Arizona Bankruptcy Attorney Blog

There are some states where public workers make more money than workers in the private sphere.

Actually, there are 41 such states!

That's got to make the means test harder for public sector folks in those states!

Well, with 300 nuclear power plants, Japan doesn't need to worry about increases in petroleum prices.

See the Reuters article for confirmation.

There is a gold mine of free, accurate, unbiased bankruptcy information at your fingertips, and I talk about it and blog about it with a certain amount of frequency.

I just ran into an article suggesting that there are ten top ways that people waste their money.

It's an interesting article.

But I disagree strongly that gifts are a waste; people give gifts to show love, and a failure to judiciously gift can hurt the feelings of the non-recipient.

Putting it another way, is a gift a waste of money if the alternative is sleeping on the couch?

Just a thought!

p.s. actually, one of the top ten benefits of a bankruptcy discharge in Arizona is that after the bankruptcy discharge, people actually have some money to spend on gifts, and on travel, and on other things that make life worth living. They also get to pay back their folks (don't do that before the bankruptcy, kids!) and to go out to eat now and then, which is good for the restaurant industry.

And for people working in the restaurant industry!

p.p.s. the guys who wrote the top ten ways article I'm discussing also think the depression is over; they couldn't be more wrong! But you knew that already, didn't you?

 

Nicolina Kovacevic, my brilliant bankruptcy lawyer associate, talks about bankruptcy, and she's always worth a listen. Even if she's semi-terminally camera shy!

 

You already know that I love Nancy Rapoport's Blog.

Now I love it even more, because it has a list of jokes, including a few bankruptcy jokes. As you may be aware, jokes about bankruptcy and insolvency are thin on the ground; if you have some, send them my way so can share them.

Here are two of my favorites from Nancy's Blog, and you should go over there and read more!

"If you don't pay your exorcist, you can get repossessed."

"You are stuck with your debt if you can't budge it."

p.s. today is like Christmas! Not only did I get some new bankruptcy jokes, but PHOENIXLAW.TV or THELAW.TV, which are powered by THELAW.TV and ABC15, apparently went live today with about 150 videos about bankruptcy law and practice in Arizona.

And Nikolina Kovacevic, my brilliant young associate, is featured in the best of them!

 

I like being right, except when I hate being right.

My previous post about oil continuing up, with occasional dips to make people bored so they don't do anything about it, was absolutely correct. 

And that makes me sad; when oil goes up, the cost of transporting goods goes up. And that drives costs up, here in the USA. And in Arizona in particular, where we favor pickup trucks. And we have wide-open spaces.

And since the price of hay hasn't gone up, and the expense of raising hay keeps going up (gasoline, right? and twine. And...everything else), we'll see a lot more farms throwing in the towel.

Now, I think family farms are a good thing. They produce far more efficiently and effectively than giant corporate conglomerations, and every farmer I've met has been a great person. Farming forces you to work hard, every single day (if you're too tired to slop the hogs or milk the cows or water the crops or bring in the crops, pretty soon you don't have a farm).

We've always had some of the most productive farmland in the world here in the United States; a lot of it has been paved over.

That's not a good thing, in the long run, if we all want to eat.

And why are there so few Chapter 12 Bankruptcy cases? Often, by the time a hard-working farmer comes in to talk to an Arizona Bankruptcy Attorney, he's so tired that it's time to shut the doors. And if everything you have in every single entity is encumbered by the bank to twice its current value, that makes things a little more difficult.

Not impossible, of course. Just more difficult.

 

Interesting article in Bloomberg suggests that the United States is bankrupt, which is ridiculous.

Insolvent, sure! Bankrupt? Hey, even States can't currently file bankruptcy cases. The United States? There's no statute which would permit it.

But I volunteer to be the Trustee! And the First Meeting of Creditors will be a lot of fun, I promise!

Note: if we hire a turnaround expert to fix the United States, the way a bankruptcy guy would fix a corporation, I move that we hire the nice lady who wrote this article, Mary Meeker. She correctly identifies the issue in the U.S. Economy: we have a spending problem.

Kind of like all of those Americans who practice "retail therapy".

 

Dave Duerson was a former Bears defensive back.

He filed a bankruptcy, and he subsequently committed suicide.

The event that caused the dominoes to fall was when a creditor of Duerson's filed bankruptcy, making his primary asset, a judgment against that creditor, worthless.

So it is with bankruptcy; it's sort of trickle-down economics, in a bad way.

 

Willie Sutton was said to have been asked why he robbed banks, and his answer was "That's where the money is!"

Maybe true, maybe not, but easy to understand.

It's also easy to understand why folks would like to see banks beaten up for their continuing Scrooge Act. On the one hand, the banks contributed heavily to political campaigns over a decade, and were rewarded with the 2005 changes to the Bankruptcy Code, which made bankruptcy a much less warm and fuzzy experience.

Then banks went on a foreclosure tear, running trustee's sales and mortgage foreclosures right, left and sideways to the tune of 1.1 million last year, and probably 1.4 million this year.

That's unfortunate, and it's even more unfortunate that the banks were too dumb to figure out a way to efficiently process loan modifications. The word from my clients in the trenches is simple: banks take up to a year to process loan modifications, and lose their documents three times during the process, and come up with contradictory stories to tell the poor mortgage debtors.

But now the pandybat is on a different foot, at least to some extent.

Wells Fargo and Bank of America have reported that they may face fines and lawsuits over mortgage and foreclosure procedures.

It won't be enough, and it sure wasn't fast enough coming down the road, but seeing them smacked around a little is a little bit satisfying. 

And it couldn't happen to nicer banks, you know?

 

Here's an interesting article about the end of lawyering as a "noble profession". 

If I were a lawyer working for a large law firm, and I read that article, and saw the advertisement for the legal outsourcing seminars that are coming up in London, I'd be...suicidal.

If I were smart.

p.s. "Outsourced" is still my favorite TV Show. But that doesn't mean that I like the end of law practice as a "noble profession".

 

Other countries are having economic troubles, too. My guess is that the underlying causes are similar.

But in Ireland, folks have had a universal remedy for hundreds of years, and lucky they were who had it. Because some came to this beautiful land.

And yes, my name is Joseph C. McDaniel.

As in "Mick".

 

The IRS says it's going to be warm and fuzzy now.

Do you believe them?

 

Do not think the the Equifax-noted drop in small business filings is a good thing.

It's really a reflection of despair on the part of small business owners, who are just closing the doors of their businesses and filing personal bankruptcy cases to deal with personal guarantees.

 

I always get a kick out of the remarkably short memory span of the collective intelligence in the world.

Oil prices spike, then come down slightly, and everybody says, "Whew! Glad that's over! Back to business as usual!"

Rising oil prices, which will keep rising forever in herky-jerky amounts, constitute a serious economic problem for the United States; the fact that we don't have a current national program to build either 300 nuclear power plants (like Japan) or GIGANTIC SCARY EXPENSIVE windmills, or acre after acre of solar generating plants, or dig for coal and drill for oil, is a testament to our collective stupidity as a nation.

Inadequate energy supplies helped lose a war for Germany (it was called World War II); it helped do the same thing for Japan.

In exactly what way does anybody think it's a good thing to depend for our energy on countries that would just as soon see us staked out on anthills?

You may wonder why this shows up in a bankruptcy blog; well, if we had a Manhattan Project for domestic energy production of every kind, that would eliminate our current 20% unemployment overnight. And our economy would benefit for decades from having cheap, reliable domestic energy production.

And we'd have a heck of a lot fewer bankruptcy cases getting filed.

 

Life after bankruptcy is something I've written about in the past, and will write more about in the future.

But it appears that there is one company has bounced back from bankruptcy, and that's General Motors! 

