are exempt! Note that everybody has five televisions, and the first one and the second one are exempt for hubbie and wifie in Arizona. But you'll also figure out when you check e-Bay or craigslist that your twenty year old black and white analog television is worth very, very little indeed.

---Yes, I said list all your furniture!!! With used-furniture replacement values. One of you gets a $4,000 exemption in Arizona, and the other gets another $4,000 exemption. But list 'em! And by the way, the trustees generally don't have the slightest interest in your third couch, either, unless a king or queen previously owned it. Ditto your non-exempt footstool.

4)Books, music, collectibles, or other art: here, count all your books, cds, and dvds; see what ten of your used cds are worth on e-bay or craigslist, and do the same for your used books and used dvds. Then give us the value of your home library. Generally everything will exempt. If you have posters framed on your walls, do a similar analysis. If you have original artwork on your walls, that your bought when you thought you were rich, go on the internet and figure out, as best you can, what it's worth, and list it. If it's worth a big chunk of money, you might want to consider whether it's worth trying to sell it for fair market value and use the money to buy food. If you sell it, or anything else significant prior to filing, that'll need to be reported on this form, and you'll need to be able to show how you spent the money if the trustee asks you. And she probably will.

5)Clothing--as I said, we usually suggest that unless you're Cher, you list clothing and costume jewelry, $500; that's much more than it's worth, of course, but if the trustee wants to take your clothes and sell them...oh, well, that's just silly. She won't want to try to sell your used clothes.

6)Furs and Jewelry - list your watches separately (the Arizona exemption is one for each of you, up to a value of $100), list wedding/engagement rings separately, and list all of your other non-costume jewelry, which is not exempt in Arizona, separately. Before you go nutty as a fruitcake about your wedding ring, read my discussion of wedding rings and whether you get to keep them. The short answer is simple here in Arizona. You keep them if you want to keep them, and you're willing to do what it takes to keep them. See the post.

7)Firearms or other hobby equipment; just itemize them with a description. Do not list "gun", however, because the trustee can't tell what that's worth and whether it is exempt. List "Smith and Wesson .38 hammerless snubnose revolver, stainless, 20 years old, value $350", or whatever else is a correct description. Ditto with exercise equipment; the trustee needs to be able to tell whether your weight set is from Sears and made of plastic and concrete or is an Olympic standard weight set worth $15,000.

8)Interest in Insurance Policies; the trustee wants to know what the face amount of the policy is, and whether there is any cash surrender value. List 'em all, of course.

9)Annuities: if you have one, list it. If you don't know what it is, you don't have one.

10)interest in education IRAs; list 'em.

11)interest in other IRAs and Pensions. Most of these are exempt.

12)Stock or interests in any business; if you own any stock, no matter whether it's worth very little, you list it!

13)Interests in partnerships or joint ventures: you got 'em, you gotta list 'em!

14)Government or Corporate Bonds: if you have these, why didn't you sell them to pay your attorney's fees? But list 'em if you got 'em. If you sell them to buy food or to make a mortgage payment, make sure you list that transfer.

15)Alimony or support that you are entitled to but have not received: list it.

16)Any other debts owed to you. Even if you didn't ever expect to collect the debt. Even if you think it can't be collected, list it!

17)Future interests, life estates, special rights or powers: if you don't know what these are, you probably don't have them. If you have them, list them!

18)Death benefit plans, life insurance policies or trusts; list 'em if you got 'em.

19)Unliquidated claims; that means that if you have a claim against somebody and you can't tell exactly how much the claim is worth, it'll go here. For instance, if you have a wrongful death claim against somebody, and you can't precisely calculate the amount of those damages, that'll go in here.

20)Patents, copyrights, or other intellectual property; list it if you have it. Value it as precisely as you can. If you've been trying to sell your patent for a decade, it may not be worth a lot. But estimate the value as closely as you can.

21)Licenses, franchises, or general intangibles. List if you got.

22)Customer list from any business you operated in the last eight years. Getting a value for this will be interesting. Note that if you owned a corporation, the customer list is probably owned by the corporation, and not by you. You own the stock in the corporation.

23)Automobiles, trucks, trailers, or other vehicles. The online bluebook may help you; trustees in Arizona are generally looking for high private party values, not trade-in values. There are a ton of other sites you may use if you have trouble with the bluebook, including carquotes.com and edmunds.com.

24)Boats and boat motors and boat accessories: list if you got.

25)Aircraft or accessories. Don't ask me where to find the value for a used wooden Fokker Propeller. I don't know either.

26)Animals. Note that most animals are either exempt or worthless. Trustees generally don't want to take custody of assets that eat or require care. Horses are generally a big issue. If you have horses, find out how much they're actually worth, however you do it, and convince me and Heidi that you're correct before we file.

27)Any other personal property that isn't listed above. Note that if you have a big collection of hand tools that you use in your job, those need to be inventoried and valued at replacement value. There is a $2,500 tools of the trade exemption in Arizona, and we can double that if you're married.

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NOW WE GET TO THE DEBTS SECTION!

YOU NEED TO LIST ALL YOUR CREDITORS. WHEN I SAY ALL, I REALLY, REALLY MEAN ALL. INCLUDING YOUR RELATIVES, WHO YOU DON'T WANT TO KNOW ABOUT YOUR BANKRUPTCY. OR THAT GUY WHO'S SUING YOU, WHO YOU THINK ISN'T ENTITLED TO A DIME. IF YOU DON'T LIST 'EM, THEY WON'T GO AWAY. AND THEN AFTER THE BANKRUPTCY, YOU'LL GET SUED BY SOMEBODY YOU DIDN'T LIST, AND IT WILL BE YOUR FAULT. NO KIDDING. AND IT'S EVEN A CRIME TO FRAUDULENTLY AND INTENTIONALLY FAIL TO LIST CREDITORS.

Here's a practice pointer; pull three credit reports on yourself, and those credit reports will act as a safety net for you. They aren't going to list all your debts. But if you have forgotten about a creditor, the credit reports are a safety net for you. For that matter, if you pull a credit report and see that somebody stole your identity and racked up debt, you're better off listing those debts as disputed than failing to list them and trying to prove after your bankruptcy that you didn't owe them.

I'm begging you now.

I don't want any of my clients to be sued after a bankruptcy, because there's little I can do to help you. It happened to a lovely couple who were clients of mine. They were sure for $100,000 on a note after their case was closed. I asked what happened, and they told me, "We forgot about that one!"

Do NOT let that happen to you!!!!

What address should you use for your creditors? All of them!!

I'd rather have one creditor with five different addresses than for you to leave out the correct address.

IN SPECIFIC, INCLUDE THE ADDRESSES FOR EVERY CREDITOR THAT SEND YOU MAIL WITHIN 90 DAYS OF FILING. AND THERE ARE USUALLY TWO OR THREE CREDITORS ON EVERY BILL! LIST THEM ALL!

You must list the account numbers for each of the creditors.

If there is a collection agency for a creditor, you should separately list that collection agency, and note that they may be using their own internal account number.

As to who is responsible for the debt, the general rule is that if you incurred the debt while you were married, it's a joint debt. If you weren't married at the time the debt was incurred, indicate that it was incurred by either husband or wife, as the case may be.

The date incurred usually relates to when you opened the credit account, and that date may show up on your credit report.

As to the amount due, that's the least important number you are going to be listing. The amount due is a moving target, because the creditor is constantly adding interest and fees.

The type of debt relates to why you owe the money, and the answer may be house, or car, or credit card, or medical bill or general unsecured debt if it's a credit card and you can't remember what you purchased.

List any collection agency that sent you a letter as an assignee of the original creditor.

List any law firm that contacted you or sued you as an assignee of the original creditor.

CO-DEBTORS: ALSO LIST co-debtors as creditors. They may very well have a right to sue you if you defaulted on the debt.

YOU WON'T HAVE ENOUGH ROOM TO ENTER ALL THE ADDRESSES FOR ALL THE LAWYERS AND COLLECTION COMPANIES OF SOME CREDITORS; LIST THE LAWYERS AND COLLECTION AGENCIES AS "COLLECTION AGENCY FOR _________________" OR ATTORNEY FOR ______________"

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Dependants: you'll be listing everyone who is your dependent. That is partly because of the means test. From the perspective of the means test, the more dependents, the better. Note that unless you listed the individual as a dependent on your income tax return as a dependent, you may not be able to benefit from them on the means test analysis.

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Income: You will be required to disclose all the income you and your spouse have received for the last six months for means test purposes. Note that you will also need to scan and email your last six months of pay stubs to Heidi, the Bankruptcy Angel, so she can check your numbers. If you received other income in the last six months, list it.

You will also be filling out information including your occupation, employer's name, employer's address, how long you've been employed, and a current pay stub.

You will also need to fill out information about amounts you earned in two prior years, both from your employment and from other sources.

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Expenses: You are going to be listing all your normal monthly living expenses. Make sure you list as well expenses that you only pay on a annual, quarterly or semi-annual basis. This is an extensive section. You'll need your checkbook or check registers, and a calculator to help you with this.

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FINANCIAL AFFAIRS:

You'll be listing the following sorts of information:

----payments to any unsecured creditor totaling more than $600 in the last 90 days


----debts repaid to relatives, partners, close friends, or other insiders within the last 12 months, so the trustee can sue them for what's called an "insider preference";

----lawsuits you've been involved in over the last 12 months (note that in Arizona, if you file a Chapter 7, any suit you have in a car accident case belongs to the bankruptcy estate for the benefit of your creditors);

----property taken by a creditor or money garnished within the last 12 months;

----property that was repossessed or foreclosed on or that was returned voluntarily to the seller within the last 12 months;

----rights signed over to a creditor within the last four months;

----you'll report whether a fiduciary took custody of your property within the last year;


----you'll report losses due to fire, flood, theft, other disaster, or gambling within 12 months;

----you'll report money paid for debt counseling or to any attorney (including me) within 12 months;

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READ THIS--READ THIS--READ THIS!!!!!!!!!!!!

DO NOT PRESS COMPLETE UNTIL YOU ARE REALLY, REALLY DONE FILLING OUT THE FORMS!!!!!

OUR OFFICE GETS AN EMAIL that tells us you are done filling out forms. After that, do NOT try to enter additional information, BECAUSE IT WON'T WORK!! Email Heidi at my office and tell her about the additional information or corrections that must be entered.

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Sit back and relax. You've done a buncha work and you deserve a break today. Relax as much as you can.

DO NOT EXPECT THAT YOU WILL GET AN IMMEDIATE, BREATHLESS CALL FROM MY OFFICE CONGRATULATING YOU! This was a ton of thankless work. Welcome to my world.

Feel free to email me and Heidi and let us know that you're done with Phase One, and that you'd like to file in a month, prior to the trustee's sale on your house, or after you've gotten your tax refund and spent it on food so your children don't starve, and AFTER you've done the "Spend Down", and have spent your most recent paycheck on your mortgage, food, car payment, or whatever you spend your check on.

Do not plan to punch "send" and to file the next day.

We now have to do the real work of reviewing it and seeing how much you'll lose to the trustee as non-exempt property, or how much you'll be buying back from the trustee. We'll also need to see what crazy, obvious mistakes you made (like listing car washes as an expense, but not listing a car, for instance).

When Trustees Attack!

Over the course of the last thirty years, I've had the privilege of seeing more things than I would have expected when I was in law school.

One is the occasional bankruptcy trustee exhibiting extreme rudeness, prejudice, or ignorance.

I've seen it about a dozen times.

Since I've worked on thousands of cases, that's a pretty good percentage; that is, I've worked on thousands of cases where trustees showed exemplary characteristics.

But think about being a trustee: you get the privilege of telling people that they're going to lose a car, a tax refund, or a house, when the tears are running down their faces.

That's gotta be tough. And they almost always do it with compassion and sensitivity, which they don't have to do.

Now, trustees are always overworked.

This is, after all, a depression.

So some trustees sometimes (and others, always) use threats to get debtor compliance.

That is, they start their first meeting by trying to scare the already terrified debtor into apoplexy. They thunder that if the schedules have omitted an asset, this is the time to come clean! And they use the word perjury as a noun, verb, and another noun. And talk about jail time.

In those first meetings, debtors really ought to come prepared with Adult Diapers.

Others don't do the thundering, but use threats to ask for documents: "and if I don't get those within twenty days, I'm going to file to dismiss your case!"

Now, there's an easy response to all the above.

"The debtor will have those documents to you by the date you've requested."

If they're not available from the bank for a month, of course, the trustee has to get a nice explanatory letter prior to the lapse of his drop dead date, just because.

But whether you get Santa Claus as a trustee, or a close relative of Scrooge, don't take it personally. The poor trustee has to process a zillion cases, and has time pressures imposed by Washington, and a trustee is a fiduciary, so it is a job that has a lot of pressure.

It's not personal; it's only business.

And if you give the trustee the documents she needs to administer the case, that case will usually work its way through the system and a good time will be had by all.

Generally, if the case is prepared with care, there aren't a lot of speed bumps or disasters.

And sometimes something blows up (it's better when all the assets and creditors are listed. Really.)

In cases where something blows up, it becomes a matter of damage control, and that normally works pretty well.

And if not, then there's more damage control.

Remember, even when you have your appendix out, there's a small risk of an infection. But then the doc does damage control. It may require further surgery to clean out the wound. It will certainly require antibiotics, and may require intravenous antibiotics.

But you don't ever want to give up, because then the results are bad.

Do Not Commit Suicide! IT'S ONLY MONEY!

Most people think money is pretty important. In fact, somebody said that money is like a sixth sense, without which we cannot make full use of the other five.

Which is one way of looking at it.

Another way that I've sometimes heard is this: I have an insurance policy, and the exclusionary period has run. If I kill myself today, my family can eat tomorrow.

Now, I don't hear that, or it's variations, with great frequency. But I hear folks nibbling around the edges of that analysis every now and then, and it always makes me sad.

Because money, when had, is spent quickly. I've read that folks who win large lump sums gambling are usually dead broke one year later.

I don't know if that applies to insurance proceeds, but it wouldn't surprise me.

Generally, when I hear people talking about sacrificing their lives to cash in for their families, it's guys who always made a good living and have never been out of work before.

And I routinely tell 'em to get medical help, counseling from a qualified professional (which I'm not), and I also tell 'em that my friends who have committed suicide have in every case regretted it.

Confuses them some, and they sometimes laugh thereafter, when they figure it out.

It's also true that there are still jobs to be had, and that it's possible to start over, even if this is a depression.

And a family needs a dad more than it needs a paycheck; but if you work 40 hours every week looking for a job every single way you can possibly look for a job, you should be able to find a lousy job at minimum wage. And that'll provide beanie-weanie money while you're looking for a better job.


On a slightly different note, I've read that Vitamin D and fish oil are both somewhat useful in reducing depression. But that's a topic for another blog.

Why Am I Going to Build "The Talking Bankruptcy Blog?"

Some folks would prefer to get their information through their ears instead of through their eyes; that is, they'd prefer to listen rather than read.

I can live with that.

So for my potential clients who hate the idea of reading a lot of pages, but can live with clicking on my pretty, pretty picture (white hair, white beard and all), I'm going to talk into the camera and see how that works for them.

Now, part of the reason I'm doing it is this: I was at a first meeting recently, and my client asked, "What Happens Next?"

As frequent readers know, that's the title of a blog entry upon which I lavished much time and love.

But this client wanted to hear it, not read it.

So okay! I accept defeat!

And now I'll run and get a camera and start the camera rolling!

So Is the Depression Over, Bankruptcy Lawyer?

No.

The depression is not over.

I'll get back to you when it is, and I'll buy the Champagne.

By the way, this depression is bad enough that even the French are buying less Champagne.

Note that during the Great Depression, the then-government announced 32 times during the course of the depression that it was over.

It was actually over the thirty-second time it was announced.

And if you're curious, a good bankruptcy lawyer is happier during a boom than a bust. During a boom, bunches of clients drop in to scrape off the debt incurred in starting their goofy business that almost worked. So they need to get rid of the debt so they can start over with a slightly different goofy business.

And eventually, IT WORKS, and the bankruptcy lawyer has a client for life, but now a business client.

For a potential debtor with no income, no assets, no wedding bells, and no prospects, there's no particular motivation to file a bankruptcy case. It's not going to get a lot worse.

The motivation crops up when there's a job or a marriage on the horizon that provides a cash flow that will be garnished by the existing crop of creditors.

And there are fewer marriages during a depression, because men aren't as stupid or shiftless as we look (we couldn't be, now could we?).

The reason there are fewer marriages is simple; guys don't want to promise things they can't deliver, if they can avoid it. The marriage rate (and age of first marriage) in Ireland was the lowest and oldest, respectively, in Europe for many years. When Ireland became the Celtic Tiger of the European Economy, the marriage rate went up and the age of first marriage went down.

Note that in the current U.S. economy, it's so bad that DIVORCES are down. That's pretty obvious if you think about it. If you can't support one household, it's that much more difficult to support two.

And there are some indications that Mexico is about to run out of oil. When and if that happens, Mexico will face massively rising inflation because it will become a net importer of oil, not a net exporter.

Do you think that will be better for Mexico?

Probably a bad thing for the economy of any country. Certainly a bad thing for the stability of any country to depend on other countries to supply energy for it.

Now, the current depression puts people to a rough decision. Normally, it would make sense to get another college degree or certificate of some kind if you can't find a great job now. On the other hand, if this depression lasts long enough, a college graduate will have one heck of a time finding money to pay off the student loans that can't be scraped off in a bankruptcy.

And that's one reason I wrote the Just for Lawyers blog for graduating lawyers, who are not being hired in record numbers right now (it's a depression, you see).

