Arizona Bankruptcy Attorney Blog

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.

 

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.