 

Foreign investment is a major issue, and it's just started dropping like a rock.

In India. 


And that's a remarkable thing, because of the reasons cited by the article in The New York Times Global Edition. 

p.s. my current guess is that India's Bankruptcy Law follows Great Britains's Bankruptcy Law, which is not terribly warm, fuzzy and supportive. Even after the 2005 Amendments, the United States has moderately humane bankruptcy laws.

But we could do much better.

 

Bankruptcy filings all over the United States went up in 2010, and that just makes sense; we also saw around 1.1 mortgage foreclosures and trustee's sales in the same period, and bankruptcy and foreclosure go hand in hand.

And since we're on track for 1.4 million mortgage foreclosures and trustee's sales in 2011, I don't expect to see the pace slackening.

What does surprise me is that so many Chapter 13 Bankruptcy Cases are being filed. 

 

Ordinary people often have a lot of month left over at the end of their money, and then want to talk to a bankruptcy lawyer in Arizona.

But if an ordinary couple, or even a couple of lawyers, doctors, or CPAs noticed a hole in their bucket to the tune of $73,000,000, they might be...surprised!

Now, I don't understand a lot of ordinary words, although I speak fairly fluent bankruptcy law after about thirty years in that country. But I don't quite understand the word "misspent" in this context.

p.s. there's a very small chance that your bankruptcy case will be audited. If it is, make me proud. I don't want any surprises to show up, like a Hummer that you forgot to list, or payments from the lottery. Or a $3,500,000 bank account. If you don't list all your assets and all your debts, and all your recent large transactions, you could be a poster child!

And nobody wants that, least of all me! Because I've been a bankruptcy lawyer in Arizona for thirty years, and none of my clients have gone to jail yet. Don't be the first.

 

Most people keep everything they have in a Chapter 7 Bankruptcy Case in Arizona, which is why most bankruptcy cases are categorized as "no asset" cases.

Bankruptcy trustees compare the list of exempt assets in Arizona with the list of assets on the schedules of the debtor, and as long as they match, the debtor keeps everything, including non-exempt items that are worthless or over-encumbered.

If you have a jet-ski, or a three-wheeler, or a toy hauler, those items are not exempt, and if they're free and clear and you haven't sold them pre-petition, the trustee will take them and auction them off, unless you buy them back from the trustee.

And sometimes they'll accept payments.

And my clients have had lots of luxury items over the years, from Rolexes to Hummers to Airplanes, but none have yet had personal submarines. 


Which makes me sad; I would like to examine one of these things for a few days. 

Just to help the client estimate its value, of course.

 

There are some cases you read about and say, "Gee, I'm sure glad they didn't drop into my office!"

 

It's important that you know what debt will survive your Chapter 7 Bankruptcy in Arizona, and everywhere else.

One starting point is 11 USC 523. Now, reading it at one sitting and trying to digest it can make a strong man go into seizures, so I'll be slicing and dicing it for the next week or two, so that a normal human can get an idea of what it means.

Here's today's lesson about nondischargeable debts: if it's a tax debt, it will probably survive your Chapter 7 Bankruptcy Case. Now, not all tax debts are non-dischargeable in a Chapter 7, but that's a postgraduate course that I'll tell you about another day.

For today, however, you will read a fairly thin slice of 11 USC 523, and you will take away this lesson: if it's a tax debt owed on the date we file your bankruptcy, you will probably still owe the debt.

And here's the slice of the statute that gets us to that conclusion, and if you start to feel faint, sit down and put your head between your knees:

"...does not discharge an individual debtor from any debt—

Why do you file a Chapter 7 Bankruptcy in Phoenix?

It's pretty simple. You want the automatic stay of 11 USC 362, and you also want the bankruptcy discharge that arrives in your file (but not your mailbox) about a hundred days after you file your case.

Mind you, there are other benefits besides the injunctions I just mentioned.

For instance, there is the benefit of the exemptions, which are also a part of non-bankruptcy law in Arizona (mind you, they function in slightly different ways outside of bankruptcy, but they're still relevant to the creditor-debtor dance).

The statute that gives rise to the automatic stay is above, and the link will show you a discussion of that injunction and the entire text of the statute.

The bankruptcy discharge of Chapter 7 (which is a little different from the Chapter 13 discharge; and before the BARF Act of 2005, the Chapter 13 provided a little something I fondly remember as the Superdischarge) is not defined as perfectly by one statute, which would be tooooooooo easy.

Instead, you get to wade through 11 USC 727, which is entitled "Discharge", but spends most of it's text building exceptions and performing lawyerly gymnastics around the concept of the bankruptcy discharge in Chapter 7.

Then you get to explore 11 USC 523, entitled "Exceptions to discharge", which goes on and on and on.

And I'll come back to it when I get a Round Tuit and discuss what doesn't get discharged in a Chapter 7 Bankruptcy in Arizona in English, not Bankruptcy (which is a language that resembles English, but isn't).

And why did I talk about the pot of gold at the middle of the bankruptcy rainbow?  Because after you receive your discharge, in the simplest case, your file will be open for administrative purposes for another six months or so; and if your case has assets to administer, your Chapter 7 may be open for administrative purposes for four years or more. No kidding.

Enjoy the reading (hey, this'll provide bedtime reading after you discover that your favorite Borders Bookstore is closing!).

 

It will be interesting to see how the fight to balance the books for the States and the United States works out.

We all have a stake in it, because when States become insolvent, that's a bad thing; ditto the Federal Government.

Some folks suggest that States be permitted to file Bankruptcy, which is Jake by me. Or they can raise their taxes, which Illinois has done to the tune of 66%, but that's probably a bad thing for Illinois. Only time will tell.

Then there are folks who say that States can balance the books by cutting spending, as Florida may do.

The beauty of having States is watching experiments with different approaches, and seeing what works best in the long run.

Because States, like any other business, can stay in business by making (taxing) more, spending less, or borrowing to cover a shortfall, and those are the three options. Period. Unless you count bailouts, which are unpopular this month.

If States are going to spend less, which is just one option, after all, they'll probably wind up arm-wrestling with unions. Some people side with unions, others against 'em.

I don't have a dog in this fight; the American Bar Association already sold out lawyers by permitting the outsourcing of legal work to Indian Lawyers, who are very smart indeed.

And while I love the television show "Outsourced", it makes me sad when lawyers get pushed off their high-rises.

Note that the Federal Government can always solve the economic problems facing the United States by printing money in gigantic amounts; that solution was used in Zimbabwe, and I believe it worked very well. At least according to CNN World.

But he who lives longest sees the most; and I'll be interested in seeing what the future of the United States economy holds.

And I hope that fewer folks in Phoenix, and elsewhere in Arizona, need to file bankruptcy; it's a lot less fun than you might think, although when you gotta, you gotta.

I liked the perspective of Marianne Bickle, who wrote a nice discussion of the emotional responses to the Borders filing in Forbes. 

I liked it that she saved her deepest sympathy for the soon-to-be out-of-work employees of the Borders Bookstores that were closing.

And she was also sympathetic to the creditors who weren't getting paid.

Frankly, there's a lot of sympathy needed in connection with most big bankruptcy cases.

Me? No, you don't have to have sympathy for me that my favorite Borders is closing. I remember a cashier there who had great customer service instincts; I think her name was Caitlin.

So I may get a new employee out of the process!

Every cloud has a silver lining!

Some days it's good being a bankruptcy lawyer in Phoenix, and some days it's a little less good.

For instance, some days clients send me gift baskets with cards that say, "Thank You. Thank You. Thank You."

Other days, clients send me emails and say, "What do you mean, my diamond-encrusted Rolex isn't exempt in Arizona????? I paid you a fee, now fix it!"

To be fair, both of those events happen seldom, but they happen, and they make me happy or sad, as the case may be.