The Means Test: Part 6,374

So when you're doing your first cut at the ball to determine whether you pass the means test, which is one of the ways to get into the doors of Paradise (labeled "Chapter 7", right above the pearly gates and just to the left of Saint Peter), consider a couple of items.

And by the way, I'll come back to this post and beat it up a lot more; it's just that contemplating the means test depresses me, because all of you paid for the drafting of it with your tax dollars, and it doesn't help you at all.

It doesn't even help the banks, which lobbied for about a decade to get it; according to a report published by the government, the 2005 Amendments don't make for more filing of Chapter 13 cases, and higher payments to creditors. They just make the bankruptcy process more expensive and difficult and time-consuming.

Who would have thunk it?

But back to today's topic: when you're first taking paper, pencil, and pocket calculator to the six month rolling lookback which is the means test, ask yourself, Do you feel lucky?

Just kidding.

Ask yourself, do I get paid twice a month, or every two weeks? Makes a difference.

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.

What Happens Next? Funny You Should Ask!

Once you've paid the retainer and filing fee, your next question is predictably going to be, "what happens next?"

I know that because I've done this for thirty years or so.

The first phase of your case is the "pre-filing" phase. During this phase, you'll take your pre-petition consumer credit counseling, and fill out materials online.

You will also start to fill out your forms, after you've pulled three credit reports to make sure that you list ALL YOUR DEBTS, because the law says you must, and if you make us amend because you didn't bother to list all your debts the first time, I will charge you more. Now, when I say all your debts, I mean you're going to list all your debts. Lately folks have failed to list business debts in their personal cases, even though they personally guaranteed those debts, or MIGHT have personally guaranteed those debts. If you're my client, list all your business debts in your personal bankruptcy! One reason is that you won't remember all the personal guarantees that you signed. One is that you may not have a corporation or llc in good standing. One is that vendors often put personal guarantee language in their agreements; it's hard to read, but they'll sue you anyway if you fail to list them.

You will also list ALL YOUR ASSETS, also because you must. Filling out forms is a pain. But you must. Use e-Bay or Craig's list to get a handle on the replacement value of your personal property, Zillow.com for your real property, and Blue Book Online for your vehicles, using the highest private party sale value for your cars, because the trustee in your case will do just that.

You will also list other bits and pieces of information including a description of transfers (which includes that sale of your car so you could buy food) and bank accounts on which you were a signer, and much, much more.

After your have FULLY AND COMPLETELY filled out your forms online, you will press "send", and Heidi will review your materials and email you back for clarifications and corrections. And when the schedules and lists are done, I will review them prior to filing, and then, on a day when Heidi and I and you are fully prepared, and when your bank account has been used to buy food and pay living expenses like your house payment or rent, and the bank account has been spent down using debt card or cashier's checks to $150.00 for you and $150 for your spouse (if you're married), and after you tell us that your schedules are true, correct and complete, we press "send".

Mind you, in some cases, there are many other projects to be done. If you have a non-exempt antique hookah, we may all talk about selling it for fair market value to buy food so your family doesn't starve, but that's a discussion that happens on a case by case basis.

After my office presses "send", and only then, your case has been filed with the Court, and your hearing date will be about 40 days thereafter.

But it is absolutely predictable that you will ask "What happens next?" at least three more times during the process, and I want you to be the best educated, best prepared bankruptcy client in the universe, so I want you to know in advance what's going to happen next.

Here's how that will happen. After you have told us that your materials are complete and true and accurate to the best of your knowledge after you've worked HARD to make them complete and accurate, and we press send and file for you, you'll ask "what next" several times, based on several triggers.

You'll ask, what happens now that I've filed a bankruptcy? So here's the answer.

Then you'll ask "What happens at my upcoming First Meeting of Creditors?" Here's the answer.

Then you'll get your order of discharge (unless there's a Complaint filed in your case, which is pretty rare, or some other speed bump or brick wall), and you'll sort of say, "Great. It's over now, right?" But it is NOT all over now.

Finally, your case will be closed for administrative purposes, and that will complete the timeline of your Chapter 7 Bankruptcy.

If you are a client of mine and I've sent you this in an email, I'd like you to hold onto this, so you can read it now, and read it at the various points when you would say "What happens next?", and if you have additional questions, please let me know, because I like to answer questions. It makes me feel smart.


p.s. if some way, or somehow, you have gotten to this point without reading and doing the homework assignments on my blog, go back! Go back now! Do your HOMEWORK! If you want to be my client, you must do the homework, which means reading all the posts in the homework section, and doing what those homework assignments ask you to do!

Now That I've Filed a Chapter 7 Bankruptcy, What Should I Expect to Happen?

Well, the first thing you should expect is some small amount of peace and quiet. Prior to the filing, you may have been getting a few love notes from creditors in the mail, or by way of their process servers, and phone calls telling you that your creditors miss their payments, deeply.

That will stop rather abruptly, because when you file your creditors will get notification of the filing and the effect of the automatic stay of 11 USC 362, and they will stop. Automatically.

Note that if you get a call or two from a creditor after you file, it's no biggie.

The peace and tranquility you experience just after you file will be a lovely backdrop to the post-petition credit counseling course that you MUST and WILL be taking the day or two after the filing date.

You will also get a love letter from a new source. That's the trustee appointed to your case. It will ask for COPIES of a bunch of documents.

In the quiet after the filing, you will mail the trustee everything he asked for, and you will do it without whining, because that's my job. Just goshdarn do it. And keep two copies; one you'll bring to the First Meeting in case the post office lost your first package to the trustee, and one you keep in your records. Forever.

You will also receive a love letter from the Bankruptcy Court itself. That will be the same notification that your creditors received, and it will tell your creditors that the First Meeting of Creditors will be held about 40 days after the case was filed. It will also point out that if they want to avoid being discharged, in MOST cases they'll need to file a complaint against the debtor soon after the first date scheduled for the First Meeting of Creditors.

Make SURE you sent the trustee the copies of documents he or she requested. If you don't, bad things will happen in your case.

Your First Meeting of Creditors is not the end of your bankruptcy case. Frankly, it's not really very important in your case, unless you goof it up by not appearing, lying at the first meeting, lying on your schedules, failing to send the docs the trustee asked for, or failing to bring your social security card or your driver's license.

So show up at the hearing, and your lawyer will meet you there. Surprisingly, your lawyer will say about eight words, total, at the first meeting: "Good Morning. I'm Joseph McDaniel for the debtor."

See, back in the good old days (formerly known as "these trying times"), the bankruptcy lawyer in your Chapter 7 case would ask all the questions at the First Meeting. Some years ago that changed, and now they're asked by the bankruptcy trustee instead.

I'm not sure that it makes a very large amount of difference.

To get a fuller vision of what happens in an ordinary case, of course, you should look at the timeline of a bankruptcy case.

Note that about sixty days or so after your First Meeting, the Court will probably enter the discharge order in your case, but you won't see if for another sixty or ninety days. And even when you and your creditors get your discharge order, the case isn't over yet!

And as you contemplate your life, and rebuild your credit, and plan for retirement, recall that many, many folks have filed bankruptcy of various sorts through the years, and that most of them lived through the process, and lived on to become famous, rich, or at least happy.

Some died in debtor's prisons, of course.

But we don't have those!

So celebrate!

And anticipate that you'll get unsolicited credit cards in the mail during the year after you file, because credit card companies know you can't file again for eight years! Makes you a darn good credit risk.

p.s. REMEMBER TO TELL ME AND HEIDI IF YOU MOVE AFTER YOUR BANKRUPTCY, UNTIL YOUR CASE IS CLOSED IN A YEAR OR FOUR. THE COURT MUST KNOW HOW TO FIND YOU SO THE TRUSTEE CAN ASK YOU QUESTIONS, AND IF THAT DOESN'T HAPPEN YOUR CASE CAN BE DISMISSED, OR WORSE.

"Am I Going to Lose My House?" Only If You're Smart.

First, it's not your house. You get to live there until you can't pay the bank anymore and then you get kicked out; so the only way you stay is if you pay, or you find some funky government program that actually works for more than .000001% of the population.

Now, let's think about this for a minute: if you are paying four thousand a month for a house, and you can rent a better house for $1,000 a month, is keeping the house a good idea?

I frequently get to talk to very, very smart people who have been hypnotized in one way or another.

If you tried to SELL them a house worth $400,000 for a price of $800,000, they'd laugh at you.

But the same people, once IN the house, desperately want to stay in THAT same house, regardless of the negative equity.

Is that a good idea?

Well, it depends on their projected retirement date. If they want to retire in 2029, it MIGHT be a bad idea.

If they want to retire in 3029, NO PROBLEM!

p.s. it's absolutely true that in some cases, a Chapter 13 will permit a stripdown of the second or third liens. Maybe. Someday. And you're trapped in a Chapter 13 for three to five years for that privilege. My prejudice is simple. If you qualify for a Chapter 7, scrape off all your debt. Reestablish your credit. Buy a house that has a little equity already. End of story.

Doesn't mean my prejudice has to control you. But I do hate to see people pay TONS more than they have to for years.

What's an Abandonment in a Bankruptcy Case?

Getting an application or motion or notice of intent to abandon in the mail in your bankruptcy case shouldn't upset a debtor very much.

It's mostly a remedy for the bankruptcy trustee, who doesn't want to have items on his plate, in his bankruptcy estate, that are worthless and burdensome.

Your house is probably one of those assets.

And the effect of the abandonment is to toss the asset out of the bankruptcy estate. And usually back into the arms of the debtor. As long as the debtor keeps making any payments that are due on the asset, which is normally a house or a car.

Abandonment usually shows up in cases under Chapter 7, because a trustee has different obligations in a Chapter 13, and doesn't need to "administer" assets in the same way as a Chapter 7 Trustee.

The closing of a bankruptcy estate without administering an asset listed in the case has been held to be the legal equivilent of an abandonment.

You Ain't Seen Nothin' Yet

I recently talked to one of the nicest couples in the world.

I sympathized with them that they had lost a lot that they had worked for here and saved during their life here in the United States.

They told me that they had come from a Soviet Satellite country, and that at one point in their lives their entire life savings had been devalued.

By a factor of 1,000.

They told me that after the devaluation, their entire life savings would have bought them one pair of jeans. Not Levi Strauss Jeans, mind you.

And they said that after that, what they had experienced here during this recession was a walk in the park.

Goes to perspective, I guess.

Probably a good idea to be thankful for what we still have in our beautiful country.

Just a thought.

Cleopatra, the Queen of Denial

There's a song that talks about the Queen of Denial, which is a gag; the idea is that the woman in the song is in denial, and her name is Cleopatra, and that's almost like "Cleopatra, the Queen of the Nile".

Okay, you had to be there.

But sometimes people are not emotionally ready to file bankruptcy cases, even if it would be the best thing for them from an economic point of view, and even if it's inevitable because their income has dropped to close to zero, and they have five million dollars in debt, and they have a cardboard box as their only non-clothing asset.

I learned long ago not to fight with anybody about what they wanted to do. If they don't want to file a bankruptcy, and I convince them against their will, they WILL, not may, have buyer's remorse, and then they will be difficult clients to make happy.

I'd much, much rather have many fewer and much happier clients; better for everybody all around.

Recently a compassionate former husband of a stunningly beautiful woman brought that woman to my office for a bankruptcy consultation.

My first clue that she was madder than h-e-double hockey sticks- was that she "didn't like the way I presented information" to her.

In my personal experience, when people say they don't like the way you are presenting information, what they really mean is that they don't like the information.

My second clue was that former wife was angry enough at being in a bankruptcy lawyer's office that she couldn't look at me or listen to a word or even speak very well. Her jaw muscles were clinched and her eyes were squinted. Hard!

In this case, former husband still wanted the best for his former wife.

On the other hand, the seriously beautiful lady did not want to hear that former hubby had no money at all to pay historic debts, because the (take your choice) real estate industry/the construction industry/the pet grooming industry had taken a nosedive, and the formerly great income-earner had struck out.

Because all the debt had been incurred during the marriage in Arizona, and it was all used for community purposes, both spouses were on the hook for the debt.

Former hubby knew that when he filed a bankruptcy, former wife was going to get sued and garnished and judgment-debtor-examined, and he wanted to spare her those traumas, because he still had affection for her.

Because he was a decent and responsible guy.

On the other hand, if somebody isn't ready for a bankruptcy, and I look like a scary bad guy because I'm a bankruptcy lawyer and they REALLY don't want to file a bankruptcy, I never, ever, ever push them to file.

I don't have to.

The creditor lawyers all do that for me.

Is the Attorney Gag Provision of the 2005 Amendments to the Bankruptcy Code Unconstitutional?

I just read a very interesting article about a provision of the Bankruptcy Code that prevents the free flow of information to consumer bankruptcy clients.

Here's the article, in a very good blog called Credit Slips.

One of the things a bankruptcy lawyer is not permitted to advise a client to do is to incur new debt for any reason whatsoever.

Because I'm a law abiding kinda guy, I will therefore not advise a client to incur new debt.

Unless or until the Supreme Court decides that the provisions in question are unconstitutional, at which point I will so advise only if it makes any sense (after all, you wouldn't normally advise a client to go out and incur new debt just for fun, right before a filing; usually, it would not be sound advice).

The article I link to above does discuss some situations where a bankruptcy lawyer might believe it was in a client's best interest to incur new debt prior to filing, and those are interesting theoretical situations.

Bulldogging a Pickup Truck in Bankruptcy Court

Back when I was digging ditches with my Philosophy Degree in the hot, hot summer sun in Arizona, I worked for Pancho Willis, one of the most intelligent men I've ever known.

Pancho would only hire ditchdiggers with advanced degrees, so it was sort of an honor to get to dig his ditches; he hired me because even though I didn't have a Masters or Doctors degree, I had a degree in a subject he'd never been lectured about before. So I got to lecture him about Philosophy as we drove from job to job, or ditch to ditch, from my perspective.

Pancho was a remarkable guy, and once when he'd had a lot of analgesic after work, he was challenged to bulldog a pickup truck, and he took a shot at it. He told me afterwards that he actually figured at the time that he could do it.

Fortunately, he'd had enough beer by that time that the pickup just knocked him aside, rather than breaking any major bones.

I just finished talked to a lovely young woman who has a few million in debt, and a bunch of properties that aren't cash flowing, and the properties are massively upside down. She can't qualify for a Chapter 13 because she doesn't meet the debt limits at 11 USC 109. Her income is somewhere between small and very, very small.

She thought a Chapter 11 might be a great idea, and she'd heard at some seminar or another that by listing all of her debts as unsecured in a Chapter 11 she could get massive leverage to force the banks to negotiate favorable deals with her.

My initial response, which I shared with her, was that the idea was simply a gimmick dreamed up by somebody who had not been in the trenches, and that such a course of action would not help her in the slightest.

I listened to her for a few more minutes, as she explained some other neat tricks of expert negotiators that she'd learned in her seminar, and I told her I thought she was looking at a slow meltdown followed by a quick Chapter 7, and she reacted as though I'd challenged her.

"I'm not one to lie down and take it!", she said.

So I gave her two names for two alternate legal opinions. And I told her I'd buy the champagne if they came up with a great solution that wasn't a Chapter 7.

She reminded me of Pancho and the pickup truck.

And I hope she doesn't get hurt trying to bulldog the bank.

How Quickly Can You Get My Bankruptcy Case Filed?

I often talk to nice people and then get a call from them some months or years later, and they want to know how quickly I can file for them.

Well, I can file very quickly indeed. I've got this electronic button, see?

But that's not the real question.

The real question is, how quickly can a bankruptcy be filed so that risk in filing is minimized to a good extent, and a reasonably good result obtained for the client?

For that question, the answer is simple: the client is the limiting factor.

How quickly can a client COMPLETELY fill out the forms online, with a COMPLETE list of creditors and a COMPLETE itemized list of assets, with replacement values determined with a good amount of due diligence on eBay, Zillow and Blue Book?

And how quickly can the client respond to Heidi's questions when she wants to know why they show spending $324.56 per month for gas, and they didn't list owning a car?

And how quickly can the client spend the money in their bank account using a debit card or cashier's checks in the week prior to filing, so that their family can eat and the electricity stays turned on, and the client doesn't have to pay the bankruptcy trustee an extra $4,325.73 that was in the bank account at the instant of filing?

And how quickly can the client read my blog, so the client knows what's going to happen before the filing, at the first meeting of creditors, how long to get the discharge (IF they get a discharge), how long until they actually SEE their discharge, and what happens AFTER the discharge in their bankruptcy case?

We'll talk, but it's a better idea not to wait till the last minute. Because while bankruptcy filings can't normally be optimized like income tax returns, they can be filed and give rise to bad consequences if a client pushes for an immediate filing and doesn't pay attention to the process.

Will I file a bankruptcy case for a client just because a client screams at me to file for them?

Depends. It's a little like setting a bone without the x-rays, but it depends on the facts. And how loud they scream.

But I'll usually just fire 'em as a client.

The same way a bone doc should fire a patient who insists on getting the bone reset without the x-rays.

FIRST you file Bankruptcy, THEN you get Married!

These things appear to go in cycles. I get five questions in this area, and then the issue goes away for a while.

The relationship between bankruptcy and domestic relations law is messy and goofy because Bankruptcy is mostly a Federal thing, and divorce is mostly a State thing.

To complicate it further, the Bankruptcy Code incorporates a bunch of State Law (for instance, the State Law of property in your State).

And community property states are their own little worlds, and each one is slightly different from the others.

Does this sound like a recipe for disaster? That's because it is.

