Arizona Bankruptcy Attorney Blog

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.

 

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.


 

You never used to see shopping cart people in Phoenix, when I grew up here, at all. Any.

The chronically mentally ill were taken care of in Arizona State Mental Hospital, and they were fed and had clean beds, and if they discussed suicide, they were either given pills or shocked until it reset their suicide button to another day. They were not left to wander the streets as they are today, which is a disgrace, by the way.

You seldom see shopping cart people these days during the summer, because it can get to 120 degrees in Phoenix, so people who keep walking on the sidewalk during the day in Phoenix just die, as do folks who have trailers and can't pay for electricity.

I know that people can lose everything and bounce back, because I see it, because I'm a bankruptcy lawyer in Arizona. I normally don't see people lose everything, but I do see a lot.

So I decided to make of list of places that the indigent can get help. Do not come to me, because I am not equipped with water, food, shelter or beds. I take care of bankruptcy cases, and my clients are often folks who have good incomes and lives (including doctors and lawyers and c.p.a.s and chiropractors), but who hit a rough patch and need a fresh start, which bankruptcy can often provide.

Many people have it worse than folks who simply need relief from overwhelming debt, which a Chapter 7 bankruptcy can provide, or a Chapter 13, or maybe an 11 or 12. And in the overwhelming majority of cases, all people lose in a bankruptcy is their debts, not their assets, even though it is called a "liquidation".

But here is a list of resources for anybody on the street (and I'll add to it as time permits), and God bless you and keep you safe until you have a home again.

DO NOT CALL MY OFFICE FOR HELP, BECAUSE I DON'T HAVE RESOURCES TO HELP YOU; BUT THESE PEOPLE MAY BE ABLE TO HELP YOU:

St. Vincent de Paul Charity has multiple locations in Arizona, and it does a huge amount of work to help the poor and homeless. It has multiple Thrift Stores, in Glendale, Apache Junction, Chandler, and Sunnyslope. St. Vincent de Paul has a medical and dental clinic at a Watkins Road location in Phoenix. It also has a dining room that is doing brisk business these days.

HUD has a website that lists food banks, food stamp locations, and homeless service groups, and more.

The City of Phoenix has homeless services, and those are discussed in this website.

The City of Mesa, Arizona, has homeless services.

The City of Chandler, Arizona, has homeless services.

The City of Tempe, Arizona, has homeless shelters.


 

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.

 

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.


 

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.

 

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.

p.s. This isn't quite clear enough. What happens, in sequence, is that the client takes as little or as much time as they want to fill in their schedules online. Some get 'em done in three days, and some take nine months. Then when they are COMPLETE, and not a minute before, the client hits "send", and the data goes to Heidi, The Bankruptcy Angel.

And there are five schedules at any time ahead of yours, so assume it'll take her a week to review yours after you hit send.

The I have to review it and complain about this, or that, and make sure the client knows that they are going to loose the antique hookah they listed, because it's not exempt.

Then, IF AND ONLY IF THE CLIENT PASSES THE MEANS TEST, we get to file the Chapter 7 for the client.

WE WILL NOT FILE A CHAPTER 7 FOR A CLIENT IF THEY DON'T PASS THE MEANS TEST, BECAUSE THE CASE WILL, NOT MAY, GET DISMISSED. And that's no good for the client.

Just so you know, I've had exactly one case dismissed for abuse since the 2005 Amendments passed; and I'm refiling for that client when he passes the means test.

But I don't want another one, and I sure don't want it to be you.

The alternatives if you don't pass the means test are various, and if have to, we'll talk about them, and we'll figure out how to take care of you under that scenario.

Some people find that they can file for their Chapter 7, but they need to take an unpaid vacation for three weeks before they qualify.

Life's tough under the 2005 Amendments.

 

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.

 

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 or Nikolina 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.

 

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.