But two different things make me very, very happy to do the work that I do, whether it's rewarding on any particular day.

One is the memory of working as a ditchdigger, with a pick and shovel, for my brilliant buddy Pancho Willis. In the hot, hot sun. In Phoenix, Arizona. In the summer.

Another is this photograph, and I urge all lawyers to look at it on days when they feel overworked, or under-appreciated. 

You know?

 

When I saw the headline, "Phoenix Home Invade by 4 Gunmen", I had several thoughts.

One was the hope that everybody in the house survived the ordeal. That's gotta be scary.

Another is one of those questions I'm seldom asked anymore, because I've answered it in this blog, which is "will the bankruptcy trustee come to my house"?

My answer was always that it can certainly happen, but seldom. And in my cases, while it hasn't happened yet, it may yet happen.

In fewer than ten cases in my 30 years of practice, a bankruptcy trustee has asked an appraiser or auctioneer to visit with my clients, by appointment.

And, remember, the bankruptcy process is a rule-based system.

And in general, the rule is that you get to keep the exempt stuff, and the over-encumbered stuff, and the worthless stuff, in your Chapter 7 Bankruptcy Case.

But you gotta remember the wisdom of "Roadhouse": opinions differ.

And you may believe you have a worthless asset, while the trustee may have a different belief.

So there's a chance that your ball of string (only the thirty-fifth largest in the world, but still an honorable mention at the Ball of String Convention) will draw the attention of a bankruptcy trustee, especially a new trustee, who hasn't yet been disappointed by losing money on estates that he decided to administer, only to discover that the value of all the non-exempt assets was inadequate to make the case a winner for him!

In many ways, it is a joy to deal with a trustee who is a veteran of the bankruptcy wars, because she has a realistic idea of the values of many used items (like a couch that has seen kittens and puppies over the years).

And if the new trustees are sometimes enthusiastic, who can blame them?

Good judgment, after all, comes from experience; and experience comes from...bad judgment!

And all of us have the opportunity in our lives to learn good judgment from our experiences, whether we're a debtor, a trustee, or a bankruptcy lawyer in Phoenix!

p.s. my hope for you this day is that if somebody comes into your home to review the value of your stuff, it's a bankruptcy trustee, and not 4 armed gunmen!

If you're in school, and you score in the top three per cent of class, there's a good chance that your parents will be happy with you.

If you weigh as much as the top three per cent of the population, on the other hand, you'll probably have serious health problems.

The consequences of being an overachiever are different in different contexts.

And so it is with Chapter 7 Bankruptcy Cases in Phoenix, Arizona, or Chandler, or Gilbert, or anyplace else in Arizona.

The vast majority of bankruptcy cases in Arizona are called "no-asset" cases, because they have assets that, if squeezed, would produce less than eight hundred dollars in value. That is, all of the assets in the case are either fully encumbered, over encumbered, worthless, or exempt.

Exempt simply means that it's listed on the laundry list of exemptions in Arizona. I've cut and pasted that laundry list from the U.S. Bankruptcy Court Website below, using a tool called "scribd".

But the core of today's bankruptcy lesson is this: there are consequences to all of the decisions you will make in connection with your bankruptcy case, and explaining fully all of the consequences of all of those decisions will probably take me another thousand posts or two.

One decision you may make is to sell your non-exempt vehicle prior to filing, and to use that money to buy food, make a mortgage payment, and to pay your bankruptcy lawyer.

You may instead decide that it's too much trouble, and you just don't care about the extra thousand or three thousand dollars you'd get from selling your extra car, or non-exempt motorcycle.

That decision also has consequences, although they are different consequences from the decision above.

A decision to leave assets in a bankruptcy case (that is, to decide not to sell your non-exempt assets to buy food, fuel and provisions, and for other similar purposes) simply means that you are going to be in the top 3% of Bankruptcy Filers!

And your case will get as much attention from your appointed Bankruptcy Trustee as all of the 97% of no-asset cases put together.

That's not in any way fatal; but a bankruptcy trustee is motivated by both virtue, and by economic consequences, like most people in our culture. Therefore, a bankruptcy trustee will work hard to determine whether to stamp your file "no-asset", so it's off their desk, or to determine whether the total amount that can be squeezed out of the non-exempt assets in the estate will bring at least $800 or $1,000.

If so, expect your case to be open for administrative purposes for four years or so, as opposed to a "no-asset" case, which will probably be open for administrative purposes for a year or less.

A debtor's personal involvement with either sort of case is often done with in the first 100 days of the Chapter 7 Bankruptcy Case, but it ain't over till it's over.

And then it's not over, either, because in some cases, a trustee will discover unlisted assets and move to reopen the case.


Arizona Exemptions

There's a Borders Bookstore at the Biltmore Mall,  next to a Cheesecake Factory, and a few steps away from the Apple Computer Store.

Today.

But it won't be there in a couple of weeks. The liquidation sale of the merchandise there is taking place, and on Camelback Road at 24th Street or so there are two nice young men twirling signs that talk about liquidation and 40% off the ordinary prices.

Here's the only trick; in order to take advantage of the sale prices, I have to have time to get there. And since I'm a Phoenix Bankruptcy Attorney during a depression, that could be tricky.

Okay, there's one major mistake people make before coming to see a bankruptcy attorney in Phoenix, or anyplace else in Arizona.

That mistake is spending all of the dough they have in their 401(k), or their IRA, or similar retirement vehicles.

Why is that a mistake? Well, the debtors in those cases mean well, but they don't get any extra gold star in the bankruptcy process from throwing themselves on an economic grenade.

Debtors who come in to visit BEFORE they plow through their retirement funds have a much easier time of life thereafter; for instance, they might be able to buy a new car for cash at an auction after they file their bankruptcy, out of retirement funds.

Just a thought. Depends on the plan; talk to your retirement planner, and find out about possible tax consequences.

Oh, yeah; tax consequences. As often as not, if a debtor steals all the money in the retirement account, in order to shove it into the rapacious maw of the credit card companies and banks, the debtors is paid for his trouble with a big ol' tax bill!

Yep! With the best of intentions, you can turn a big bundle of dischargeable credit card debt into a mess of nondischargeable tax debt!

Now, does that seem like a good idea to you?

And I've read stories about retirees who have to get their protein eating cat food, and that disturbs me.

But apparently, some people are working to give us an alternative to cat food for folks who are poor.

And the alternative makes cat food (normally made from fish or poultry) look very appetizing!

The moral: do not spend all the money in your retirement accounts in a futile, doomed effort to make credit cards love you again; they never did! Yes, you were just an object to them!

A wallet object.

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I don't know Governor Jan Brewer. Some people like her, some hate her, because that is the fate of politicians. It all depends on whose ox is getting gored.

But I always like it when a politician cuts taxes. Always. 

And it happens so infrequently that I'm disproportionately happy when I see it.

Now, I'd like to see taxes cut far more.

But hey, "slash" is far better than a 66% increase, of the sort that happened in Illinois recently.

And my overall theory is that more jobs are better than no jobs. So lower taxes on businesses is a good thing, right?

Because I'm in a pretty good spot as a Bankruptcy Lawyer in Arizona to see what employers do when costs of any kind go up.

And that's simple; they fire employees, because it's better to fire them than failing to pay 'em. They get so cranky when they don't get paid, you know?

And if it sounds like I see anything funny about people losing jobs, I sure have you fooled.

There are some ideas that don't come naturally to me.

One of them is hiding from creditors, because I'm an Arizona Bankruptcy Lawyer, and have been for thirty years.

But if MSN Money wants to give you pointers on how to hide from creditors, well, there you are!

And thanks and a tip of the bankruptcy bench to David, who pointed out the article to me.