Here's one general rule to live by: your life is less complicated if you file your bankruptcy first, get your discharge, and THEN get married, as opposed to getting married and saying, "You know, I ought to file a bankruptcy just for myself today!"

Generally, the question that comes up is "Can I file a bankruptcy for myself in Arizona without affecting my spouse in any way?"

The answer is simple: maybe, sorta, kinda.

There's going to be SOME effect. It may well be trivial (the trustee in your case wants to see the tax returns filed by your spouse for the last three years) or it may be huge: the trustee demands that all of the income of your spouse goes in to fund your mandatory Chapter 13 Plan.

Depends on the facts of your situation.

A Timeline for Your Bankruptcy Case; Usual Sequence of Events in A Chapter 7 Bankruptcy in Arizona

Prior to your bankruptcy, suffer and worry a lot. You will, no matter what, and all that suffering will make you feel better when the overwhelming load of debt goes away.

If you can possibly help it, try to refrain from throwing away all of your life savings in the 401(K) prior to thinking about bankruptcy. Your choice, of course.

But when you've suffered enough, and you want to file a bankruptcy, do the following:

1)Do your homework.

2)Make an appointment (by phone or email), come in and ask me all the questions you can come up with after you've done your homework, and then consider whether you can stand me enough so we can work together to get you through the process (feel free to do your homework on my blog and then go see any other bankruptcy lawyer you want. Here are tools for finding a good bankruptcy lawyer if you're not in Arizona, or you meet with me and decide you'd rather have a different bankruptcy tour guide.

3)Decide that you are actually going to file and retain your bankruptcy lawyer, or to file without a lawyer if you feel lucky. "Retain" means to sign a written fee agreement and pay your agreed upon retainer and filing fee, and then get yourself in front of the computer and pay to do your PRE-filing credit counseling (required under the 2005 Amendments); you'll also have to do POST-filing online counseling right after you file, or you don't get a discharge. You are not my client for any purposes until you have paid your retainer and signed the written retainer agreement.

4)Get the password to our system from Heidi and start pumping in your list of creditors and your ITEMIZED list of assets, and all the other info required.

5)Get a call or an email from Heidi, with her list of questions (You list paying $234.56 per month for gas, but don't list a car. You list spending $250 per month on .38 caliber ammunition, and don't list a revolver.)

6)Go back and forth with Heidi until you both think the schedules are true, correct, accurate and complete, and then she brings them to me for review.

7)Spend your last paycheck prior to filing with a debit card or cashier's checks, make sure that we're on or about the perfect day to file your case, and we push the button and it goes to the Bankruptcy Court. Congratulations, you're a debtor!

Note: the reason you're spending your last pre-filing paycheck with a debit card or cashier's checks is that the exempt amount showing in your account when the trustee x-rays it at the instant of filing is $300 for a couple, $150 for a single. If you use ordinary checks to pay your living expenses prior to filing, the amount in your account when we file will be above the exempt amount, and you'll have to pay money to the bankruptcy trustee that you really should have been able to spend on your roof and food. DO NOT EVEN CONSIDER PUTTING CASH IN A SHOEBOX UNDER YOUR BED TO HIDE IT FROM A TRUSTEE. YOU'LL GO TO JAIL, AND I WON'T EVEN VISIT YOU, BECAUSE YOU ASKED FOR IT!!

8) Enjoy your quiet time; the creditors calls will stop very quickly. Tell those who do call get that you filed a Chapter 7 on date x, and the bk number is y. Have a nice day!

9) Read the TRUSTEE LETTER you will receive a day or three after the filing; it will request (demand, really) three years of tax returns, copies of docs concerning your house and cars, and whatever else it asks for.

10) Make three copies of the docs for the trustee, and mail him or her one of those stacks. Call them in a week to make sure they received it. Bring one of the stacks to the first meeting of creditors in case the trustee doesn't receive it or loses it.

11) Read what happens at a First Meeting of Creditors in Arizona.

12) Meet with me a half hour before your First Meeting in Arizona.

13) Attend your first meeting of creditors, MAKING SURE THAT YOU BRING YOUR SOCIAL SECURITY CARD AND YOUR DRIVER'S LICENSE. OTHERWISE WE ALL GET TO DO IT AGAIN, AND THE TRUSTEE WILL BE CRANKY. I WILL NOT BE OVERJOYED, MYSELF.

NOTE: IF YOU DIDN'T SEND THE TRUSTEE WHAT HE ASKED FOR (SEE Trustee Letter, Above)WE GET TO DO THE FIRST MEETING OF CREDITORS AGAIN. AND MAYBE THE TRUSTEE IS NICE, AND WE JUST HAVE TO DO IT AGAIN. MAYBE THE TRUSTEE IS CRANKY, AND MOVES TO DISMISS YOUR CASE.

14) Twiddle your thumbs and breathe for the next 60 days, hoping that a Complaint to Determine Dischargeability of Debt or Objecting to Discharge doesn't get filed. That's an uncommon complication, but if you racked up your credit cards just prior to filing, expect it.

15) After the first meeting, if the trustee wants something, GET IT TO THE TRUSTEE.

16) Receive your discharge in the mail about 90-120 days after your first meeting. It was probably entered in your file at 100 days post-filing, but they don't hurry to mail out discharges. Rejoice with insane joy when you get your discharge, BUT IT'S NOT OVER YET!!!

17) Twiddle thumbs. If you had a no-asset case, your case should be closed for administrative purposes in about a year. If you had a case where there were assets for the trustee to administer, the case will be closed for admin purposes in two to four years or so. Either way, you don't care very much (or shouldn't, anyway).

18)Rebuild your credit with blinding speed, and become an expert on retirement planning. Don't keep doing what you were doing prior to filing, because then you'll keep getting what you got!

19)Save money, invest it well; trust no one, because nobody cares about your money as much as you do.

20)Retire a millionare and vacation frequently in Tahiti. Little fru-fru drinks with umbrellas on beach.

Enjoy!

During the one year or four years until your case is closed, make sure if you move that Heidi and I know so a change of address form can get filed with the Court. That is VERY IMPORTANT, so the trustee can ask you other questions if he or she wants to during that period.

Filing Bankruptcy to Get a Job

Recently I've been retained by two folks for an unusual reason. Now, I'm an Arizona bankruptcy lawyer, and I've been a bankruptcy lawyer for about thirty years, so I've heard a lot of reasons for filing.

But these folks were different.

They weren't being sued. They weren't living in a house that was the subject of a trustee's sale. They weren't being garnished. No debtor's exam was scheduled.

They had been told that they would not be offered a job because their credit was bad, but if they filed a bankruptcy and got a discharge, they'd do just fine with the new job.

Frankly, that makes at least a little sense to me. If you are an employer, would you rather hire somebody who has no debt, and can therefore live on what you pay him, or would you rather hire somebody desperate for more money, and willing to do what it takes to get a little extra dough?

I knew that bankruptcy was pre-retirement planning; I had not previously seen it as a job search enhancement project.

Can I Donate My Car to the Church before I File my Chapter 7 Bankruptcy in Arizona?

That would be a "no".

The adage in insolvency law is that you must be fair before you are generous. It surprises me, because I'm an Arizona bankruptcy lawyer, that so many people want to be generous, just prior to filing a bankruptcy case here in Phoenix.

So if you have a car that you can't keep because it's not exempt, you can think about selling it at arm's length to somebody who buys it for close to fair market value, and then use the proceeds to buy food, fuel and provisions (baby formula? diapers? toothpaste? It's not clear what provisions may be).

But don't give the car to anybody or any organization you like prior to filing. It's a clear fraudulent transfer (you don't need fraudulent intent to make it a fraudulent transfer) because in Arizona, there's a FOUR-YEAR fraudulent transfer statute that's available, through state law, to the trustee in your case.

Now, you probably weren't insolvent four years ago, so the birthday present you gave to your kid is probably okay, IF YOU GAVE IT TO HIM FOUR YEARS AGO, WERE NOT INSOLVENT AT THE TIME, AND YOU TRANSFERRED TITLE BACK THEN, NOT NOW.

Hey, Give Heidi a Break, Okay? Itemize your Furniture!

Here's the deal: when you fill out your forms online in our computerized system, there will come a point when you are finished, and you will hit "send".

If you don't itemize your furniture (yes, I'm not kidding; here in Arizona, furniture is exempt up to a replacement value of $4,000 for a single, and $8,000 for a couple, BUT YOU HAVE TO ITEMIZE IT! REALLY!!).

When I say itemize, I mean you need to list your furniture on our form as single items so the trustee can tell if they add up to the exempt amount, and if all the pieces of furniture fit into the exemptions, kinda like:

couch, 8 years old, $40
dining room table, 12 years old, $30
brown chest of drawers, $10
black chest of drawers, $15

AND SO ON, INCLUDING ALL YOUR STUFF!

If you hit "send" before you're really finished with your schedules, your filing will be delayed while Heidi, the Bankruptcy Angel, is wasting her time typing in (the old fashioned way) what you didn't type in when you were filling out your online forms.

This makes her sad, and that makes me sad.

It makes you sad as well, because it will delay your filing date, because we will serve no bankruptcy before its time (reference to old Gallo Wine commercial; old guy reference).

So help us help you, and fill out your online forms completely; you'll wind up doing twice as much work, overall, if you lump your furniture together and then have to itemize it and send it by email to Heidi and we have to do stuff mechanically.

THE GOOD NEWS: you don't need to itemize your clothes. The exemption for clothing in Arizona is $500, and unless you're Cher, your used clothes aren't worth that much, because they're....used clothes! Go online and see how much replacement value for used clothes is, and you'll understand why we don't itemize clothing in Arizona.

The other news: itemize all your stock, your airline tickets, your real property (that means houses and land) and everything else you have, because it's a real live crime to fail to list your stuff. If you have a used matchbook collection composed of three matchbooks from a bar, a hotel, and another bar, you probably don't need to list those. Probably.

Also note: a lot of people would like to lump items like "exercise equipment" together.

No.

If you do that, neither we nor the trustee know what you have. You may have a jumprope. You may have a $73,345.12 Olympic lifting setup, including a wall of hand weights.

If you're trying to hide stuff by failing to itemize, you might slide stuff past me and Heidi; you won't slide it past the trustee, who will have gone through your check registers and credit card stuff to find out what you have purchased these last many years.

And if you have a firearm or firearms, you have to tell us and the trustee what it is, really.

Gun could mean a black powder rifle worth $72.00;

Gun could mean a World War II relic, rare, in museum quality, worth $17,000;

Gun could mean a .32 pocket pistol so rusted it won't function again, worth $0.

Gun could mean an AR-15 worth (in today's market) $1,752, given the add-ons.

Gun could mean a WWII bazooka, although that would surprise even me.

So make your life easier and let us know ahead of time what you own, with replacement value, so we can figure out if it's exempt or or if it exceeds the exemption values, based on replacement values.

Note: eBay is invaluable for determining the actual replacement value of assets, so use it when you're estimating replacement values for your personal property. Use Zillow for your house. Use blue book for your car (the highest value you can find. We'll talk about it).

Note also: you'll be amazed at the actual replacement value of stuff now, during a depression.

If you play hide the pea from us, you'll have a bad day with the trustee.

I promise.

Getting Their Bench Broken; Landmarc Capital in Receivership in Arizona, Said to be Insolvent

The word "bankruptcy" comes from two Italian words, "banca rupta", meaning "broken bench".

The phrase came about because moneylenders in Venice worked sitting on "banca" in the public square.

I read an article about an Arizona company that was just declared insolvent by the State of Arizona, and couldn't help thinking that their bench was just broken.

The receivership was set up so that the business could be wound down with less expense than a bankruptcy, and I wonder, when the day is over, which technique of liquidation will look less expensive.

Receiverships are interesting animals: I've done a few, and they're particularly creative because you get to sort of write your own version of the Bankruptcy Code in the Receivership Order, as long as the Judge decides it's a legit order. On the other hand, the Bankruptcy Court has specific statutes dealing with preferences and fraudulent transfers, and a huge supply of what lawyers call "jurisdiction", so I can see good arguments for handling the Landmarc Capital case in State Court with a Receivership and in Bankruptcy Court, as either a Chapter 11 or a Chapter 7.

Arizona Realtors: Does Your Commission Belong to You After You File A Chapter 7 Bankruptcy in Arizona?

Maybe, maybe not.

The analytical framework is understood by most experienced Arizona bankruptcy lawyers, because a lot of our clients over the last three decades that we've worked have been realtors.

Here's the Reader's Digest version of the story: maybe you get to keep the real estate commission you receive after you file your bankruptcy, and maybe you don't.

Clear?

Just kidding.

The statute that controls is 11 USC 541, Property of the Estate. Remember that when any bankruptcy is filed, an estate comes into existence automatically, and the important exception to property of the estate in a Chapter 7 is "except such as are earnings from services performed by and individual debtor after the commencement of the case".

Courts have held that the earnings exception applies only to earnings generated by services personally performed by the individual debtor post petition, and NOT to invested capital, accounts receivable, goodwill, employment contracts with the firm's staff, client relationships, fee agreements, and so on.

Cut to the chase: if you did a bunch of work on a real estate deal prior to filing your Chapter 7 bankruptcy in Arizona, and you list your real estate contracts as assets AS YOU ARE REQUIRED TO DO in your schedules, you may:

-get a Chapter 7 trustee who demands 100% of your commissions received post-petition, that were based on pre-petition contracts;

-get a Chapter 7 trustee who understands that a commission that was partly earned pre-petition and partly post-petition should be pro-rated because it's partly property of the debtor and partly property of the bankruptcy estate;

-get a trustee who doesn't care what the facts are or the law is, he wants your commissions and he means now.

If you get a smart trustee who understands the law well, or a smart trustee lawyer, there will be a discussion in which In re Wu, 173 B.R. 411, figures prominently.

In re Wu tells us that an "all or nothing" analysis is probably not correct, and that it's difficult to precisely determine the amounts that are property of the estate, and that legal proceedings to make that determination can take years and cost a lotta dough.

Enter smart trustees and smart counsel for trustees.

Your best friends.

They don't want to torture you without necessity. They just want to do their job and get the dough that belongs to the estate over to creditors, which means extracting it from you, the debtor.

But if a realtor has not decided to go on vacation for six months prior to filing, which might have the effect of making the means test pretty easy, and letting cases close pre-petition and living off those commissions pre-petition, and then filing a Chapter 7 bankruptcy, the realtor will need to list the outstanding contracts in the bankruptcy schedules as an asset, and take his chances (or, of course, her chances) on the precise nature of the trustee or his lawyer in the case.

The best result that's available is when the trustee is smart, knows the caselaw, and says if you kept hourly records, we can pro-rate the commission based on pre and post petition hours.

Or if you didn't keep time records, and there's clear evidence that you were doing work (your daytimer shows all the meetings you had both pre and post), then maybe you prorate based on the number of days prepetition and post, after the contract was signed.

Recently I watched a smart trustee (who's also a pretty tough customer) ask a realtor with a smile, "I see that you received a seven thousand dollar commission two days after your filed your Chapter 7 bankruptcy; that was already in the hopper when you filed, wasn't it?"

The debtor's lawyer was clueless about the reason for the question, and about what was about to happen.

But it wasn't good for his client.

If you're a lawyer and want to figure out how the analysis goes for realsies, just plug In re Wu into fastcase.com and you'll be able to wander through cases to your heart's content. And the State Bar of Arizona GIVES fastcase.com to Arizona lawyers for My Favorite Price!

Reaffirmations: Threat or Menace? or Let Them Eat Steel!

We already know that I hate reaffirmations.

They weren't required in the 9th Circuit prior to the passage of the evil 2005 Bankruptcy Amendments.

Now, the option of staying current and retaining isn't a legal option, but it's a practical option in many cases.

I've never had a mortgage company try anything funny as long as a client stayed current.

But automobile financing is different. About half of folks who lend on cars have started demanding reaffirmations, or they want the car back.

My preference is that we let the car companies eat steel; here's your car!

But some clients have only five payments left. For them, reaffirmation on a car is clearly a pretty good decision.

The problem with reaffirmations is that they re-establish personal liability on a car, so if the debtor, post bankruptcy and post reaffirmation, loses a job and can't make car payments, the car is picked up at 3am by Big Lou and The Hook, and the debtor, post discharge, now gets stuck with a BIG deficiency judgment.

So reaffirmations are agreements I hate, and on the other hand, I'm not quite as dumb as I look (that's not, after all, possible). If a client doesn't have a source of dough to buy another car for cash, and if the car isn't totally upside down, I'll help the client through the reaffirmation if the client asks me to do so.

Note: if the amount owed on the car is thirty thousand dollars, and the car is worth five thousand dollars, even if the client really wants to reaffirm on the car, I'm going to have to be convinced.

A lot. Seriously.

Because I want my clients to get the biggest possible bang for the buck out this not-so-much-fun-as-you-think process.

Just Another Trap in the Bankruptcy Jungle

The 2005 Amendments were not debtor-friendly. They were downright debtor-hostile.

The banks, seeing the collapse of the U.S. economy coming, were interested in trying to avoid the consequences of their own actions in shoving credit cards and mortgages at anybody with a pulse, and they lobbied Congress heavily (translation: spent money like water on campaign contributions) for ten long years before they got what they had paid for: the 2005 Bankruptcy Amendments.

Here are two more of the miserable surprises they plugged into the Code: you must take a counseling course PRIOR to filing (but it can't be too much in advance or it doesn't count!), and you must take such a course AFTER you file.

Just take the second course the day after we file for you and get the certificate to Heidi so there aren't any problems.

The Bankruptcy Court is Like a Jungle, and Filing is Like an Expedition into an Exotic Land. With Rhinos. To Bag the Elusive Discharge.

Prior to the 2005 Amendments, the Bankruptcy Court was a fairly safe, loving, supportive kind of place. Never a walk in the Themepark, but not bad.

It wasn't Disneyland, but bankruptcy lawyers could always point to nice, loving, supportive language in the legislative history to the Bankruptcy Code (the "New Code" of October 1, 1979) that indicated it was supposed to be the land of the Big Mac. I mean Fresh Start.

Now things are somewhat different. The presumptions are changed. Debtors are subject to tests of various sorts to see if they are worthy of relief. And it is clear that the legislators who passed the laws actually intended that there be some poor folks who were not permitted to obtain any relief in Bankruptcy Court.

Tests of various sorts now determine who gets relief and who gets the boot. Or worse.

And the consequences of those who fail the multiple tests are potentially troublesome: dismissal of the case, conversion of the case, denial of the discharge, sustained objections to exemptions, or time in the Greybar Motel.

Previously, both the pity pitch and the stupidity pitch were used extensively in Bankruptcy Court, and probably more than reality would dictate.

Now, neither the pity pitch or the stupidity pitch are of much consequence in Bankruptcy Court. Made a mistake? Too bad! Forgot? Too bad! Got it rough? Too bad! Your numbers don't work, so out you go!

So if I didn't already have white hair, this job would give me white hair. While there are times that I don't worry about my cases, they tend to involve periods of REM sleep.

Or my infrequent trips to the gym, where I only worry about hydration, because my gym is temperature-controlled with swamp coolers.

I've previously used the metaphor that Bankruptcy is sort of like going off the grownup ski slopes without poles, so you better be aimed right on, because changing directions is hard, and there are trees on the slope.

Today's metaphor is the jungle.

The debtor is walking along with the local guide through the fetid, steaming terrain of Bankruptcyland at dawn, seeking the elusive Discharge.

Pith helmets abound.

Suddenly a crocodile darts out! The debtor loses a leg!

The guide and debtor barely make it alive back to base camp, where a Discharge is poised on the debtor's pillow, grinning up at him. The debtor, weak from loss of blood, shoots! After a side trip following the trail into the back country to put the badly-wounded Discharge out of its misery, the debtor departs (vowing never to return) from Bankruptcyland.

The debtor, sadder and wiser and now with the stuffed head of a Discharge on his den wall, talks about the experience for the rest of his life.

Okay, back to Phoenix, Arizona, and the District of Arizona Bankruptcy Court.

Bad things can happen in Bankruptcy Court. They are the exception, and not the rule. But even if you do everything right, things happen.

And don't even think about what happens if you do things wrong.

Because Here There be Tygers.

So If I Don't Like the Direction My Chapter 7 Bankruptcy is Going, I Can Just Dismiss It, Right?

Wrong, Insolvency Breath!

Actually, you can always ask to have it dismissed; just no guarantee that you can actually get it dismissed.

I'll turn this into a real blogpost soon enough, but in general just understand that you don't have an absolute right to dismiss your Chapter 7 case if it starts moving sideways.

Bankruptcy Pre-filing Jitters, and the Platonic Ideal of Bankruptcy Schedules

It is absolutely normal to get nervous just prior to filing your bankruptcy; don't let it disturb you at all. I've had 30 years of watching folks who have pre-filing jitters, some much more than others.

Do a little more exercise; take the dog for a walk. Cook some hotdogs on the grill out back; when you burn your finger on the grill, it'll take your mind off the filing!

The steps just prior to filing a Chapter 7 bankruptcy case in Arizona are pretty simple. You need to review the final draft, and if there are errors, you'll email my paralegal and let her know about them, and she'll correct them.

Some issues are more important than others. If you just remembered that you own a small nation-state, and you didn't list it, you have my permission to come unglued, because I'll fire you as a client and be unkind to you all in the same sentence.

If an account number or zip code is off by a digit, email my paralegal and she'll correct that.

There's also the issue of spending your paycheck just prior to filing.

You get your paycheck sometime; a couple never gets both paychecks on the same day, because that would make it too easy. And we usually agonize over the perfect day to file to optimize the result for a client, but it's also impossible to find the perfect day, partly because the date is often forced by a pending trustee's sale or some other external factor.

The exemption for money in Arizona is a miserly $150 per person, so when you get your $3,000 paycheck, you'll probably want to consider, after consulting with your bankruptcy lawyer, paying for your mortgage with a cashier's check, and using a debit card to buy groceries and prescription drugs and vitamins and minerals and soap and deodorant, because in Arizona there is an exemption for six months worth of food, fuel and provisions (and no, I don't know what provisions are; I once researched all the caselaw on the subject with the most advanced computer system known to mankind, and didn't find an answer. My guess is that cigarettes and feminine hygiene products, as well as toilet paper, are included in the word "provisions", but I'm not absolutely sure.).

The reason for the cashier's check? That's out of your account semi-right-now, so when you look at the account (or more importantly, when the trustee looks at your bank account as of the instant of filing), it will accurately reflect an amount that is exempt.

How about just cashing the check and putting the cash under the mattress?

No. Just don't go there. I'm deadly serious.

But some folks do very well during their meeting with a lawyer.

Some experience stress during the pre-filing phase, and then relax once they review the schedules and they're close to okay.

Some find it remarkably hard to let go of the schedules, and that may be partly my fault; I try to get very accurate schedules, but no bankruptcy schedules are perfectly accurate.

Some are simply over the top, with 45 page faxes of corrections of the information that they themselves typed into the online computer system we use; and that's a function of pre-bankruptcy jitters moved to an entirely different level.

The amounts owed are a moving target, for instance.

The means test is a backward looking rolling test, and the calculations may have been made a day or two days prior to filing.

The value of the assets listed is always a best guesstimate value chosen by the client after they have done some due dilligence, for instance by going to ebay or blue book or zillow, but there is never certainty about values. All appraisals are guesses, no matter how well educated, as Chief Bankruptcy Judge Caldwell told me when I was just a little tadpole of a lawyer.

But I wish I could give an adequate level of comfort to the one client in a thousand who has real, serious problems, and who displaces the emotions about his life into the filing process, which is after all a matter of organizing a mass of disorganized data into an organized form.

And it will never be perfect; I want it much more perfect than most folks (I spent three years reviewing bankruptcy schedules at the Bankruptcy Court, so I have a pretty good benchmark in my head of what they should look like).

But full and complete perfection? The Platonic Ideal of the Bankruptcy Schedule? It is not seen this side of heaven.

And probably not there.

Because where would God find a bankruptcy lawyer?

How Will I Pay for a Bankruptcy if I'm Broke? How Much Will My Chapter 7 Bankruptcy Cost?

There's an old joke among lawyers: a bankruptcy attorney walks into a cocktail party, and the divorce lawyer asks, "How does a bankruptcy lawyer get paid?", to which the response is, "Up front."

There's a certain amount of truth buried in that joke. A consumer bankruptcy lawyer doesn't want a fee owed to him to be discharged along with all the other debt, so he or she has a tendency to get paid in full prior to the filing. For that matter, a commercial bankruptcy lawyer has a similar concern, so he may want a ten million dollar retainer.

Some bankruptcy lawyers take tiny payments over a long period of time. I do not. Because invariably, in my experience, when I take a tiny payment stream from a potential client, something terrible (lawsuit, garnishment, getting fired, foreclosure) happens to them long before their fee is paid, and they know I'm not exactly their lawyer yet, and I know I'm not exactly their lawyer yet, and yet both of us are unhappy and confused about our status.

So instead, I take retainers from my clients because, as Abraham Lincoln said, that's how a client knows he has a lawyer and a lawyer knows he has a client.

And the written retainer agreement is just as important, because it sets out exactly the scope of what I've agreed to do. If I have to jump in front of a bus for a bankruptcy client, that costs extra. As set out in the written agreement.

The one area I can't help with is finding the money for the retainer. I can make a lot of debt go away, and help the debtor keep most (or all) of his stuff. I can't do that trick with the loaves and the fishes. The client can beg or borrow the money from mom. That's fine, although if she borrowed it from mom, mom is then a creditor, and must be listed on the schedules, and also as the source of the dough on the 2016(b) disclosure statement. And mom will be discharged along with the other creditors, and that's fine, because daughter or sonny boy can pay back dough to loving parent post-filing.

Or the kids can get a GIFT, not a loan, from parents, at which point they don't need to list mom as a creditor.

Or the client can sell a non-exempt asset (the other car, for instance) for fair market value. Selling a non-exempt asset or an exempt asset to find money to hire a bankruptcy lawyer is fine, although that sale (a "transfer") must show up somewhere in the statement of affairs, and the proceeds must be accounted for just like any other pre-petition transfer, and the amount paid to the lawyer must be reasonable, as reasonable is defined in that jurisdiction. There is a substantial geographic differential.

Or a potential client can pull money out of a retirement vehicle to pay bankruptcy counsel; that may well have a tax consequence.

Speaking of taxes, a client will sometimes wait for a tax refund, and use that to pay the bankruptcy lawyer.

For that matter, once a potential client makes a final determination that they will be filing, they probably won't keep paying on their credit cards, because that's a lot like throwing money out the window, IF they know that they'll be filing. Obviously, it's a bad idea to stop paying on debts relating to a car or house you want to keep, at least in most cases. But the money that was being spent on credit card payments can be used to accumulate a retainer for a bankruptcy filing.

Some people think they can use a credit card to pay a bankruptcy lawyer; that doesn't make a lot of sense to me, because credit card use within 90 days of filing is presumptively nondischargeable, and it seems squinky.

Over the years, I have suspected that some clients have used credit cards to pay OTHER expenses, freeing up money to pay a bankruptcy lawyer, and then not filed for 120 days after they used the credit cards, but there are only 29 hours a day and 12 days a week, and I can only suspect some things.

On the other hand, if mom wants to take a cash advance and pay for daughter's bankruptcy, that's fine, done right. Mom remains liable for the debt, and presumably pays it, so there's no bad deed done as to the credit card company.

If a potential client makes it into my office and can't possibly afford me, and has no assets to speak of, and no relatives or friends from whom they can borrow money for a bankruptcy filing, AND no particular legal complications that show up in our discussions, and has very, very modest debt, I may refer the potential client to the self-help center at the United States Bankruptcy Court. On the other hand, because there are different volunteers there from time to time, results may differ. Kind of like a barber college.

The presumptively reasonable fee for an uncontested Chapter 7 bankruptcy in the District of Arizona, the last time I checked, was around $3,500, and some lawyers will charge as little as $999, plus costs, for a small uncontested Chapter 7 (although they may charge for add-ons; read any retainer agreement carefully). Several of those consumer debtor lawyers are friends of mine, and if I think there is a good chance they can handle a case for some folks who are entirely up against it, I'm happy to refer them over if they can't afford more credentialed representation, AND their debt is very modest AND there are no serious complications.

If there's a business involved, or the debt is greater than a million dollars, I personally may charge more than $3,500, depending on the case and the amount of work I can see in the case (if the name of the business was "Ponzi Schemes R Us", I'll always charge a good deal more).

Note that the filing fee of $299 for the Court is extra, and the client normally pays for their own pre- and post- mandatory credit counseling. Heidi, my paralegal, keeps me up to date on which of those approved mandatory counseling services is the least expensive for my clients to suffer through online.

I'm certain that brand new lawyers who have never filed a Chapter 7 bankruptcy for a client before will be willing to file for much less, and lawyers who have just gone to work for bankruptcy "mills" will take your case for whatever dollar amount their bosses tell them to take.

I personally set my fees only after I visit with a potential client and look at their face, because I want to know the person or couple I'm representing.

And I think it's VERY IMPORTANT that a client have an opportunity to meet with me prior to making any retention decision, because if they can't stand me or I can't stand them, they really need other counsel.

And I set my fees on a case by case basis, although my fees are comparable to other lawyers in Phoenix with comparable experience, credentials and ratings.

Note that Chapter 13 cases are more expensive than Chapter 7 cases, but since the debtor is trapped for a minimum of three years in a payment plan to creditors, the legal fees in a Chapter 13 bankruptcy are (or should be) the least of their worries.

Should you file a bankruptcy case without a lawyer? Well, there are all sorts of kits, and online services, and non-lawyer "bankruptcy petition preparers", and so on. And they might work for you, and they might not. If you read all the books about bankruptcy that I've reviewed in this blog and at Amazon.com, you'll be better able to determine whether such a service might be appropriate for you.

On the other hand, if you file a bankruptcy by yourself, and it doesn't work very well, and your case has been dismissed, or your discharge has been denied, or the presumption of abuse has arisen in your case, assume that it will cost a LOT more to fix the problem. If the problem can be fixed. And honestly, you may just be outa luck for a repair job, because the 2005 Amendments to the Bankruptcy Code are not very forgiving to debtors.

Think about it. You can take your Mercedes to a dealer, and get a pretty predictable result, and it will cost a pretty decent price. Or you can take the same car to a backyard mechanic, and he might fix it, and he might mess it up. Or you can take it to somebody who charges very, very little indeed, and has a new toolbox and a diagram. Or you might try to fix it yourself, with your "I'm a Mechanic, Just Like Daddy!" Automobile Tool Kit.

After somebody jams up the transmission pretty good, will it cost more or less to get it fixed at the dealer? If it can be fixed?

Just sayin'.

P.S. I was at a first meeting of creditors this week, and got to watch a lovely couple who made a decision to use a "filing service"; they lost three vehicles and a ton of dough to the trustee. Not a remarkably good result, I thought.

The Lost Generation

Has anybody else noticed that we're about to lose a generation of our best and brightest?

Not to war, although some will go that way. Not to disease, although I expect a fairly remarkable increase in tuberculosis over the next few years.

No, to depression and despair.

The kids coming out of college during this depression are saddled with the biggest student loans in the world. Those who are the highest-performing among the students, like baby lawyers, will find very few jobs. Or start their own practices.

But those lucky enough to find those low-paying, insecure jobs or small, new practices won't meet their expectations. And more importantly, they won't pay enough to handle debt service on the huge student loans involved.

Depending on whether the incomes of doctors take the same sort of hit, which I expect, same result.

Engineers actually have to study in school. Lots of hours of hard, grinding work to make an engineer.

Who now will get to experience an inspiring five years asking the world's most famous Koan: "Would you like fries with that, sir?"

Those are engineers. They'll beat out the sociology degrees for the few jobs that are around, I expect. Practice that flipping motion and the fries will be perfect!

Kids who came out of school three or four years ago were able to get good jobs, and some very good jobs. They have the best ringside seats on despair, because they had it good, made a lot money, started making payments on their student loans, got beautiful cars and homes, and watched all of it erode, slowly at first. Then right down the swirling magic bowl.

Along with their now-worthless diplomas, those kids coming out of college have student loans that even a Chapter 7 bankruptcy won't (in almost all cases) cure.

The Secret Chapter 7 Exemption in Arizona

There's a secret bankruptcy exemption in Arizona, which accounts for the fact that most bankruptcy cases in Arizona are designated no-asset cases.

It's so secret that you won't find it in any law books, or on the list of exemptions at the Bankruptcy website for the District of Arizona.

Okay, I fess. It's not exactly a secret, and it's not exactly an exemption.

But it is the reason for so many no-asset Chapter 7 bankruptcy cases in Arizona.

In general, it works this way: if you have a non-exempt asset, like one extra television set, ten years old, and black and white, with a 12 inch diagonal screen, and the replacement value for it is fifty dollars, and it's your ONLY non-exempt asset, you'll probably have a no-asset bankruptcy case.

Because trustees are humans, and humans have overhead, too.

I've heard on the grapevine that experienced bankruptcy trustees would rather not administer a case if the actual, factual total value of the nonexempt assets is less than eight hundred dollars or so.

And I'll check with a friendly trustee to see if I can get a sharper pencil on this one, when I get a Round Tuit.

And don't hold me to this one, or repeat it. It's a secret. And I may edit it out of existance at any moment.

Congratulations on Receiving Your Discharge! No, Your Chapter 7 Case isn't over yet!

There's a lot for debtors to understand about the way the new, post-2005 Bankruptcy World works here in Arizona. And my guess is that it's similar in the rest of the U.S.

When debtors, even very intelligent debtors, receive their long-awaited Discharge Order from the U.S. Bankruptcy Court for the District of Arizona, it's pretty normal for them to breathe a sigh of relief and say, "Whew! Now THAT'S over!"

And, of course, they're wrong.

And, of course, that's why I'm writing this post.

The Discharge is a permanent injunction (a permanent Court Order) that indicates that creditors who have been discharged are forbidden by the Bankruptcy Court to pursue collection activities against the debtor in connection with the debtor's personal liability.

On the other hand, it doesn't apply to debts that were not discharged, like most tax debts, and child support, and alimony, and debts incurred by getting drunk and squashing people, and student loans, and so on.

There are exceptions to those rules (for instance, if you're on a heart-lung machine, and don't have a head, you MIGHT get a discharge from your student loans. If you file the right papers. On a timely basis. In front of the right Bankruptcy Judge. With a tailwind).

By the same token, the Discharge Order doesn't affect properly-perfected liens, which survive the bankruptcy process, so that if you don't keep making payments on your car, eventually (and sooner rather than later) Big Lou will put the Hook to the Bumper, and away it will go! And then there are judgment liens, and you MUST tell your bankruptcy lawyer about those so he can take special action to scrape them off, or they will survive your bankruptcy, and when you go to sell your house, there they are!

And if you don't make payments on your homesteaded house, which the bankruptcy trustee didn't want to take away from you because the equity was within the homestead exemption in Arizona, the bank will run a trustee's sale, and 90 days later, you need to be elsewhere.