That one is pretty simple. You lose it if you have not spent it on ordinary living expenses, non-dischargeable debts like child support, or legal fees by the date of your bankruptcy filing.

I discuss tax refunds and Chapter 7 Bankruptcy Cases in Arizona at a little greater length here.

This is just a shameless plug for a book by friends of mine.

I know Tom Salerno the best of the trio; he was a crackerjack, high-end Chapter 11 bankruptcy lawyer from the day he started his practice, and he had the opportunity to study with the best.

And now he generously teaches what he knows, in seminars to lawyers and Judges, and in books.

So if you want to read a fine work by excellent bankruptcy attorneys in Arizona, here you go!

What's this: "clop, clop, clop, clop, clop. BANG! clop, clop, clop, clop, clop, clop, clop....."

It's an Amish drive-by shooting.

Here's the non-joke takeaway: the Amish would rather not be involved with Bankruptcy Courts, or Bankruptcy Proceedings. 

And, to be fair, if you haven't been involved in any sort of bankruptcy process in the past, the learning curve is a killer! 

I have a love-hate relationship with pizza.

It tastes so good that I can eat two or three big pizzas at a sitting, or at least I could before I saw the dreaded Hawaiian Vacation Photos ("who's the fat guy standing next to....").  The same is true for some of my family members.

Some people can handle their pizza, and have a productive life. Some people can eat pizza, in moderation, every single day, and remain healthy.

And some of us have to have a moment of clarity and come to the realization that for genetic reasons, or biochemical makeup, or ordinary gluttony, we have to "just say no" to pizza.

I'm only half-kidding when I suggest that pizza is addictive, and that some people can't handle pizza.

But the addictive quality of pizza makes me say this: if you can't sell enough pizza to make money, this is a depression, not a recession.

And some well-known pizza purveyors are now filing bankruptcy cases of various sorts, which I find very scary as an overall economic indicator.

p.s. this is just a subset of a prior post of mine, where I pointed out that if you can't sell enough booze, sex, and gambling to make a lot of money, this has got to be a depression!

p.p.s. and no, even though I'm a bankruptcy attorney in Arizona, I'm not happy that this is a depression, and I want good times to return as quickly as possible. During good times, I'm just as busy, because during good times there are plenty of folks who started a "can't lose" business, and they need to go through the car wash, or to try to reorganize their family business; that's also plenty of work.

p.p.p.s. If there were any food designed to make it impossible to hit your perfect body weight for longevity and to reduce morbidity, that would be pizza! 

Here's a blog entry with a video about your First Meeting of Creditors, also known as The 341 Meeting!

Big bankruptcy cases take on lives of their own, and some have life spans that rival redwoods.

This is the first live blog about the Borders Bankruptcy that I've seen.

Thanks and a tip of the bankruptcy bench to Edward Vielmetti in Ann Arbor!

This is a quick reminder, because I just got a very sad email from a nice lady who has relatives who are being sued for a bunch of money they received from the debtors during the year prior to filing.

I'll come back and beat this to death soon, but for now the message I want you to take away is that you should not pay back relatives during the year prior to filing. Period. It's called a preference payment.

I'll give you chapter and verse next time, but don't be that nice lady who is distraught because she tried so hard to do the right thing and scrimped and saved to repay her relatives, only to get 'em sued when she filed a bankruptcy. By the trustee's lawyer. For their receipt of a preference. After a 2004 Exam of the debtors.

My heart goes out to her, but the bankruptcy planning maybe should have been better, right?

Here it is, for your reading pleasure! And I give this Mike Edwards props for writing it, because announcing the ground rules to the public when a big Chapter 11 is filed makes for less panic in the streets for your habitual customers!

Everybody wants a free lunch, and that includes me.

If somebody is handing out a free, jewel-encrusted ponies I can take home to the kids, I'm there!

But I've decided that there's no such thing as a free lunch; somebody is going to pay, and if you're reading this, the chances are that you've been a payor!

Now, AHCCCS reached it's present size and shape by a Legislative Initiative, which amounts to folks voting to give away a bunch of free health care, which is laudable and generous.

But times change, and tax bases shrink, so the cupboard in Arizona is now bare. And AHCCCS is about to get shrunk ("Honey, I shrunk the AHCCCS!").

There are a couple of ways to deal with the problem of insolvent states which promised too much: we can ignore it, which is the usual politician response.

Or we can cut back on the amount of free stuff we give away (note: when a State or a Country gives money or services to somebody, it first has to take it away from somebody else. This is an immutable economic law. There is no such thing as a free lunch).

Or we can raise taxes, the way Illinois raised taxes by 66%! Now, that would be a perfectly good solution, but Illinois forgot half of that solution, the one that East Germany remembered; Illinois forgot to build a wall to keep its tax victims in the state! So they will leave, and the tax base will shrink, and then Illinois will raise taxes again, and...you get the idea?

Many people will be sad when Medicaid is cut back. I have friends in that category.

On the other hand, Arizona may not need to file a bankruptcy, like California and Illinois.

Because either somebody makes a decision to spend less, or States run out of money, because they can't print money like the Federal Government.

And even if there were federal bailouts for States in the wings, and there are not, I don't think Arizona would get them.

Not sure why I feel that way; just a guess.

p.s. States all have a choice; they can follow the lead of Arizona and Wisconsin or they can give up and admit that they're scared to cut back on entitlements and then they can play bankruptcy for States! Or they could briefly fix their woes by raising taxes by 66% as the Illinois lawmakers recently did, but that just makes people who make money get the heck out of Dodge. Or Chicago. Close enough.

Union workers often include heroes like firemen and policemen, and unions are often involved in collective bargaining.

And the unions, because they focus well, are frequently better at collective bargaining than the cities and states with which they bargain.

There is a law of unintended consequences coming here.

If you get somebody to agree to pay you more money than they have, that deal will not last.

Politicians often back the desires of unions, and it's pretty easy to buy votes with deals that seem okay today (yeah, your salary is high, but you do great work!), but have goodies on the back end (and you can retire at forty and collect most of your pensions, and the amounts of your pensions will be very high!) that can make a city or a state insolvent.

So it is with Wisconsin. Politicians had made common cause with unions forever, and when the unions said they wanted things, if one politician wouldn't deliver, the unions voted for one who would.

And that was fine, until the bill came due for the back-end pension benefits.

Because when the cupboard is bare, it doesn't matter what promises were made fifty years ago; no money means insolvent.

This paragraph from the Reuters article says it all:

"Senate Joint Finance Committee co-chair Alberta Darling said the choice is either to get these concessions from employees, or lay them off.

"It's not like we're choosing to do this. We are broke," she said."

So the choice will be pretty simple all around the country; crazy promises by politicians for fifty years made some people pretty happy about the prospect of retirement, but there's no dough for social security (the world's biggest Ponzi scheme) or for retirement pensions all over the country.

It will be interesting to see how the Wisconsin experiment works out; I hope somebody tells the truth to the unions for a while, and I hope that the unions believe it.

Because nobody is going to bail out Wisconsin, so it's going to have to live within its means.

Now if we can just convince the Federal Government to quit printing money like paper, there is a small hope that we can dodge the hyper-inflation bullet.

Because if we get to hyper-inflation, governments at all levels can pay people any pension they want; the currency will be worth as much as a Zimbabwe ten-trillion dollar bill!

And people will pay bankruptcy lawyers in Arizona in citrus, cattle and copper! Or maybe chickens. Chickens are nice. With catsup.

The New York Times has reported on the Borders Bookstore Chapter 11 Bankruptcy. 

This paragraph grabbed my attention: 

"Large publishers have grimly accepted that they will lose millions on books they shipped to Borders throughout the holidays. Besides Penguin, other publishers owed money include the Hachette Book Group, Simon & Schuster, Random House, HarperCollins and Macmillan."