BUT YOUR BANKRUPTCY ISN'T CLOSED YET, even though you got a Discharge Order!

So tell your Arizona bankruptcy lawyer when you move, so he or she can get your change of address form into the Court.

So if the Trustee wants to know about the antique hookah that you listed, and tries to contact you, she can find you!

Otherwise, it gets ugly. Really ugly.

SUMMARY: there are two timelines in a Chapter 7 consumer bankruptcy case. One timeline leads the debtor to a Discharge, which is the major reason most debtors file. One timeline relates to how long it takes the Trustee to collect non-exempt assets (if any), sell them, work the proofs of claim, and file a closing report, which is a two or three YEAR process.

Most debtors don't know beans about what happens in their case after they receive their discharge, because not a lot is going on. But a debtor MUST keep counsel informed of their contact information, so change of address forms can be filed.

Because I've looked at exemptions all over the country, and the antique hookah is fair game for the Trustee, and if she wants it, make sure that she can reach you to collect it and sell it.

Otherwise you have an angry, cranky or irritable trustee on your hands, and nobody wants that.

Really.

Pre-Judgment Remedies Again? Everything Old is New Again!

A brilliant paralegal, Fred Hersh, who was the smartest guy in several states, worked for me for several years.

He had essentially memorized the pre-judgment remedy statutes. Knew 'em backwards and forwards.

He had been a marine, and he was a really, truly, and seriously tough guy. He'd been on the beaches at Normandy, and afterward had gotten a broken back when a wave hit his ship. But he was way too tough to die from a garden-variety broken back. Then he became a lawyer. Then he came to Phoenix, Arizona, and became a paralegal. He worked for me for a long time, and took the worst care of himself that I've ever seen. Every day, both before and after his heart attacks and amputations, he ate a Breakfast Jack, extra greasy.

As he was being rolled out of intensive care one time, he asked the orderly for a cigarette. And got it. And, of course, smoked it.

Finally he smoked his one millionth cigarette, knocked back his one millionth shot of whiskey, and then Fred was dead. I still miss him.

Today I was reminded of Fred because a beautiful couple told me that they were waiting for the Sheriff to come out and execute on a pre-judgment remedy.

The reason that it made me think of Fred is that I haven't seen a creditor try to use a pre-judgment remedy since before Fred was dead.

Okay; a pre-judgment remedy happens when a creditor wants to grab stuff before bothering with all that silly "go to Court and get a judgment" silliness.

That enthusiastic creditor must pay a price for his first-in-line attitude; the creditor must post a great big bond to get his pre-judgment relief.

As a result, few ordinary creditors are willing to post that bond, and therefore few creditors actually use a pre-judgment remedy.

It doesn't much matter; what's going to happen is that the lovely couple will file a Chapter 7 Bankruptcy and that will bring things to a screeching halt with the automatic stay of 11 USC 362.

In addition, if the creditor actually manages to collect anything pursuant to his pre-judgment remedy, the bankruptcy trustee will make him cough it up, because the creditor will have received a preference!

Final thought: once I'm retained, if I'm retained, I'll call and give the collection lawyer a heads-up courtesy call. No need for him to waste his time and effort and energy when he won't be able to keep whatever it is that he grabs. And no need for his client to get cranky with the aggressive collection lawyer, which will happen when the collection lawyer gets to explain why it is that the creditor has to return all the dough he received, even if he's paid a third of it to the collection lawyer.

Because there's no good reason to make things rough on the collection lawyer. He's just doing his job.

Fred did a lot of collection work at one point in his career.

And he was very effective.

Are Gas Cards Exempt In Arizona?

Maybe. Maybe not.

The Arizona exemption reads "food, fuel and provisions". For six months.

If the debtor has two gas cards worth two hundred each, and lists them as exempt as "fuel", they ought to pass muster because exemptions should be liberally construed in favor of the debtor, and there's no opposing case law.

On the other hand, a gas card is a cash equivalent; and I'd rather my client have an exempt homestead than an exempt homestead account with a hundred grand in it.

Things that are just like money seem a little too tempting to a trustee.

On the other hand, if the gas cards are the only, only arguably non-exempt assets in the case, a trustee probably won't want to make an issue of it, because at $800 dollars and below, some trustees in some cases will stamp "No Assets" on the file, because a trustee has overhead, and below that it sometimes doesn't make economic sense for them to administer a file.

New trustees will sometimes administer any file for fifty bucks. Then they go out of business as trustees.

But in the meantime, they could be inconvenient until then.

UPDATE/NEW CASE LAW: One of our Bankruptcy Judges has recently opined that food cards are not exempt; I'll post the opinion when I get a chance. Until further notice, don't buy gas cards unless you want to give them to the bankruptcy trustee in your case.

I SAVED THE FAMILY FARM, WITH THE HELP OF SMART OPPOSING COUNSEL!

Frequent readers will recall that I was agonizing about the prospect of filing a Chapter 12 Bankruptcy to save a family farm here in Arizona.

But I didn't have to file a Chapter 12 case for the Good Ol' Boy. I was able to fix it with the free bite at the apple, augmented version (I made the phone call, instead of the client making the phone call).

There is a tool that makes all cases in all areas of law work better, and I had that tool to work with in my Family Farmer case.

That tool is Smart Opposing Counsel(tm).

Opposing counsel, representing Snidely Whiplash, with a potential trustee's sale on the family farm, was smart, experienced, courteous, and capable.

And with several decades of experience, he approached this case with exactly the right attitude; he knew I'd file if I had to in order to protect my client from foreclosure, and he knew I would avoid filing if I could do so and still protect my client.

And he knew about the cure provisions in Chapter 12 cases.

And he got far more for his client than he would have gotten if I'd filed the Chapter 12 for my Good Ol' Boy.

And my Good Ol' Boy was spared the embarrassment of filing for a bankruptcy, and spared the risk associated with any proceeding in any Court at all.

Now, what can be learned from this sort of negotiation? First, when you negotiate with opposing counsel, always be nice. If opposing counsel turns out to be as dumb as a stump and as pleasant as a rattlesnake, there's always plenty of time to change your approach. And do your homework prior to making the first phone call; find out how long opposing counsel has been in practice, and what AVVO and Martindale and Findlaw say about him or her.

Second, if opposing counsel turns out to be as dumb as a stump and as pleasant as a rattlesnake, don't shift gears too quickly. What if his wife is undergoing chemo? Do you think that might make most folks a little cranky? What if she was in an accident in the dojo, and now has fainting spells and worries that she can't stay in practice and support herself? Opposing counsel is human. Be compassionate.

Third, don't go in too hard. Tell 'em what you want, and listen to what they want. If you can keep it nice, you get to say "Gee, I'd really like three months, because I don't want to have to come back to the well if my guy doesn't have the dough in 60 days!"

LISTEN TO OPPOSING COUNSEL; YOU GET FREE INFORMATION THAT TELLS YOU WHAT THEIR CLIENT WANTS THE MOST. Because, sometimes, they just up and tell you!

LISTEN HARD, THEN LISTEN SOME MORE, AND THEN TRY LISTENING FOR A CHANGE! AND DO SOME CHANGE-UP! LISTEN, THEN TALK, THEN LISTEN LISTEN LISTEN!!!

When you listen, you learn things. When you're talking, your negotiation opponent is learning. On the other hand, there's probably free information that you want to give away.

Another issue in negotiation is similar to work in front of a judge. Repetition works. Certainly, put together all the arguments and theories you can, but when you find one that seems like it's your strongest argument, repetition is a useful tool. It works even when people say, "You're just repeating yourself now!".

Here's a trick that shouldn't work, but does. When you ask anybody for anything, use the word because. "May I cut in line here at the water cooler, because Aliens from Mars are eating my shorts?" Because is an interesting word; after that word is used in a sentence, most people act like somebody just pressed their reset button, and they are much more liable to say, "Sure!" and not even ask about the Martian Aliens.

Here's a cool part that wasn't around a few years ago in Arizona. I now get to go to AVVO.com and tell the world that opposing counsel is Smart Opposing Counsel(tm), and I get to tell the precise truth about my experience with him as opposing counsel.

Over the course of years, there should be a good deal of benefit to the bar from similar posts.

And then, there's Evil Smelly Opposing Counsel Who Calls With Two Associates on the Line and Immediately Confirms Nonexistant Conversations and Agreements, but there are very, very few of those. But they are very dangerous, and must be treated with the same care as an old, unstable vial of nitroglycerine.

Remember, baby lawyers; if a grown up emails or faxes you a confirming communication for a conversation or agreement that never happened, respond immediately with a short "I disagree with every aspect of your letter, fax, email." Don't try to catch every white mouse that's been dumped on the floor.

But don't let the non-confirming confirming letter or email stand, because it will be the centerpiece at the emergency hearing scheduled for later the same day.

Not unless you LIKE Striped Pajamas!

No, I won't file a bankruptcy for you.

Because you are already entitled to receive a $2,000,000 inheritance (not her real number) from your mother's estate in Lithuania (not his real country).

And 11 USC 541 (Property of the Estate) says that if you are or become entitled to an inheritance within about six months of filing your bankruptcy, that inheritance becomes property of the estate.

No, it makes no difference at all that your name is not yet on the property.

No, you can't refuse the bequest; you'll be asked about that at your First Meeting of Creditors, under penalty of perjury.

So what can you do about your current situation, which involves lots of calls from credit card companies and a pending trustee's sale?

We'll, you weren't planning on keeping the house, and there's only one mortgage. Do check and see if there's a tax consequence relating to the trustee's sale, but the Arizona Anti-Deficiency Statute may apply as to deficiencies. Check with your cpa about tax consequences.

As to your credit cards, you're almost a year late paying some of them. Negotiate with them. And talk to your cpa about cancellation of debt tax consequences, because if debt is forgiven, it's treated as regular income. That's what I hear, anyway.

Check with your CPA.

How to negotiate credit card debt?

Very carefully.

Sorry, I couldn't resist.

But after you check with your CPA and decide that you can live with the tax consequences, call all of your credit card creditors and tell them you want to borrow dough from dad, in order to pay something to everybody and make them go away.

After a year of nonpayment, you aren't dealing with The Friendly Bank. You're dealing with The Unfriendly Bottom Feeder who bought your debt for a penny on the dollar or less. Or more, perhaps. But not much in any case.

The bottom feeder sees a 1/3 recovery as a home run. And any more than he paid for the debt is just gravy, after all.

So read ten books on Amazon on negotiating with credit card creditors, and email me and let me know which of them are worthwhile, and which are worthless, so I can let others know as well.

Some folks negotiate credit card debt down to less than 10% after a year, and some can't do that. Remember that it's hard to predict, because you have no clue who has bought and sold your debt again and again.

I don't do credit card debt negotiation because it's frustrating, and debtors are never happy with any results, because it takes too long, and it costs too much, and your credit is trashed during the process, and there's that pesky tax consequence if you're able to do a great job, and the whole process is hard to predict.

And I only like happy clients; I should have gone into adoption law.

And no, I don't know of any companies that advertise on tv or radio who do a good job of credit card negotiating. I know a few that have gone out of that line of work, but none that are good at it.

If you find one, let me know!

Do I Get to Keep the Wedding Ring, Part II

I previously blogged about the wedding ring issue, but I'm going to try it again, and this time I'll try to make it more direct.

1)You will absolutely get to keep your wedding ring in an Arizona Chapter 7 Bankruptcy case if you decide you want to do so;

2)The only issue is how much dough you have to pay the Arizona Chapter 7 Trustee if you want to keep your wedding ring;

3)In 98 per cent of all cases, the wedding ring is worth only $2,000 replacement value, so if wife and husband "stack" their exemptions on her ring, they keep it without paying the trustee anything, as long as the trustee doesn't object to the exemption-and if he does, the trustee will be objecting to value, not the ring itself;

4)Your wedding-ring-specific homework, IF YOU THINK THE RING MAY BE WORTH MORE THAN $2,000, is to go to three pawn shops and ask how much they'd give you for the ring. Then write down the number they offered you, and the name of the guy who offered it, and the date and time and address and name of the pawnshop;

5)Then go to a high-end consignment jewelry shop and find out what they think the price on your ring should be so it will sell in a reasonable time in their store, and write down the same items;

Now you have several expert opinions of the current value of your wedding ring.

ONLY AFTER YOU HAVE COMPLETED THE FIVE STEPS LISTED ABOVE ARE YOU PERMITTED TO HAVE WORRIES AND CONCERNS ABOUT YOUR WEDDING RING IN A CHAPTER 7 BANKRUPTCY.

Because until you do the above, you have no clue at all what the ring is worth.

Once again, are you going to be able to keep the ring?

Absolutely!

As long as the ring is really worth less (replacement value or fair market value) than $2,000, or, if it's worth more, you are willing to pay the trustee the difference between value and the exemption, YOU GET TO KEEP THE WEDDING RING.

Example: Your ring is worth three thousand dollars, really truely.

The trustee has it appraised, and now he objects to the exemption, because he believes it's worth more than the $2,000 stacked exemptions.

The normal resolution of the matter is that you offer the trustee the amount of "overage" represented by the ring, and that's the end of it.

BUT WAIT: some trustees may require that the ring go through the auction cycle; in which case you'll be there and bid in your two thousand dollars of exemption as the first bid, and than match any better or higher bids.

CONCLUSION: this is a non-issue in 98% of my cases, and is only an issue if your ring is worth more than $2,000, FOR REAL. Unless you are a gem appraiser, you have no idea whatsoever what your ring is worth. So don't borrow tomorrow's trouble; today's is plenty enough. Wait until you know what the ring is worth to panic. And then don't panic. Just plan.

Note: I have never had a client lose a wedding ring when she was determined to keep it, even if it was worth considerably more than the exemptions when they were stacked. So do breathing exercises, or meditate, or pray. But don't come unglued until there's some reason to come unglued. Because you absolutely will get to keep that ring, without question. Very probably without paying to keep it, or by paying some modest amount (a thousand or two)to the trustee, or by paying an indeterminate amount at an auction where you have a bidding advantage because you start at a bid of $2,000 because you've "stacked" the husband ring exemption, and the wife ring exemption, all on her ring.

Note again: the RETAIL cost of NEW jewelry has very, very little relationship to the actual replacement or fair market value of pre-owned jewelry. Wedding rings cost a fortune when new, but they're a drug on the market during a depression.

And it's all just a matter of money.

Bankruptcy and Crayons Don't Mix

I love kids, particularly well-done with catchup.

Just kidding!

I have two, and the white hair to prove it; and I love them beyond understanding.

But bankruptcy is serious stuff. You actually have to hear the discussion when we are talking, and if Johnny is chewing on the electrical cords, or wetting down the computer that I use during consultations, that might make it harder for you to hear. Or discuss. Or remember what we talked about during the discussion.

Most importantly, if you're paying attention to your child chewing on the electrical cord and pushing the hairpin into the outlet, as a good parent will, you're not paying attention to me when I tell you that you can GO TO JAIL if you don't list your assets. Or that the trustee will move to DISMISS YOUR CASE if you don't provide the materials demanded in the Trustee Letter you'll receive right after we file for you. Or that you MUST bring your social security card as well as your driver's license to the first meeting of creditors or you'll suffer from Cranky Trustee Syndrome AND Repetitive First Meeting Disorder.

I want you, the hypothetical reasonable potential bankruptcy client, to have as good a chance as you can to survive the bankruptcy process with a whole skin, and as little pain as possible. You will not have a perfect chance of that if you spend our valuable time together concentrating on 1)ignoring little Johnnie while he draws with crayons on the walls of my office, or 2)correcting little Johnnie for coloring with crayons on the walls of my office, or 3)comforting me by letting me know that the crayons are washable, so there's nothing to worry about, or 4)letting me know that I don't need to thank you for the artwork I'm getting for free, or 5)preparing an invoice for the artwork that Johnnie and the crayons are providing.

My love is broad and wide; if you must bring your small, happy, energetic six kids to our meeting...I know a really good lawyer who loves to have kids running everywhere around in his office! With lots of crayons in their hands! And fingerpaint! And I want to show him that there are no hard feelings about his moving backwards on our deal in the McGillicudy Case!

And you'd do well at his office. Really. I'll give you the map! No, you don't need an appointment. Surprise him!

So Can I Save the Family Farm from Snidely Whiplash?

Frequent readers will readily recall my most frequent answer to any mixed fact-and-law bankruptcy question: maybe.

Turns out that Chapter 12 Bankruptcy cases are capable of being filed here in Arizona, although they often are not because our farms tend to be a bit too big, and the debts a bit too big, for jurisdictional limits.

The Good Ol' Boy, who is about as decent a guy as you'd ever want to meet, may be able to get out of his fix by feeding Snidely his favorite meal: interest, sprinkled with money. With a little cash on the side, hold the mayo. You know, a #3 combo.

We'll see if that does the job; some cases, even after all these years, make me a little more intense than others.

I told the trustee in one case recently that my client was now on dialysis, and was dying, and that if the trustee wanted to object to his tools of the trade exemption, I'd be happy to fight with the trustee on that issue until I was dead.

He was just funnin' with me, because the time had come and gone for objecting to the tools of the trade in that case. And I took the bait, and frothed like a lunatic.

I try hard NOT to get emotionally involved in any case, because it makes it much harder to use the professional objectivity that lets a lawyer do a better job than a debtor at negotiating a deal.

It's much, much easier to snivel for somebody else than it is for yourself. Try it!

But back to Good Ol' Boy: I have a potent weapon in that as-yet unfiled case. A smart lawyer on the other side. I LOVE having a really smart lawyer on the other side. That lawyer may well teach me something new, and usually a smart lawyer is going to try to avoid the multiplication of legal fees that happens in a dogfight.

So I'll wait until the lawyer for Snidley Whiplash gets back to me, and I have a pretty good feeling about it; even if I have to file, working with smart people on the other side generally makes the range of outcomes better.

A Free Bite at the Apple

I drafted this post for my bankruptcy blog, and then realized it was useful to baby lawyers as well.

So to read it, go to my Just for Lawyers blog!

I Have a New Blog; Ignore it. It's Just for Lawyers. No, really! It's Just for Lawyers!

This post is about my new blog called "Just for Lawyers".

I've filed bankruptcy cases for lawyers (and doctors and C.P.A.s and dentists and Corporate Moguls), but it always makes me sad to do so, although I've been happy when the lawyer got a discharge in the bankruptcy and got to move on with life.

But there are a bundle of new lawyers coming out of law schools who won't be able to get a job because BigLaw isn't hiring, and they're competing with established lawyers.

And long established, AV rated lawyers with more credentials than a dog has fleas (AVVO "superb", Superlawyers profiled, certified as specialists, and former Chairs of Bar Association Sections or Committees) are going to continue to be fired by BigLaw, making it harder for baby lawyers.

So I started a brand new little blog called Just for Lawyers in the hope that it will help baby lawyers just starting their careers avoid the learning curve I had, and ditto for BigLaw lawyers on the street trying to learn how to feed themselves for the first time in years.

I hope it helps prevent some attorneys from needing to file bankruptcy cases in Phoenix, Glendale, Scottsdale, Mesa, Tempe, and in fact all over Arizona and the United States!

I'm not Casper, and I Won't Ghost-Write the Schedules for You

At the Arizona State Bar Convention Bankruptcy Seminar today, there was a great discussion of the ethical rules associated with bankruptcy.

One of the situations that Susan M. Freeman (a brilliant young lawyer who practices with Lewis and Roca) discussed was the ghost writing case; that's where the debtor puts together the petition, schedules, lists and statements, and the bankruptcy lawyer doesn't sign and file it. The lawyer just reviews it and gets paid a some minimal fee, and the debtor signs it pro-per, as an unrepresented debtor.

As Susan M. Freeman indicated, no ghost-writing case ever comes out well for the lawyer involved.

And that, ladies and gentlemen, is why I do no ghost-writing. Go visit Casper. He's friendly.

Guilt, Shame and Bankruptcy

So there I am, asking questions and answering questions during any old client interview.

And there I am, amazed and befuddled when they burst into tears.

Here's why. I'm sometimes too far ahead, because I'm working on the "how" of the process almost from the moment that the clients show up in my office. Because I know the goal of the endgame: the clients keep their stuff (mostly) and lose their debt (mostly). With fairly few speedbumps (mostly).

The clients, sometimes, are still at an earlier phase of the process: dealing with the guilt and shame they're feeling about being unable to pay their bills.

Which is why I keep the Kleenex on the client side of my desk.

And, dear reader, you know they've also spent their 401(k) down to the last cent, and that makes me so sad, because it would have made their post-bankruptcy life so much easier.

Here's link to a Useful Free Video About Consumer Bankruptcy

Here's a link to a video (runs about an hour!) that talks about ordinary bankruptcy in ordinary language.

The guy speaking is a little nervous at the beginning of his presentation. But he's a knowledgeable and experienced bankruptcy lawyer, and you'll learn a fair amount when you listen to his presentation.

So listen to him, no kidding. Write down your questions, and when you come in to see me, we can zip through all of them quickly.

Enjoy!

And if you don't enjoy it, fine, but suffer through it nonetheless!

Hey, Getting Dumped by Voicemail is Bad, but Getting Fired? From BigLaw???

During this depression, no job is safe, not even at major law firms. Not even at major law firms in Great Britain.

The genteel practice of law that existed in Great Britain is now changing, in the same way that the deceptive security blanket of working for big law firms in the United States has unraveled.

Recently some trainees (think "summer clerks" on steroids) at a major firm in Great Britain were let go. A few were hard to reach with the first phone call (a personal life? explains why they were let go!).

So how did the news make it through?

Voicemail.

Why Do I Care if you do your Homework Before You Visit With Me for the First Time?

Gentle reader, you may wonder why I care whether you do your homework before you come in to visit with me for the first time.

As it happens, it's because I like productive time, and your time is going to be spent more productively if the homework assignments have been done prior to our visit.

Then there's the second reason. At my point in life, I find that surprises are less attractive to me than they were previously in my life and career. And it has been my experience that my clients like surprises, if anything, less than I do!

So being advised, beforehand, on issues including how long the bankruptcy process will take, what you get to keep, what you DON'T get to keep, whether you get to keep using your credit cards, whether you should max out your credit cards (uh, no.), and what you might do (like modifying your mortgage) instead of a filing bankruptcy is good for you to know.

Because all of you are DIFFERENT!

Some of you know a lot about real estate law, because you used to own a mortgage company, or you used to sell real estate.

Some of you know a lot about contracts because you managed those for a publicly traded corporation.

Some of you are acquainted with the criminal justice system because you're Irish, and you know how to celebrate St. Patrick's Day the right way! And isn't it a shame what the bloody British are doing to us all? (note: at this point, I appear to have ancestors on both sides of most of the big conflicts of the last several thousand years, and what my Cherokee ancestors did to my English ancestors, and what my English ancestors did to my Scottish ancestors, and what my Viking ancestors did to my Irish ancestors at Lindisfarne on June 8, 793 Anno Domini Nostri Iesu Christi all gives me a certain odd perspective on history).

Some of you have lost a relative, and have some idea how the assets of decedents is distributed; or you've lost a marriage, and know about the family law system in Arizona or elsewhere.

Some of you know nothing at all about the law in any respect, because it's never knocked on your door and said howdy before, at least until the notice of trustee's sale. Or being served with that $432,743 lawsuit!

And we have limited time together!

Because we have limited time to talk, the world being what it is, it's important that you know what you need to know.

And that you know what you don't know. Did you understand that sentence? I didn't!

For instance, you may really, really need to know what happens if you repay a debt to your 401(k) prior to filing.

Well, if I'm still trying to figure out whether your car will pass the exemption limit in Arizona, we may not have time to get to that question! And if you didn't do your homework before you came in to see me, we may still be struggling with the value of the car and the amount of the lien on the car!

Spare me! Spare you! Spare ribs!

Or if you paid a $200,000 preference to dad eleven months ago, and I'm trying to tease the amount of your unsecured debt out of you instead of being able to focus on the important stuff, because YOU DIDN'T DO YOUR HOMEWORK, that's...gosh, that's sub-optimal!

And you guys don't want to be up to your necks in sub-optimal, do you?

Isn't that the reason you decided to come in and visit in the first place?

If You're Going to File a Bankruptcy Anyway, Is a Short Sale the World's Best Idea?

I just got off the phone with a lovely woman who was arm-wrestling with the IRS over a tax consequence of a short sale.

And she had some other debt and wanted to talk bankruptcy.

Made me wonder how many other folks are trying to short-sell their houses in a good faith effort to be good-do-bees and who are therefore walking into nooses that they don't see coming.

Am I an expert on the tax consequences of short sales? You gotta be kidding. Keeping up with changes in the means test and talking to the endless line of debtors outside my office door keeps me busy. And then there are my business and corporate clients.

Not a tax expert; I know a couple of good ones here in Phoenix, Arizona. Not one myself.

But I'm asking myself if it makes sense to work your behind off trying to get everybody in line for a short sale if the IRS is going to thank you with a massive new tax debt.

Oh, yeah. Some local banks are happy for you to do all the work to put together a short sale to help 'em out.

But their documentation says they can chase you for any deficiency, even though they're agreeing to permit the short sale.

Sounds like being a nice guy is a good way to get....I have a mental picture. It's not a very pretty mental picture.

If You're So Famous, Why Did You File Bankruptcy, Rembrandt? Fame and Bankruptcy in the United States. And Elsewhere.

I was reminded today that fame is no protection against insolvency. Nor prior success. Nor intelligence. Nor spiritual attainment.

Insolvency happens. Bankruptcy happens. I've heard it said that the average American millionaire goes broke four times before he or she gets to keep the dough. And that makes sense to me. Nobody in the United States or elsewhere teaches how to run a business (you hear me, Harvard Business School?).

And running any business becomes more difficult as government dumps additional regulation on businesses. You hear me, Washington?

I didn't think so.

So who besides Rembrandt filed bankruptcy?

Well, Barnum (but then he merged with Bailey, and became "The Greatest Show on Earth").

Mark Twain filed for bankruptcy, but he doesn't really count because he paid everybody back. Nice going, Mark! Ruin it for everybody else, why don't you!

Mathew Brady, the photographer, filed; and afterwards he reopened his museum. Henry Heinz filed, and afterwards started a new company and also started selling ketchup, so history was made.

Oscar Wilde was the subject of a bankruptcy, and wrote my favorite question about wealth: who, being loved, is poor?

Hershey failed four times and then made it big; Henry Ford failed twice with car manufacturing. Number three was the charm.

Micky Rooney blamed drinking for his money problems (although I've known business guys who made their best deals in the drunk tank). Sweet Debbie Reynolds, strong Johnny Unitus, rockin' Jerry Lee Lewis, studly Burt Reynolds, smooth Wayne Newton, hot Kim Basinger, good ol' Walt Disney, old Larry King (twice!), and Iron Mike Tyson all filed.

For everyone, there was life after bankruptcy, and for most, huge success.

It's good that in the United States we have the right to fail and move forward.

Because they don't teach you how to run a business in school. So typically you find out as you run your business. And sometimes you guess wrong. So you fail.

And that's what separates Henry Ford and Hershey and Heinz from some of the rest of us.

They were just too stupid to know they were beat.

p.s. I forgot to add: it's better to be lucky than smart.

Here's a Cool Website if you want a Judicial Clerkship!

If you can't recognize a neat blog, why bother blogging?

There's a nifty blog located here that lets prospective clerks know about judicial clerkships; it's called the Clerkship Notification Blog.

I'm an old used judicial clerk, first for U.S. Bankruptcy Judge Maggiore, and then for Chief Bankruptcy Judge Caldwell, both for the U.S. Bankruptcy Court for the District of Arizona.

That was when and where I learned the law, because law school is a vacation compared to clerking or (shudder!) the practice of law.

So congrats to the kids who set up the website, and go there if you want a judicial clerkship.

I was particularly impressed with the founder of that website: Katherine McDaniel.

She's probably from one of the distant smart branches of the family.

Why Did You Ask if We're Married when we Talked About Filing a Chapter 7 Bankruptcy Petition in Arizona?

Simmer down.

I don't want to know about your personal lives, exactly.

But you have two separate and distinct last names, and you don't wear wedding rings.

I don't care if you're doing what my parents would have called "Living in Sin". Or what my generation, 30 years ago, would have called "Ordinary Life".

I care because I can only file a joint bankruptcy petition in your case (that is, a Bankruptcy Petition for both of you) if you are a married couple.

If you aren't, there are going to be two filing fees, and two retainers.

So I guess I really do care if you're married.

Because I'm trying to save you a couple of bucks.

I Hope I Don't Have to Re-Learn how to File a Chapter 12 Bankuptcy for a Family Farmer in Arizona!

I hope I don't have to re-learn Chapter 12 cases.

My firm confirmed one sometime in the paleolithic period, but I haven't done one recently.

My memory tells me that they're pretty similar to Chapter 13 cases, with no requirement for a disclosure statement.

And the statements and schedules are pretty similar to a Chapter 11 or Chapter 13 Bankruptcy, as well.

But I just talked to a good ol' boy who looks like Paul Newman in his later years, and he has a family farm with about a million dollars of crop sitting on it.

And there's one secured creditor, who's trying to foreclose on it for a relatively tiny debt.

I called the lawyer who's running the trustee sale and left a message that recited that I was talking to Mr. Good Ol'Boy, and he didn't rightly see that losing the family farm to a foreclosure made any sense, when there was a million dollars of spinach (not his real crop) in the field.

And that he wasn't my client yet, but well, you know....

And that the Good Ol' Boy could either pay Snidely Whiplash for an extension of 90 days, or he could pay me, and I would really rather see the money go to Snidely.

Be interesting to see how it all works out.

Told the good old boy (who's a very smart guy, even if he does wear a cowboy hat indoors) that I'd rather he got an extension in writing on the trustee's sale than pay me.

But if the creditor continues to act like Snidely Whiplash, the poor ol' good ol' boy might just need to retain some Arizona bankruptcy lawyer for a Chapter 12 (if the farm qualifies) or a Chapter 11 (if it doesn't).

So now I'll cross my fingers and learn the law and procedure of Chapter 12 bankruptcy cases in Arizona real quick, just in case.

See, the reason I'd rather not file for him is that there is ALWAYS some risk in any kind of bankruptcy filing. And I'm pretty risk averse at this point in my life.

But if Snidely Whiplash is going to move forward to swipe the family farm, well, that's just not going to happen.

Where's my red cape?

p.s. I just checked the requirements of a Chapter 12; debt limits are high enough to cover this matter, and not restricted to individuals, like a Chapter 13. The plan isn't due for 90 days. Looking pretty good for good ol' boy, less good for Snidely!

If my wife and I are Going to file a Chapter 7 Bankruptcy in Arizona, do Both of Us have to take the Credit Counseling Classes?

Yes.

What Happens to my Little Business When I File a Personal Chapter 7 Bankruptcy in Arizona?

That depends.

Have you noticed that things all happen in clusters, influenced apparently by sunspots?

I got three calls this month from folks who had filed pro-per emergency Chapter 11 cases. And yes, I referred all three out of the office. I want to know the end game before I file a Chapter 11.

But I've also talked to three nice folks who couldn't afford the entry ticket for a Chapter 11. They'll be filing garden variety Chapter 7 cases.

They all three (sunspots, remember?) have little businesses. And all three will very probably get to keep their micro-businesses (my frequent readers will recall that I won't guarantee that lava is hot, iphones are cool, or grass is green).

And why might they get to keep those businesses?

Well, first, because they listed them (or the stock in them) in their bankruptcy petitions.

That's not unusual.

And the businesses are stinkers; the corporations that enclose the little businesses are insolvent.

None of that is unusual.

Note that they may not get to keep the little businesses if their competitors want to buy them from the trustees in their cases.

But I'll talk to you more about this topic as time goes by.

Also note: an alternative for all three entrepreneurs is simply to start a new business after they file their bankruptcy.

New lease, new office furniture (which costs zip these days; office furniture is a drug on the market); the same client base if it's public record or they buy the customer list back from the Chapter 7 trustee. Same line of work.

For instance, if there's a pool cleaning corporation being operated by the owner of the business, that may be simple. After the business dies, the debtor files a bankruptcy, and then blanket advertises for pool services in the same zip code after his Chapter 7 is filed.

NOTE WELL: there are a lot of wrong ways to try to hang onto a small business after a bankruptcy filing.

The dumbest is to transfer stock to your boyfriend/girlfriend/father/brother for no consideration.

The second dumbest is to sell the stock to your boyfriend/girlfriend/father/brother for a dollar.

The third is simply not to list the stock. Dumb as a bag of hammers.

The Trustee Wants Three Years of Tax Returns Immediately After You File Your Chapter 7 Bankruptcy In Arizona, No Kidding!

Right after you file your Chapter 7 bankruptcy in Arizona, your trustee sends you a letter asking for COPIES of titles to your vehicles and your real property (your house, for instance).

The Trustee also asks for copies of three years of tax returns.

Our Trustees are very polite, so it sounds like they're requesting the three years of tax returns.

They are, in fact, demanding the tax returns, and very politely, thank you.

So give them what they want. Mail them the copies they want right after you get the letter.

Keep three copies of what you've sent, so when you go to the First Meeting of Creditors, if the trustee says, "FEE FO FI FUM, I DIDN'T GET MY COPIES OF DOCUMENTS!", you can hand them the second set and back slowly away from the trustee.

Seriously, send them the entire stack of copies they want. There's no percentage in making the poor, overworked, underpaid, and under-appreciated trustee sad.

Everybody involved in this process should want happy debtors, happy trustees and happy Judges.

Friends Will Get You Through Times of No Technology Better Than Technology Will Get You Through Times of No Friends!

Clients, ignore this post.

This is just a thank you to my friends Ru, Chris, Jon and Joel, who have recently routed me articles as grist for my blog, and in one instance restored a broken link from my blog to the ABA Journal online version of the Arizona Bankruptcy Attorney Blog. One tried recently to help me with Twitter, but that's going to take more work (I know there's a formula about age and the length of time it takes to grok new technology, probably involving the square root of frustration). And thanks to Alex, who pointed out to me that blogging was good for the soul and the practice. Both my soul and my practice are doing much better now, Alex.

And I also appreciated the work that Alex did helping me tinker with the Official Joseph C. McDaniel Website, even though he sneers that it's "just a template site". I can't imagine how he can improve it, but I know now that if he tells me something, I can take it to the bank.

It's good to have friends, and those are good friends.

Is This a Do-It-Yourself Bankruptcy? What am I Paying You for, Anyway?

About a decade ago, I went in to have laser surgery done to correct my nearsighted eyes.

I did all of the research in the world, and the doc I finally chose had more credentials than a dog had fleas. He may have been the most highly-credentialed eye surgeon in Arizona at the time.

He was very relaxed on the day of surgery, and I commented on that. He said, "On the one hand, I checked out your eyes very carefully. I wouldn't have taken you as a patient if you weren't a good candidate for this kind of surgery. And by the same token, this is the most sophisticated computer-driven laser known to mankind, and it does most of the work."