The reason I noticed this paragraph is that so many of my small business clients have started telling about losing tens or hundreds of thousands or millions of dollars when a customer filed a bankruptcy, leaving them an unsecured creditor. Dominoes, you know?

Do you know the technical definition of an unsecured creditor?

It's a creditor who doesn't get paid in a bankruptcy. Mostly. 

I love cartoons, because some of the people I get to help every day aren't laughing very much about their impending bankruptcy; on the other hand, some are already delirious with joy that the harassing phone calls from credit card companies will stop when they hire my firm.

But I love cartoons, especially when they're relevant to a bankruptcy case, like the Borders Chapter 11 Bankruptcy!

My favorite quote from the article: "Online relationships aren't just for World of Warcrafters anymore, although we tend to interact with fewer level 9 fire trolls (I have never played this game)."

Can you sell stuff prior to bankruptcy and spend the proceeds prior to filing your bankruptcy?

Well, sure, if you have some guidance from an experienced bankruptcy attorney, and you list the transactions in the schedules, sell for fair market value, and actually receive proceeds for the dough, and if the sale is a real sale.

And you'll want to keep track of that dough, as well as keeping track of where you're spending all your other money as we get closer to filing for you, because inquiring Trustees want to know!

Now, some people think they can outsmart the system.

And maybe somebody gets away with it.

But some people become bankruptcy poster children, and that makes me sad.

Has anybody else tried to post a pdf on a blog, whether it's an Arizona Bankruptcy Blog, or anyplace else?

For a simple back-country Arizona Bankruptcy Attorney with no computer skills, it's challenging.

On the other hand, sometimes you run into sites that make computer skills unnecessary. One of those is a site called scribd.com, and if I did this correctly, you are about to see a pdf reader embedded on this very blog, and you will be able to see the materials posted the U.S. Bankruptcy Court for the District of Arizona concerning exemptions in most Arizona bankruptcy cases.

Now, here's a link to that site so you can check for changes; to get there, just click on the debtor bankruptcy faq entitled "exemptions, what are they?"

And if the scribd.com site does what it says it does, you can read the currently posted list of exemptions below!

Arizona Exemptions

Here's a short article that makes a mistake by assuming facts not in evidence.

The article assumes that Chapter 11 Cases are all business cases, and that Chapter 7 Cases are all personal cases.

There are also personal Chapter 11 Cases and business Chapter 7 Cases.

But the smart money bets the same way as the article, of course.

Apparently, the United States is not the only country with an inflation issue. 

p.s. I wonder how kind and gentle bankruptcy laws are in China; inflation robs from paychecks, and with the remarkable inflation in China, that's going make more individual Chinese insolvent. 

This article in the Kansas City Star suggests that the proposed budget would add 13 Trillion to the National Debt. 

And you know the old gag: a trillion here, a trillion there, pretty soon, you're talkin' about real money!

This is one case where the speed of inflation is apparent; over just one person's lifetime, that joke has transmogrified from "a million here, a million there" to "a trillion here, a trillion there".

While I like jokes a lot, that one just doesn't seem as funny as it did in the past.

Well, a discharge in a Chapter 7 case is a very good thing.

It's really an injunction, or a court order. It prevents creditors from taking actions against you to collect the debt, based on your personal liability.

But there's a reason that secured creditors took a lien, or security interest, or deed of trust, on their collateral.

And the reason is that a discharge doesn't scrape a properly perfected voluntary security interest off of the collateral.

If you think about it for just a minute, it will make sense.

If it worked any other way, you could buy a house with a small down payment, then file a bankruptcy, discharge the debt, and keep the house without paying for it!

We would need a bigger bank bailout if the law permitted you to do that!

Lesson to Take Away: a properly perfected secured lien on collateral survives a discharge, but in most cases, the personal liability for the debt does not. So after the discharge order is entered, the creditor still has an interest in the collateral, but is normally unable to sue you, or garnish you, or take other actions to collect the debt.

From the Congressional Budget Office Website

"Hiring rates remain very low, with only faint signs of recovery, even though the recent recession appears to have ended in mid-2009. CBO expects the unemployment rate to average a little over 10 percent for the first half of 2010, and it will probably not dip below 9 percent until 2012. It is projected to fall to 5.3 percent , close to CBO’s estimate of the “natural” rate of unemployment (which reflects the difficulty of immediate matches between job seekers and jobs), in 2014."

Everybody happy?

Well, maybe I'm doing you a favor, because I can scrape off some liens, or lien amounts, in a Chapter 13, after you have made payments for three to five long and painful years.

And if the market goes up, maybe I did you a favor. When should we expect the Phoenix housing market to rebound?

 In 2034, says CNNMoney.com!

p.s. thanks and a hat-tip to my smart lawyer buddy Robin Dugas for sending me the article!

Here's an advertisement of Bankruptcy Law and Litigation Report, which is apparently being sold as a Valentine's Day Gift.

I find that a little disturbing, even though I'm a Phoenix Bankruptcy Attorney.

Does anybody else have a little trouble wrapping their heads around a number like 3.7 Trillion?

Now, I know that inflation has something to do with that number.

Here's a link to a graph that sets out deficit numbers over a period of time.

Here's a link to a pie chart that shows the categories of spending in 2010.  It's interesting. Most of the spending (about 75%) is in just five categories.

Probably the most interesting chart is one that shows income and expenditures; take a look at it.

It looks as though, if you were an ordinary person, and you spent that much more than you took in every year, fairly soon you'd need a bankruptcy attorney.

I don't know how long a government can keep spending money it doesn't have coming in without raising taxes or just printing gigantic sums of money.

But if a government just prints money, the money eventually starts to resemble the bills in Zimbabwe, where you get change in 100 Trillion Dollar Bills.

Now, if the United States keeps printing money at the present feverish pace, my guess is that money will become as worthless as Zimbabwe (insanity is doing the same thing again and again, and hoping for a different result, right?).

On the other other hand, if we print enough money, that solves the problem with social security once and for all; if you print enough dough, you can hand out as much as you want. Mind you, the social security recipient won't love you, because they can add all of their checks together for a year, and it still won't buy 'em a cup of Starbucks Coffee. Maybe Jack in the Box Coffee, which is surprisingly good.

So the budgeting process is more interesting this year than in prior years.

Now, some people have strong opinions about this stuff; I do not.

I'm just looking forward to my collectors edition 100 Trillion U.S. Dollars Set from the Franklin Mint(tm)!

No relationship between bankruptcy and Valentine's Day, you say?

Au contraire!

Here's how this works: do NOT get married first, and then file bankruptcy.

If you want your sweetie to send you a Valentine with chocolates instead of nitroglycerin, scrape off your debt before you say "I do!"

Even a big bankruptcy, with lots of resources and a Chapter 11 Plan already set to go on the date of filing, can experience some speed bumps.

I was, however, entertained by the idea that somebody wants a Chapter 11 converted into a Chapter 7 because the debtor is insolvent.

Of COURSE the debtor is insolvent! Putting it another way, and with apologies to "Casablanca": "I'm shocked to discover that the Chapter 11 Debtor is insolvent!"

 

I always liked bookstores and libraries, particularly when I could hide in libraries in grade school.

And I never knew much about buggy whips, because they were more or less obsolete when I was growing up. So I never drove past a Buggy Whip Factory.

But if the projections I've been reading are correct, brick and mortar bookstores are in for some real trouble in the next few years; some projections say that about three-quarters of all books published are going to be published for e-books, and that will have a heck of an impact on both bookstores and their bottom lines. And books may be as plentiful as buggy whips in the near future.

I have friends who said they'd never give up their omnipresent paperbacks who switched to Kindle, and have never looked back; and I think those fairly early adopters are the wave of the future.

It's possible that Borders will benefit from its upcoming extensively rumored Chapter 11; if it can cut overhead to the bone, with a plan for the next five years rather than the next five weeks, it may be one of few bookstores standing on the other side of the Great Book Obsolescence. And with five hundred million in debt or thereabouts, and a lot of resources and financing lined up ahead of time, a Chapter 11 should be a useful tool for Borders.

First, when I read a headline like "Egypt's Military Dissolves Parliament", I get a bad feeling.

Remember the nice, democratic government that was set up immediately following the Russian Revolution?

Well, there was a nice, democratic government right after the Czar stepped down, which government was shut down by the Communists soon after the abdication of the Czar, followed by the murder of the Czar and his family. And the rest was history.

But whether shutting down Parliament in Egypt was a good idea, or a bad idea, this much is certain to me: oil prices are going to go up.

And that will be very, very bad for the United States Economy.  Particularly here in Arizona, where we have wide-open spaces that induce agoraphobia in easterners (which is always fun to watch).  And the vehicle of choice is now and always has been the pickup truck.

These days sometimes replaced by the Escalade, but still.

Oil price increases are bad for Arizona farming, restaurants, and businesses in general. Public transit works well when you have a bunch of people jammed into a small space. Phoenix, Scottsdale, Chandler, Mesa, Gilbert and Glendale, as well as Tempe, are all really one BIG city, and people who live here drive to each of them frequently in the ordinary course of business.

Of course, that may change as the price of oil increases.

But higher oil prices mean more bankruptcy cases in Arizona and everywhere else in the United States.

And I think that's a bad thing, even though I'm a Phoenix Bankruptcy Attorney. 

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• What is a Chapter 7 Bankruptcy?

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Not Just Around Here Department: personal insolvency highest in Great Britain in 2010.

 

There are a lot of reasons for inflation.

And everybody knows that inflation is going up, and going up fast. 

But you can play with statistics, and you can talk about the importance of inflation in commodity prices, or at the grocery store.

But for a family that's up against the wall, the combination of higher gasoline prices and then higher prices at the grocery store may just be enough to push over the Jenga Tower.

And then you get more consumer bankruptcy cases.

p.s. of course, on the bright side, there is no bright side. With the United States poised for another 1.4 million mortgage foreclosures and trustee's sales this year...well, there is no good news.

The issue of Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, and Chapter 11 Bankruptcy is an issue in a lot of cases these days, even bankruptcy cases for Rappers.

And that is clearly the issue for the moment in the "Young Buck" case, now a Chapter 11.

Seahawk Drilling Inc. is filing a Chapter 11 Bankruptcy.

It makes me sad when drillers file bankruptcy.


     

I am not the same guy I was in college, and except for the biceps, I think that's a good thing.

In college, my beard and long hair would have gone well with my Che Guevara T-Shirt, except that I couldn't afford a Che Guevara T-Shirt. And I thought a Glorious People's Revolution would have been cool, because the People's Dictator would certainly have given me the Che Guevara T-Shirt I so deserved!

There's nothing like working in the private sector (and I've also worked for years for the government, as a bankruptcy law clerk for Bankruptcy Judges and bailiff for Superior Court Judges) and reading history to make you suspect that most revolutions are just one guy grabbing a government from another guy, the American Revolution excepted (read history; you'll be amazed!).

And don't read stuff about the American Revolution; read the stuff written by the founders themselves, and it will, you know, blow your mind! 

So I don't much agree that revolution in the Middle East will result in a Glorious State of Democracy, and I don't agree that the United States is a bad do-bee that props up tin-pot dictators (except when that seems like a good idea), but I do agree with folks who are all over the political spectrum on this one issue: oil prices are going up.

I don't know how or why oil prices are going up, because I'm not that smart, but I do know that oil prices are going up. A lot. And they will go up steadily. Forever.

There are some countries that have had short discussions in their governments on Tuesday and then fixed their national energy policy on Wednesday. It's not like it takes a lot of thought.

Japan is one such country; it has about three hundred nuclear power plants, and those produce extremely cheap and safe energy for Japan. The reason there are three hundred plants instead of one hundred is simple; we bombed Japan back to the Stone Age during World War II, and they knew what not having energy was like.

They didn't like it much.

When the cost of oil goes up, so does the cost of everything, because it costs more to deliver all products, and it costs more to drive to work.

That will drive up the cost of all goods sold, and everything that people buy will become more expensive.

Fortunately, everything that people buy now is produced in China, and China has solved it's energy problems the easy way; it drills for oil off the coast of the United States.

And burns that oil and the gas from it in China. Now, my scientist friends tell me that oil and gas burning in China produce zero emissions, which means that letting China produce everything made in the United States is a great idea!

On the other hand, one side-effect of oil burning in China is that jobs are burning in the United States.

Summary: things will get worse for a long time in the United States Economy. That will happen until we re-build an economy which has an overwhelming manufacturing advantage over our global competitors.

Which means, unless we develop some source of cost-effective energy production today, we will have zero jobs tomorrow.

Conclusion: if you ever plan to retire, you probably ought to consider filing bankruptcy so that you are debt-free, and will be able to buy copious supplies of cat-food, which has substantial protein.

And you might also want to consider buying some Vitamin C, D, and a Multi with adquate Selenium.

To go with your cat food; it's a good source of protein, not so much of Vitamin C.

p.s. I love the circularity of the concept; we atomic bombed the heck out of Hiroshima and Nagasaki, and the easiest possible way to fix the energy deficit in the United States is to hire Hiroshi Morimoto to ship us designs (or prefab, I'm not picky) for nuclear power plants.

Japan might be so amused they it would do so for free. Here, we'll help you out! And can you imagine the number of actual jobs that would be produced if we permitted nuclear power plants to be built en masse in the United States? And the electric cars that we could build would have noise generators that went "vroom-vroom"!

p.p.s. note that I don't care, as a U.S. Citizen, whether we build windmills, tide turbines, roof the United States with solar panels, drill for oil and mine for coal, or build nuclear power plants; the only advantage that the nuclear plants have is that they produce electrical power more cheaply and predictably than the others. If somebody comes up with cold fusion on Monday, and it's cheaper and safer than currently existing nuclear technology, great! But unless we do something intelligent now, our middle class is toast, ground between the millstones of taxation and inflation. And unemployment.

My inclination is that the news story should really be "noted real estate entrepreneur did not file bankruptcy today!"

Because news stories are supposed to reflect unusual events, and it's unusual today to see former real estate biggies who have not filed bankruptcy.

And when I see an article telling me that a noted real estate entrepreneur and businessman has filed a Chapter 7 Bankruptcy, I'm also a little surprised when I don't see a paragraph that says, "After holding out for this long..."

We may soon see an end to bankruptcy cases by real estate professionals; I understand that the Environmental Protection Agency is lobbying to get them declared an Endangered Species.


    

Here's an article discussing a proposal to add a new bankruptcy Chapter to deal with mortgage foreclosures. 

My guess is that Congress works too slowly to go with this sort of a program, but it might be useful.

An easier repair job would be the repeal of the 2005 Amendments; making it easier to discharge credit cards would free up money for mortgages.


   

Bailouts are interesting; some people like them, some hate them.

One this is certain; bailouts seem to cost a lot of money.


Here are the numbers for bailing out Fannie Mae and Freddie Mac, so far; it makes you wonder whether it would make more sense to let them file...you know, bankruptcy!

And it gives you a taste of how much it may cost if we have to bail out insolvent States, which is one reason I'm moderately inclined to let States file bankruptcy; it will cost far too much to bail them out, and most of them seem incapable of not spending!

Do you think the States might need consumer credit counseling?


   

It crossed my mind that I never talked on this blog about a fundamental question: what is a Chapter 7 Bankruptcy?