So why am I paying you, I asked the doc, mostly kidding.

I'm here in case something goes wrong, he answered, not kidding at all.

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Flash forward ten years or so.

I'm talking to a grizzled veteran of the Bankruptcy Wars. He'd filed a prior bankruptcy some other place, and some other time (like before 2005), and as a result he was used to a much kinder, gentler Bankruptcy Code. And I told him that the Code USED to be easier to deal with. Then I asked him approximately a hundred questions designed to determine whether it was safe for him to file a Chapter 7 Bankruptcy. Or any other kind of bankruptcy.

He asked how long the process would take, and I told him that he was my limiting factor, because I couldn't control how long it would take him to pull three credit reports, look at his bills, and go into our online program and type in all his creditors and all his assets.

He thought I was joking.

"Is this a do-it-yourself bankruptcy? What am I paying you for, anyway?"

I could have told him that the real work in a Chapter 7 bankruptcy wasn't typing; that was only typing. Or that the whole process worked better if he input the data himself, because that way a minimum wage typing pool employee or an overworked secretary couldn't transpose the addresses of creditors. Or I could have told him that the real work begins only after the data is typed into the program.

But I knew the real answer.

On the one hand, you're paying me because I worked for years to learn how to determine if you're a good candidate for the procedure.

But there's another reason you're paying me.

I'm here in case something goes wrong.

My Feelings Are Hurt.

I just saw a cute television advertisement for a credit card.

Beautiful commercial, showing all sorts of beautiful happy things you can get with your brand x credit card.

It even shows the whole panoply of goodies under a huge rainbow.

Now, I gave 'em a chance.

I recorded it, and ran it in slow motion, and in reverse.

And I looked at it very closely.

But there was no bankruptcy lawyer at the end of the credit card rainbow.

Well, That Answers the Question About a Credit Card after your Chapter 7 Bankruptcy in Arizona

Bankruptcy lawyers have suspected for a long time, based on anecdotal evidence, that credit card companies are pretty smart; they're happy to give new credit cards to debtors after the filing, because it's going to be a bunch of years until those folks can file again. Now we're up to eight years.

Now there's a study. The University of Iowa has conducted a study that concludes that credit card companies are offering credit cards to people who have just filed a bankruptcy, without even waiting for the entry of the discharge.

The study also found that almost one hundred percent of those who had filed were offered new credit cards within a year of the filing.

I don't see that as a bad thing.

The debtors have now had the experience of a bumpy economy, so they know that things can go wrong, and they've had mandatory credit counseling by the time they have been offered new credit cards.

Most debtors want to rebuild credit as quickly as they can after a bankruptcy, and many ask me if I'll help them reaffirm on a credit card so they can keep it.

As my loyal readers will know, my routine answer to that request involves the phrase "when the temperature of that place described by Dante in such detail attains the temperature at which water becomes solid", then and only then I'll be happy to help you reaffirm on an unsecured debt.

In fact, loyal readers know that I reaffirm only when brutalized into doing so by a reaffirmation rabid client with weird facts, even with secured debt.

I have historically directed debtors who want to reestablish credit to secured credit cards.

The study from the University of Iowa suggests debtors don't need to go the secured credit card route.

Mind you, I don't know the interest rate being charged on the new post-bankruptcy credit cards.

And the study itself, if I still remember how to link, is located here.

What Could be Good About this Depression?

Well, nothing.

But if there were, what would it be?

A depression always means that people will be out of work.

And that means that those who are out of work have time to think.

After all, when you're on top of the world, you have a tendency to think things like, "Boy, I'm smart! Gee, I'm well-disciplined! Hey, I have great networking skills! And on top of it all, I DESERVE all this cool stuff because I planned and executed my plan, and I'm a wonderful person!"

Now, I've never had those thoughts, and I'm sure you haven't, but I've heard that SOME people have thoughts like those when things are sailing along.

But when things are going poorly, people tend to think things like, "I'm a failure. I'm as dumb as a bag of hammers! How could I have made that stupid investment, taken that stupid job, made that goofy business decision?"

Now, beating yourself up when things go badly in the bank account is not very productive or smart, and I've certainly never done it, and I'm sure that you haven't either. But SOME folks do.

Another thing that people do is to look for work, just as hard as though they were working. And that's a good thing, because it will ultimately be productive.

But one other thing that folks may also do when they have too much time and too little money is to think about what's important to them.

Ultimately, many people reach the conclusion that what's important to them is somebody else, or a few such somebodies. For instance, they may decide that their children, spouse, friends, or pets are the most important things in their lives.

And that's a good thing, because it's close to being correct.

Because love is the only thing in life that is important, because with love, nothing else matters much, and without love, nothing else much matters at all.

Or to paraphrase an alternative comic book trio, The Fabulous Furry Freak Brothers, love will get you through times of no money better than money will get you through times of no love.

And those thoughts parallel the thought of Oscar Wilde (okay, a weird dude, but he knew how to turn a phrase, and this one is particularly spot on):

Who, being loved, is poor?

Do Medical Bills Cause Bankruptcy?

There's a study being passed around that concludes that the bankruptcy tsunami is driven by medical bills.

The methodology of the study and its conclusions were provocative.

It was exactly as though, in seeking the causes of death in men, the researchers had gone to the morgue, and discovered that 29% of the men who had passed away were bald, and that most of the other had at least 10% hair loss prior to their deaths.

And then concluded that baldness was the major cause of death in men.

Post hoc ergo propter hoc, I think they called it in Philosophy Class.

Medical expenses are a fertile ground for bankruptcy myths, whoever is involved in compounding those myths. I blogged a while back about a medical bill/bankruptcy myth, but it appears that they'll keep on coming.

For the record, my position is that medical bills are often a PROXIMATE cause of a bankruptcy, but they're more in the nature of a precipitating cause than a root cause.

Bankruptcy cases come into existence like a game of Jenga --that is, a family will have credit card bills, and they're no big deal. Then the amounts charged eventually pile up, and that's a big deal, because the payments go up. But everything looks fine from the outside because mommy and daddy are both working their brains out and taking every chance for overtime they can get.

Then one spouse gets fired, and one of the credit cards goes into default, and the interest rate goes up to 35%. And the family sells furniture or goes into the small retirement fund to make ongoing payments on bills.

Then the remaining spouse gets sick, and is out of work for a month. That's a month of NO INCOME.

That month of no income results in defaults on all the outstanding credit card bills, and a dozen credit cards with interest rates of 35%; and probably a lawsuit or two, eventually.

And then there are medical bills on top of all that.

And just like a game of Jenga, everything falls down.

My Favorite New Bankruptcy Ads on Television in Arizona!

I don't watch a lot of television (distracts me from blogging), but I was recently told about a couple of big budget advertisements for Arizona bankruptcy lawyers.

One funny example: the narrator says in a very loud voice: OUR BANKRUPTCY LAWYER ARE ALL (voice changes to a whisper) supervised by BOARD CERTIFIED BANKRUPTCY LAWYERS!


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Here's one a little more sophisticated and sinister:

"Our bankruptcy lawyers are LICENSED to practice bankruptcy law in Arizona!"

That one is cuter. The gag is that all attorneys who are licensed in Arizona are licensed to practice bankruptcy law; the commercial is implying that these lawyers somehow have a SPECIAL bankruptcy license, which is simply misleading.
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Remember that ACTUAL qualifications and certifications for Arizona bankruptcy lawyers include the following (and I assume the lawyer has a valid ticket to practice law in the first place): recognition by the Arizona Board of Legal Specialization as a Specialist in Bankruptcy Law, a Martindale AV rating, an AVVO rating of "superb", which ranges from a numerical rating of 9 to 10, and a profile of Superlawyers. It's also useful to see if your potential bankruptcy lawyer has been active in the American Bar Association, or the Arizona Bar Association, or the Maricopa County Bar Association Bankruptcy Committees or Sections, because it's useful to know the other lawyers who habitually practice bankruptcy law, so you can ask for extensions or other favors that lawyers grant other folks who are in the same area of practice (unless they're horse's patoots, of course; but good bankruptcy lawyers are generally pretty genteel).

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I don't entirely blame the firms with the funky advertising, or even the firms that try to turn personal injury lawyers or divorce lawyers into instant bankruptcy lawyers; they're trying to make money to keep the doors open. And I know that it's difficult to become board certified in bankruptcy law in Arizona by the Board of Legal Specialization. That's why only 28 lawyers in Arizona are currently so designated. And don't hold me to the number; maybe somebody has been certified or de-certified recently, so my math could be off, but not by much.


I just sort of wish the firms with the funky advertising wouldn't try to make money by trying to confuse or hornswaggle consumers of legal services.

Play 20 Questions with a Bankruptcy Lawyer!

I built a list a lot like this 30 years ago, so when I came back from a gigantic lunch I wouldn't forget to ask about important stuff.

See, the problem with a gigantic lunch is that afterward you just want to sleep; and if you're sleepy during a client conference you may not ask all the right questions. So I built a bankruptcy checklist so there wouldn't be any surprises.

Now, nothing at all will fully eliminate all bad surprises in a bankruptcy case; you may have a bankruptcy trustee who just plain doesn't like you (doesn't happen often, but it could) or you might just forget to list an asset (and if you do, God help you, given the 2005 amendments). But if you answer these questions before you come in and see me (or some other Arizona bankruptcy lawyer) it'll give me (or them) more time to answer YOUR questions, which is a good thing.

This particular list is a work in progress. I'm going to play around with it over time to make it more perfect, but for now, use it to accumulate information before you come in to say hello to me or anybody else you like.

Let your prospective lawyer know the following:

Your name:
Your phone numbers:
Your email address:
Your physical address:

Do you pass the means test? (remember the free online means test calculator); don't panic if you don't pass. We'll talk.


Did you file your most recent bankruptcy MORE THAN eight years ago?


Have you lived in Arizona for the last two years?


Do you know that you WON'T, in all probability, discharge tax debt, debts associated with child support and alimony, fraud judgments, and student loans? If you have such debts, list them here:




Are you judgment-free? If not, list your judgments and describe them:



Do you have LESS than $150,000 in equity in your primary residence? How much less?


Do you have LESS than $5,000 in equity in any car?


Have you made some of the payments on a car not titled in your name, like your child's car?


Do you have a car titled in your name, but all the payments were made by somebody else?


Do you want to surrender your car to the lien holder?


Do you want to keep your car? If so, learn about reaffirmation (I'll link to this word in an upcoming edit)(note: I'd rather have a root canal than do a reaffirmation for you)


Have you filed your last three years of tax returns? (note that the trustee will want to see those, PRONTO, right after a filing, along with a bunch of other copies of documents. Make sure you do not disappoint the nice trustee. Not kidding even a little bit.)


Do you have a tax refund still owed to you? Do you know that if you are owed a tax refund on the date of filing, you should kiss that tax refund good-bye? Because you MUST turn it over to the trustee, because it's property of the estate. If you don't have an emergency, better to wait and buy a little food with it, but maybe that's just me. You MIGHT get back a pro-rated slice of the tax refund, SOMEDAY, but better if you count it as gone forever if it's owed to you on the date of the filing.


Are you suing somebody, or do you have a reason to sue somebody? Because you MUST list your cause of action and the trustee WILL own it when a filing happens. So if you were looking to collect on your whiplash lawsuit, forget about it. It belongs to the trustee.


Have you been accused of fraud in any context?


Have you actually committed fraud in any context? (for instance, did you sort of fib about making a million dollars a year in income so you could get a big limit on your credit cards. Tell me now, it'll be less painful than if I have to find out later)(and it's not like I've never heard it before, whatever it is)


Do you have big non-exempt assets, like other houses, real property in general, stocks or bonds, jet-skis, airplanes, boats, toy-haulers, three-wheelers, dune buggies, gliders, hot-air balloons, Waterford crystal collections, Beanie Baby collections, stock options, or ANY OTHER BIG STUFF which the trustee could sell to pay your creditors?


Do you have retirement accounts like 401k or pension accounts of any kind? What kind and how much in them?


Do you have an inheritance to which you might become entitled within the next year or so? Another way to ask this is the following: do you have a puny rich relative who likes you a lot and who will die soon? Because if they go to heaven within six months of your filing, the inheritance you might have gotten goes into the estate. Or you lose your discharge.


Do you need open-heart surgery or a brain transplant (to see if you're paying attention)? If so, maybe we wait until after the surgery.


Are you planning to get a divorce soon? If so, leave now. Put down the magazine and the soda pop, I don't want to talk to you. If the two of you disagree, and one of you tells me to go left, and the other tells me to go right, I'm frozen in place and can't chew my gum. Uncomfortable. So leave.


Are you employed? ARE YOU SELF-EMPLOYED?


Do you own all or any part of a corporation, limited liability company, partnership, or any other business entity, or a dba? Talk to me A LOT about your business, if you have one.


How much do you make per year in regular income?


How much are your secured debts?


How much are your unsecured debts?


Have you bounced checks you didn't cover? Note: bad idea.


Do you have dishonored gambling markers from Vegas? Not kidding. This is a big deal. Go to jail, do not pass go, unless handled properly.


Have you made any transfers of any sort in the last year? Four years? What were they?


Do you have check registers that show where you've spent your money? Or other records?


Do you fully understand that you have to list ALL your creditors, even if you want to pay them, or you dispute them, or you love them, or you hate them, or they're relatives, and that you must also list the collection agencies and lawyers who have tried to collect for your creditors?


Did you get that you have to list all your creditors? With correct addresses and zip codes and account numbers? And that I'm telling you to pull THREE credit reports as a safety net, although you will want to review your own records first.


Do you get it that you have to list all your assets? Even the broken down truck with no transmission? And even the pyramid scheme $4,000 of stale cosmetics in the store room? And you'll get in BIG TROUBLE if you don't list all your stuff? And that the trustee has antenna like My Favorite Martian and will, not may, know if you don't list stuff? No, I'm not kidding, actually. Under their hair. Or behind their ears.


Do you get it that you have to list all your assets, and put a value on them, and that you have to value each television separately? You can't say, "six televisions, value unknown" ?


One quick question here: do you understand that you're going to have to list all your debts and all your assets, and if you're "cute" the trustee will be your worst nightmare? And that you will wish you had never filed or been born? Just checking.


Did you STOP using your credit cards at least 90 days ago? This one isn't fatal, but tell me.


Did you repay a debt to a relative within the last year? Big debt, big repayment, big problem. Preference.


Did anybody cosign on any of your debts? List 'em also.


Did you cosign on a debt for someone else? List 'em.


Do you understand that you have to keep me informed if you move within the next three years, because your case may be open for three years?


Do you understand that I'm not your lawyer for any purposes until you've signed my retainer agreement and paid the retainer and the filing fee?


Do you understand you MUST do pre and post filing consumer credit counseling, which will cost you around $100?

Are you currently being sued? Why? What's the answer date? Or was it answered?



Is there a trustee's sale scheduled on your primary residence?



WHAT ELSE do you think I ought to know about you before I decide (or anybody else decides) whether to accept you as a client? Is there a murder warrant out on you? Are you a legal citizen of the United States? Are you a member of an organized crime family who murders lawyers who get results you don't like (in which case, have I got a lawyer for you! Great guy! You'll love him!).



And do you understand that the forms don't fill themselves out, YOU DO, and that you'll need to do a complete, truthful and accurate job of filling out the forms online so your case won't be a disaster? Note: my paralegal has told me she has a friend in an organized crime family who will, not may, visit me if I ever take another "big cardboard box with bills in it" bankruptcy case. So if that's you, have a great day! I'll refer you to a beginner who needs the practice!

Clients Ignore: Lawyers, Check it Out! Somebody Who Gets Twitter!

I know things are very tough out there, because of the number of lawyers who have contacted me about filing a bankruptcy here in Arizona.

And the ABA Journal has reported that about 10,000 lawyers that they know of have lost jobs this year.

Many people would say, "That's a good start!"

I would say, those poor devils need some help.

Frequent readers know of my admiration for my friend, knowledgeable Internet guru, Alex Morris, the Yoda of Internet Communication.

That's the first place for a lawyer who wants to help new clients.

But a brilliant young lawyer has recently threatened to teach me to use Twitter.

Twitter is something I simply don't get yet, because I'm old.

My brilliant young lawyer buddy emailed me a link to a blog published by a lawyer who DOES understand Twitter.

That website is http://lawyerist.com/

And it's located here, if I did my link (mwahha-haaaah-haaaa! Now I know how to link!!!!!) correctly.

Now, it took me forever to get into blogging, so don't hold me to any timeline with Twitter; somehow I think it may take a little longer.

Remember that old commercial? With a name like Smucker's, it must be good?

Sort of my first thought about Twitter.

p.s. I've gone to the website, and started to learn about Twitter. But now there's something new. TinyChat. Oh, the humanity!

When Is a Liquidation not Like a Liquidation in a Chapter 7 Bankruptcy in Arizona?

Will they liquidate my house and my car and my food and my medicine?

No.

Probably.

The only way "they" (not the "Men in Black") will liquidate your house is if your house is worth more than the mortgages on it, AND the exemption in Arizona. Note that there's a cap that went into effect in some cases after the 2005 Bankruptcy Amendments.

How about your car? Well, unless it's worth more than BOTH the underlying lien PLUS your exemption ($5,000 in most cases, $10,000 if you're lucky enough to be a "cripple", which is the word used in our statute, and is not defined), the trustee won't want your car.

Food? Uh, not in any case I've seen. Medicine? Unless you're a pharmacy, I don't think so.