   

No two bankruptcy cases are the same, neither consumer bankruptcy cases, nor business bankruptcy cases.

After thirty years, I see patterns that are similar, but never identical.

And large bankruptcy cases are their own little ecosystems. You could read Bloomberg instead of the funny papers.


   

I generally don't like singleton filings, because Arizona is a community property state.

Here's an interesting article from a bankruptcy lawyer who is a little more optimistic than I am about the prospect of filing a Chapter 13 bankruptcy without your spouse.


  

There are a lot of tools you can use to track down the best bankruptcy lawyer for your particular case, and they include AVVO.com, Martindale.com, Findlaw.com, and Board Certification as a Bankruptcy Specialist in Arizona.

And some amount of experience might also be nice. 

Here's a more complete discussion of the various considerations to...consider!


  

Think Chapter 11 Bankruptcy Cases look like fun?

Then WaMu must feel like it's in Disneyland!


  

I just read a nice editorial on the issue of permitting States to file Bankruptcy, perhaps under Chapter 9 of the Bankruptcy Code.

The tone of the editorial was appreciated, because the issue seems to provoke people with strong opinions into shouting.

Frequent readers will recall that I wobbled for a while, and now I'm generally in favor of permitting States to file Bankruptcy, because I have some despair that politicians can bring themselves to be honest enough to say that a State is insolvent, and has to cut spending, and all those promises made over the last twenty years to purchase votes were poppycock. Or worse.

There's one argument that is often made against permitting States to file: that argument is that permitting such a filing would have bad effects on the Bond Market, and make it hard for States to borrow.

Frankly, I see that as a plus, not a minus.

Because I don't see any good reason for States to borrow; it just gives them a better opportunity to become insolvent.

Perhaps I shouldn't soft-peddle this: a State that becomes insolvent isn't like you and me. A State has a thousand professional bean-counters who can tell politicians what the numbers look like. You don't.

A State knows precisely how much dough is coming in from taxes; you don't know how much dough you have coming in, because you can lose a job, experience a divorce, or get garnished. A State cannot.

So if a State is insolvent, that's for precisely one reason: a politician knew, and didn't care, that he was spending pretendadollars. Or didn't know, which is just as bad. 

So if a State can't borrow, this is a bad thing in which ways?

You decide!

Because ultimately, you'll be footing the bill for insolvent States, or an insolvent United States.


  

I noted on my calendar that I'm going to be visiting soon with a couple who have serious problems, and who said that they'd talked to several bankruptcy attorneys in Arizona and that they'd been treated like poop during those meetings.

I'm mystified.

We don't kill the fatted calf for you (we like fatted calves, and it would trash the carpet), and you'll sometimes need to wait a bit because this is a Depression and I've been a Arizona Bankruptcy Attorney for about thirty years, and therefore a lot of attorneys know me, and a lot of lawyers send me referrals, and those cases are typically a little more complicated bankruptcy cases than some others.

So we sometimes back up a little in the office; sorry about that.

But, while I don't guarantee that the grass is green or the sky is blue, I do guarantee this: you will not be treated like...you know.

p.s. you may very well not like what you hear, because I'll tell you that bankruptcy in Arizona, while an effective and efficient way to deal with overwhelming debt and move toward a fresh start, it's not any fun.


   

Hot off the presses to my readers: take a look at Subprime Foreclosures and the 2005 Bankruptcy Reform! 

Donald P. Morgan is a very smart guy!

p.s. the essence of the article is the idea that the 2005 Bankruptcy Amendments made things far worse in the economy, because if people could have easily discharged credit card debt, they could have more easily made payments on their mortgages.

And you know what? I think that idea is dead on target!

According to TheStreet, WaMu has filed a new Chapter 11 Plan.

Now, I get calls with frequency from folks who think a Chapter 11 Plan for them personally can accomplish all sorts of wonderful things.

And they can; but they sure are expensive.

And when I talked to a nice guy who had just gotten out of a personal Chapter 11 (that is, his plan had been approved by the Court), all he wanted to discuss was the half-million in legal fees that he had been billed.

And he was not happy!

Frankly, I think there is a combo platter of approaches in small business cases that gets a better result than a Chapter 11, and it sometimes works pretty well.


  

Since I've been an Arizona Bankruptcy Lawyer for thirty years, I am well-acquainted with the practice of bankruptcy law in Arizona before mandatory pre- and post- consumer credit counseling.

There have been a good number of articles that discuss the failure of the 2005 Amendments to benefit anything or anybody.

But in the interest of fairness and balance, here is an article that discusses ways in which consumer credit counseling can (allegedly) help you.

Myself, I yearn for the good old days, formerly known as "these trying times", before mandatory consumer credit counseling.

 

I really enjoyed talking to Susie (not her real name!) just now.

Not only did she have a lovely personality, she didn't need to file a bankruptcy here in Arizona! Neither a Chapter 7, nor a 13, nor the dreaded personal Chapter 11!

Oh, sure, there was a trustee's sale scheduled. But there was only the one mortgage! So there's a good chance that the Arizona Anti-Deficiency Statute will apply, and the large deficiency after the trustee's sale will simply...vanish!

But wait! There's more!

While there may have been a few credit cards, the credit cards had not been paid in a long time. And they were fairly small. And did I mention that they had been "seasoned" with nonpayment for quite some time?

See, if you try to negotiate with a credit card company when you are current, all you can hear is "Peggy" laughing his head off in the background.

But, if you're lucky, after a year or so of non-payment, if the debt is modest and the bank doesn't have personal animus toward you, the bank is often willing to settle for a very small dollar figure.

So I was a happy boy!

See? This is my happy face! 

p.s. and as I told her, remember that if you are able to get some debt forgiven, you will probably have tax consequences! 

 

John Keefe, on CBS MoneyWatch.com, has written an article about why it's a terrible idea for States to be permitted to file Bankruptcy.

One thing I liked about the article was his observation that the excessive spending had to be fixed, and John Keefe and I certainly agree on that point.

He has a philosophical preference for a fix engineered by politicians, not U.S. Bankruptcy Judges, and there's nothing wrong with that preference.

And I'm pretty easy either way, as long as the problem gets fixed. So far, I haven't seen a lot of fixing; but the Governor of Georgia, Rick Scott, has announced deep budget cuts very recently, as reported in Florida Today.

If he can get them enacted, and Florida rebounds (or at least doesn't need new bailouts), that will provide one sort of template for the other insolvent States.

It will be interesting to see if other States can get their checkbooks balanced, or whether bankruptcy is the only possible option for them, because their politicians can't bring themselves to stop spending.

I'm pretty easy; if politicians don't have the brains to spend less than the States bring in, we can either put up with infinite tax increases or inflation from printing presses (at the Federal Level), or we can permit Bankruptcy Judges to do the heavy lifting that politicians are afraid to...lift!

And just so you know, Bankruptcy Judges are generally pretty well acquainted with the decision-making process. Every day of the week.

 

Here's a link to a nice article about bankruptcy in Nevada; it sounds like Arizona!


   

You think you have problems with a bankruptcy?

Former Mayor Richard Pastrick filed a Chapter 7 Bankruptcy, but it has not been without speed-bumps.

As you can see from this article, Pastrick may have a problem with the Means Test, but worse, it may be that he fails to pass the debt limits for a Chapter 13.

Let's do that again, because bankruptcy law is confusing, whether it's in Arizona or Illinois.

To pass muster and get the benefits of a Chapter 7 Bankruptcy, a debtor must pass the Means Test or be subject to an exception to the Means Test, like the Business Debt Exception.

If a debtor doesn't pass muster under the Means Test, the U.S. Trustee's Office will file a Motion to Dismiss or Convert to a Chapter 13.