Clothing? Have you ever gone to Park 'N Swap at the Greyhound Race Track? I don't know if it still exists (used to be referred to as "Swipe 'N Sell" by some of my buddies in the old days, when they found their tools for sale after their truck had been broken into).

But if you go to Park 'N Swap you'll see that used clothing has a fair market value of close to nothing. Not zero, mind you, but not much. And in any case less than the Arizona exemption.

Summary: the trustee only wants to grab your stuff in a Chapter 7 Bankruptcy in Arizona if it's not exempt, or worth more than the exemption plus all liens on the property. If it's worthless, you get to keep it.

But the Arizona Exemptions are generous enough that most Chapter 7 Bankruptcy cases in Arizona are what are called "No-Asset Cases", simply meaning that the trustee could not see a way to make money to pay creditors by selling an asset and paying the costs of sale and then paying the creditors.

Your Top Ten Bankruptcy Questions, Answered!

There are some questions that come up with great frequency. I've posted blog entries to address some of those, and the most frequently asked are the following:

How Long Will This Thing Take?

What do I get to Keep?

How will They Even Know I Have It?

What Happens at the First Meeting of Creditors in Arizona?

Will They Take Away All My Credit Cards?

If I'm Going to File a Bankruptcy, Why Don't I Just Max Out My Credit Cards First?

Are They Going to Take My Comic Book Collection? My Beanie Baby Collection?

What About My Wedding Ring?

Do I Have to List All My Debts and Assets, Even if I Don't Want To? (Hint-Yes!)

Could I Just Modify My Mortgage Instead of Filing Bankruptcy? Hey, Take a shot!

What are Secured Debts? What are Unsecured Debts? What are Priority Debts? What is a Judgment Lien?

The definition of secured, unsecured, priority debts, and liens (two flavors; consensual and judgment) is something ordinary folks don't normally need to know about.

But in the same way that Eskimos have three hundred words for "snow", Arizona bankruptcy lawyers have many, many different words for debts, because the precise kind of debt determines how that particular debt is going to be handled in the bankruptcy case.

Secured debts are the king of the hill. They have a special relationship to a particular asset. For instance, your mortgage is a secured debt. The lien on your car is a secured debt.

Unsecured debts aren't so lucky. They are debts on which you are personally liable, but they aren't "attached" to a particular asset. Usually. Note that this area of law, like all of 'em, has lots of exceptions. But for this simplified discussion, unsecured debts include credit card debts, medical bills.

Priority debts are paid out of a bankruptcy estate if there is money to pay them before any payments are made to poor old unsecured debts.

And if somebody takes a judgment against you and records that judgment in the Maricopa County Recorders Office, for instance, it's probably going to become a judgment lien on real property you own in Maricopa County (like your house, for instance), and have to be paid when you want to sell your house, unless you can scrape it off in a bankruptcy with a special mini-lawsuit. There are also consensual liens, like the one on your car. Judgment liens and the consensual liens on your car are usually secured debts.

Confused? Don't worry. So are most lawyers.

Doesn't a discharge get rid of debt?

No. The discharge will block a creditor from collecting on a debt in connection with your personal liability. But a properly perfected lien or security interest or mortgage or deed of trust is not set aside by the discharge, and all those have to be discussed with your bankruptcy lawyer.

A Funny Blog About Bank Law?

I just found a screamingly funny blog about Banking.

Yes, I know. It's like finding a screamingly funny blog about watching grass grow.

But it's true, and you can see it here.

In case the link doesn't work, here's an url:
http://www.banklawyersblog.com/3_bank_lawyers/2009/05/so-you-thought-being-a-bank-director-was-an-honor.html

By way of nothing but coincidence, several friends and associates of mine opened a bank or two in the last few years.

Glad I didn't.

If I'm an Insurance Agent, Can I File a Bankruptcy? If I'm a Lawyer, Can I file a Bankruptcy?

Yes, and Yes.

But those aren't really the questions you mean to ask.

You really mean to ask, are there terrible consequences?

And the answer is, as it so often is, maybe.

If you're a lawyer, and you didn't steal from your clients, and you just have a bunch of debt, oh, well. If you did steal from your clients, you are in deep kim-chee, and you need an ethics lawyer, like Linda Shely, not a bankruptcy lawyer. Although you may also need a bankruptcy lawyer for your non-stealing-from-clients debts.

If you sell insurance, you may slide right through the bankruptcy. Or not.

The issue that always worries me is this: do you have a book of business that the trustee can sell in order to generate funds to pay your creditors?

Think about that for a minute.

You've worked years trying to build up your book of business, and now the trustee might want to swipe it and sell it?

Maybe.

I recently did an emergency filing for a nice insurance guy. He guaranteed and swore to me that he had no book of business, as some insurance guys do, because he was merely an independent contractor, servicing a book, and that the Insurance Company itself owned the book.

I said, I'll file for you, but only if you KNOW that, not believe it. Contact your insurance company and get that confirmation from them. You are not the only guy who sells for Giganto Insurance Megalith, Inc., who has ever filed a bankruptcy.

And believe me, the insurance company has considered and addressed the issue.

So he asked, and he confirmed, and I filed for him.

Am I Too Competitive? Clients, Don't Bother With This One.

Everybody needs a hobby. Mine is First Meetings of Creditors.

But at some point, I got the goofy idea that I'd write a bunch of reviews on Amazon.com, and watch my rating go up.

Some people watch the paint dry, I watch Amazon ratings go up. Hey, takes all kinds to fill the freeway, right?

So I'm feeling good, because I've written enough reviews that my rating, listed on my profile, has gone up from about 30,000 to about 6,500.

And then on a whim I looked over the list of the top 100 reviewers, and found a friend of twenty years standing, who is a top 100 reviewer!

I was getting set to crack the champagne when I broke the Top 1000 Reviewers and got the coveted TOP 1000 REVIEWER BADGE!

That's a lot more reviews I'm gonna get to write!

However, gentle reader, you know I'm gonna!

And I'll celebrate when I break the five thousand barrier, and then the 1000 barrier. And then the 100 barrier.

But I'm never going to be the Number One Reviewer on Amazon; I'm an Arizona bankruptcy lawyer, and this is a depression!

I Thought I Would Just Pay You and You'd Do Everything!

That would be a "no".

I'm always made sad by the number of folks who figure that if they've done the hard work, getting themselves psychologically ready to go into an Arizona bankruptcy lawyer's office and talk about bankruptcy, that the rest of it should be easy for them.

And you know, gentle reader, that easy, simple bankruptcy cases show up as frequently as the Easter Bunny.

Because of the LISTS! And SCHEDULES! And STATEMENTS!

You gotta list your assets (yep, even the replica light saber that cost you $300 and now sells on e-bay for $3), and debts (with address AND ZIP and account number), and go through the questions in the Statement of Affairs.

That's a lot of work, and sadly, my office can't do it for you.

But I have a dream. Not as wonderful as that dream, but still pretty cool.

In my dream, when clients pull three credit reports, those will have all their debts, in perfect accuracy and completeness.

And it will take only the push of one button to get all those debts and zips and account numbers onto lists. And another program will capture all the assets and spit 'em onto the electronic page (with electronic spit).

But that day is not today, paraphrasing the Return of the King.

Today a debtor gets to tippytype all the info into our online program. I recently agreed with Heidi that we will not, ever, do another big cardboard box bankruptcy (the debtor comes into the office with a big cardboard box full of bills and says:"Here!" and runs out the door).

So unless you're online, you don't get to be a client of mine. But of course, unless you're online, you can't use MapQuest, Yahoo Maps, or Google Maps to find my Phoenix, Arizona office, next to the golf course at the Biltmore.

And apparently you need to, because my office seems to be wrapped in an Invisibility Cloak, based on the number of clients who have trouble actually finding it.

So use the online maps! And plan on doing a lot of typing.

Why File a Chapter 7 for a Corporation?

I asked this very question of a nice gentleman I met yesterday.

He wanted me to file a bankruptcy petition for his flat puppy corporation.

I pointed out that such a filing would not discharge the debts of the corporation.

He knew that.

I told him I'd have to charge him to file the Chapter 7 for the corporation, and to attend the First Meeting of Creditors with him, and to attend the probable Rule 2004 exam with him if the trustee wanted to know more about the flat puppy.

He knew that.

I pointed out that he'd have to list ALL the debt and ALL the assets, and explain where the assets went if they're not there, and if he sold them he'd have to account.

He knew that.

I pointed out that such a filing would not discharge HIS personal guarantees.

He knew that.

I pointed out that the corporation does not survive the process; the legislative history says that after the corporate estate has been fully administered, the corporation simply ceases to exist. The legislative history says that's to prevent trafficking in corporate shells. Whatever that is.

He didn't know that but wasn't surprised and didn't care.

I pointed out that the corporate Chapter 7 filing would not give him as President the benefit of the automatic stay.

He knew that.

I pointed out that he'd have to give the Chapter 7 trustee the unsold pile of worthless widgets in his garage.

He knew that, and said his wife would kiss him the day she could park again in the garage.

So WHY, I asked, do you want to file this corporate Chapter 7?

To make my phone stop ringing, he said.

Well, okay then, I said.

I also pointed out that it won't make the phone stop ringing entirely, because you may have personally guaranteed some debt.

Yep, he said, but three calls a month beats three hundred calls a month.

I had to agree.

A Website to Try to Get a Mortgage Modification under the Obama Plan

I don't do mortgage modifications right now, but there's a nifty Nolo's Bankruptcy and Foreclosure Blog that points to a government website with tools to help people find out if they qualify for an Obama mortgage modification.

That blog is located here; if you have trouble with the link, the url of the website is: http://www.makinghomeaffordable.gov/

I hope it helps somebody stay in their house, without paying an additional quarter of a million dollars above the value of their house!

Shall I Rack Up My Credit Cards to the Max Before I file My Chapter 7 Bankruptcy?

I don't normally suggest that as a course of action.

Maxing out your credit cards just prior to filing is generally considered rude, crude, and fattening by the credit card companies themselves, and that only seems fair.

They set up a deal with you based on your expressed willingness to pay as agreed on the credit card, and loading them up to the limit just before filing a bankruptcy just looks bad.

That's why there's a presumption that if you rack up credit card charges prior to your bankruptcy filing, they won't get scraped off. The relevant portion of 11 USC 523 is the following:

"(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable"

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There is a moral here: if it seems like it ought to be the wrong thing to do, it probably is.

What Do I Do About my Beloved Rolex in my Chapter 7 Case in Arizona?

Whatever you decide to do about your beloved Rolex Submariner in connection with your bankruptcy case in Arizona, keeping it is probably not a perfect option.

The exemption for watches in Arizona is about a hundred bucks, and your Seiko or your Timex will probably not be an issue.

But your Submariner has a value, even if it's not ticking, of around five to seven grand.

That will be an issue.

So after you sell your Rolex for fair market value and keep the receipt and keep a meticulous list of where you spent the proceeds on food and medicine and soap and filling up the gas tank, what do you do about the naked space on your wrist where perfection lived before your Chapter 7 bankruptcy?

Why, you get a watch that looks like it's twin brother!

I don't get a kickback from Invicta, but I really should get an "honorarium" for selling their watches. I recently wrote a review of my Invicta watch on Amazon.com, and the only problem with it is that it doesn't adequately describe what a magnificent family heirloom watch Invicta sells.

For a hundred bucks.

P.S. Do NOT fail to list your Rolex on your schedule. IT'S JUST A WATCH! IT'S NOT WORTH IT. DO NOT BECOME THE POSTER CHILD THAT THE U.S. TRUSTEE'S OFFICE WOULD LOVE TO FIND! REMEMBER THAT YOU'RE TESTIFYING UNDER PENALTY OF PERJURY! AND IF YOU WONDER HOW THEY'RE GOING TO KNOW THAT YOU HAVE THE ROLEX THAT YOU DIDN'T LIST, I'LL TELL YOU: MAGIC!

P.P.S. I know it's obvious, but don't GIVE the watch to your son or father, because that's a fraudulent transfer!

What Happens if My Credit Card Companies Keep Calling Me After I File a Chapter 7 Bankruptcy in Arizona?

It's probably a good idea to set up two lists.

One list for things you should be afraid of (atomic bombs, giant poisonous snakes, visits from your in-laws), and another list for things that are less scary.

And then when you need to feel afraid, you can just go down the list to good old number 73, and watch your hair follicles clench in terror!

A call from a credit card company after you filed your bankruptcy probably should go in the "less scary" list.

The credit card company (or the fifth company that bought the debt) may not have a well-organized system, or may just be a bad apple. Happens.

In either case, you can take the first bite at the apple. Just say, "please don't contact me again. I have filed a Chapter 7 bankruptcy, number ___________________. Do not call again. Have a nice day!"

Don't engage the collector in an argument; he's getting minimum wage in a country where English is not a first language.

If the creditor keeps calling after being told by you that you filed a Chapter 7 bankruptcy case, call your Arizona bankruptcy lawyer and he or she will contact them and send a "knock it off" letter that points out the provisions of the automatic stay.

If the creditor won't knock it off after the Arizona bankruptcy attorney has sent a knock it off letter, then maybe it's time for a contempt motion.

But I've only needed to file two or three of those in thirty years, so don't plan on it in your case.

Most creditors just need a little love and attention.

So What Happens when I File a Chapter 7, Part I?

This is the good part.

Right after you file your Chapter 7 in Arizona, you'll hear something you haven't heard for some time.

TO READ THE REST OF THIS POST, CLICK HERE!

It's Going to Get Worse Before It Gets Better

I'm just a simple backwoods bankruptcy lawyer, but it's clear to even me that we're in a depression.

A major equipment leasing company laid off about two hundred people today in Arizona, and the street was lined with guys taking cabs home, because their company cars had to be left behind.

And I had lunch today with a very capable bankruptcy lawyer today, Randy Nussbaum, who told me that he expected the commercial real estate disaster would make the consumer home real estate disaster look like a walk in the park.

And the number of deficiency lawsuits being filed by banks (now that they have their conveyor belts in operation) which are sending droves of formerly well-off clients to my little lemonade stand tells me that the worst is far from over.

This is a depression, not a recession.

Please Stay Current on your Student Loans!

On my flowchart, one of the items I cover when I talk to clients is whether there are student loans.

Then I use the Joseph C. McDaniel Test for Student Loan Debt Discharge in Bankruptcy.

I count their arms, legs, and head.

If the number is more than two and less than nine, the student loan will probably remain.

Okay, less than eight.

But seriously, you don't want to be in such a bad way that I can scrape off your student loan, because if you are, you have more than debts to be unhappy about!

In addition, those who collect student loans have more brutal, and faster, collection abilities than tax collectors.

A Lunch with My Internet Guru is Like Lunch with Yoda

If you're a client, don't bother with this post. Remember that I told you to read my blog, but don't bother with entries that are bankruptcy book reviews or just me whining about how difficult it is to get perfect schedules put together.

Another category of my blogs for a client to ignore is me talking about a great day. There are going to be fewer of those than whines, but those are still not very useful for clients.

On the other hand, if you're an Arizona lawyer, and you know you could help more people if only they'd come into your office, you couldn't do any better than to talk to my buddy Alex Morris. He's the Yoda of Internet Communication, and Findlaw is remarkably lucky to have him. He apparently is still providing a FREE 40 minute consultation to lawyers, and it is my considered opinion that any attorney who doesn't take that consultation needs psychiatric help. Or simply hates the idea of helping a larger number of clients. Alex maintains a great lawyer marketing blog, and if he were a lawyer, he'd be AV rated, Board-certified, AVVO 10, and the Chair of his section of the Arizona State Bar.

Today I learned to harness the power of the LINK for blogging from my friend Alex. And many other mysteries of the internet.

Later I met with two wonderful lawyers who may be joining me in several months, depending on this and that (after all, with Alex working with me to increase my internet presence, and me being an Arizona Bankruptcy lawyer, and a Depression moving forward...you understand). One of the young lawyers I talked to is me, thirty years younger, and learning to practice bankruptcy law the only way there is to learn: read it, and beg for help from experienced lawyers, and then do it. And panic and fix the mistakes, which become fewer and fewer over the years. He's going to be a force to reckon with in the next few years, no matter which law firm is lucky enough to get him.

The other lawyer I met with is a Swiss-army knife of a lawyer who's been in practice several years, and can persuade anybody to do anything with remarkable niceness and likability, and the added impact of an agile and intense intelligence (which is a better superpower than mine, which is boring creditors into unconsciousness). Not only is she really nice, but she's clearly much smarter than I am. Both are good qualities.

And even better: she said that when we next have lunch, she's going to show me how to use Twitter!

Bankruptcy Decision Tree: Do Ya Wanta Retire? Well, Do Ya, Punk?

First, ask yourself if you feel lucky.

If you're reading this, you probably don't.

Bankruptcy is really sort of a pre-retirement planning exercise.

You can't very well start to save for retirement if you're paying 30% on your credit cards. And even if saving for retirement is out of the question, you can't retire if you have to keep making payments on credit card debt.

Putting it a different way, find a calculator and see how long it will take you to pay off your credit card debt. If you discover that you'll be two-hundred and seventy-three years old before you've paid off your credit card debt, there could be a bankruptcy in your future.

Or you can try this one: find an online retirement calculator. Decide when you want to retire. Figure out how much you need to save to retire. Decide how much you can obtain on your investments and how high inflation will run. Then work backward.

If you discover that you need to start saving at age 4 in order to retire when you would like to retire, there may be a Chapter 7 in your future.

If social security goes belly up, and jobs keep evaporating as they have recently, we'll see a lot more in the way of pre-retirement bankruptcy filings.