But wait! Not everybody qualifies to file a Chapter 13 Bankruptcy!

The requirements include regular income, as defined in the statute, and also requires that the debtor have less debt than the amounts specified at 11 USC 109!

If a potential debtor has overwhelming debt, the only other bankruptcy tool in the briefcase is a personal Chapter 11 Bankruptcy, which will sometimes get a good result, but it ain't easy, fast, or cheap.

p.s. if there's a 100-million dollar judgment against Pastrick, he doesn't qualify under the debt limits for a Chapter 13. Now I don't guarantee much, but I'll guarantee that! 

 

The Washington Post reports Bernanke saying that it will be several years before unemployment comes down. 

Does anybody else find that unacceptable?

And Bernanke also tells us not to worry about inflation.

But I'm fine with that; after all, it doesn't matter if a product cost five bucks or ten bucks if you have zero bucks, right?

All kidding aside, I can't see a rosy future for the United States as long as the economy stays this lousy.

If they want it fixed, I'll be happy to fix it for 'em; it ain't that complicated.

Does a bear sell insurance in the woods?

As a practical matter, as prices go up with inflation, and energy prices go up with scarcity, all prices in the economy will drift upwards.

Since unemployment is still hovering around a real level of 19%, wages will not go up to match inflation.

And bankruptcy cases will result.

The only question is how many.

I like top ten bankruptcy lists.

This particular list was put together by Dororthy Bunce, a Nevada Bankruptcy Attorney. Since I'm an Arizona Bankruptcy Attorney, I won't see her at First Meetings in Bankruptcy Cases, but here's a tip of the hat to Dorothy Bunce for two related top ten bankruptcy lists!

Besides, I like her picture; she looks compassionate and non-judgmental, which is a good thing in a bankruptcy lawyer.

Apparently, nobody is immune to crazy banks, not even Congressmen on the House Financial Services Committee. 

Why do I suggest that the bank in this case was smoking Wacky Tabacky? Well, before a Congressman goes belly-up, I bet he tries to cut some kind of reasonable deal.

Even though Abraham Lincoln filed a bankruptcy, it's not generally the sort of action voters anticipate from a Congressman, especially on the House Financial Services Committee, right? 

And the second reason I think the bank was crazy? Well, this Congressman was on the House Financial Services Committee. And he's still on the House Financial Services Committee.

You understand my thought process, right? Would you like to be that bank asking that committee for a favor?

p.s. Can you imagine being the bank lawyer who told Ruben that the bank refused his offer, whatever that offer was? The poor son-of-a-gun is probably a scorched spot on a carpet in a bank conference room somewhere. "But his offer wasn't within the guidelines you told me were acceptable..." the lawyer stuttered, prior to being vaporized by the bank's evil Laser of Doom.

Cathy Moran is a smart bankruptcy lawyer who practices bankruptcy law in California.

How do I know she's smart?

Well, she wrote about the best reason to file bankruptcy, and suggested the use of a retirement calculator to compare what a potential debtor would have at retirement if they used the payments they are now making to credit cards toward their retirement fund.

And that is a smart, insightful approach to the issue!

As soon as I get a Round Tuit, I'll dig up my post talking about the same thing! I think I suggested starting with a credit card payoff calculator, to find out how long it would take to pay off your credit cards at your present rate, but we'll find out when I get that Tuit.

 

When an idea first becomes a focus of conversation, the discussion tends to be superficial.

Now we're starting to get nice, in-depth articles about the possible State Bankruptcy Filings, like this one by Associated Press!

Bear in mind that I've now become a supporter of bankruptcy permission for States.

But that could change, if somebody shows me a reason that it won't work well.


  

Articles continue to be written about the proposal that States be permitted to file bankruptcy, and it's been predicted that a bill to permit such filings will be introduced in Congress. 

I have to ask myself, because I'm an easily amused Bankruptcy Attorney in Arizona, will the States have to take pre-filing credit counseling classes? And post-filing classes?

Because it's obvious that budgeting isn't the strong suit of any political entity, States included.

And would a State have to pass The Means Test? How insolvent would a State need to be to file a bankruptcy proceeding?

Could a State that almost passed the Means Test start tithing to the Church of its choice until it slid under the Limbo Bar?

Ask yourself: would you like to be able to vote on a bankruptcy plan proposed by a State?

The more I think about it, the more fun I think it might be to watch a State try to make it through a bankruptcy.

If individuals are subject to an idiotic presumption of abuse, should States be subject to a similar presumption?

Or is that a non-rebuttable presumption for a State that NEEDS to file a bankruptcy?

And does anybody else think it's ironic that bankruptcy for people who need relief from overwhelming debt has been made so much more difficult by the BARF Act, and that the proposal for States will make it easy for the States?

 

I liked the article I just read, although I don't agree with all it's assertions.

On the other hand, I always liked top ten bankruptcy lists, because thinking about bankruptcy can be overwhelming, and any cognitive tool that people can use to make thinking about it easier is aces by me!

That's why I built the Arizona Bankruptcy Homework Blog; it makes it easier for people to organize their thoughts, as well as answering their most frequently asked bankruptcy questions.

 

There are similarities between Arizona business bankruptcy cases and those in Nevada.

And this is a nice article in Nevada Business about business bankruptcies in Nevada.

 

There's only one way that's any fun to pass the Means Test.

Make more babies!

One of my nicest clients qualifies to file a Chapter 7 Bankruptcy.

After the Blessed Event.

And I sure hope she's taking her pre-natal vitamins!

 

My particular perspective as an Arizona Bankruptcy Attorney, in a state ranked in the big five for mortgage foreclosures and trustee's sales, causes me to see a lot of economic misery.

And it makes me wonder whether it's just me, or whether the United States is really in a depression.

My conclusion is that we are in a Depression, not a Recession. And that there is no reason to worry about a double-dip Recession, because we have not emerged from the economic Death Valley.

I'll come back to this issue over time. I may be wrong, because of my specific perspective.

And a lot of folks say this is not a Depression; and I'll give them plenty of time to talk.

Some folks believe that this is a Depression; and I'll give them plenty of air space, as well.

And as always, he who lives the longest sees the most!

 

So I'm sittin' there, like you do when you're a bankruptcy lawyer in Arizona, and asking questions.

And I got an answer that got my attention, even in the afternoon: "We're going to need to file a bankruptcy because the sex change for my cat was so expensive!"

So I immediately said, and I pride myself on snappy repartee, "Huh?" 

Apparently cats also get kidney stones, or some functional equivalent. And to prevent kidney stone problems in the cat, the veterinarian performed what I considered a remarkably...extreme surgery on the cat, which was previously named "Butch", and is now named "Flossie"(not the cat's real names).

Now, the debt to the vet was really only the cherry on top of the Sundae, because there was adequate debt in relation to income to justify a Chapter 7 Bankruptcy, and a fresh start is in the works for the couple.

And given the pet exemption in Arizona, the cat should be a member of the family for many years to come.

I like a happy ending, no matter how unusual the story.


O

While it's possible for a debtor to scrape off student loans in a Chapter 7 Bankruptcy in Arizona (or anyplace else), that doesn't mean that it's easy.

The combination of impossibly high unemployment, and underemployment, AND gigantic student loan amounts paid to institutions with more administrators than professors is having an interesting effect.

And by "interesting", I mean gosh-awful.

See, a University is dependent for its continuing survival on a regular flow of lambs to the educational slaughter.

And kids are catching on that getting a very, very expensive degree purchased with student loans may not be a good economic investment if there are no jobs to be had by new graduates, or anybody else.

Student loan lenders have zero motivation to be economically reasonable; they'll cheerfully garnish for the entire life of the student, and keep running interest rates and default penalties that would make The Godfather blush.

Here's my prediction for the Student Loan Bubble; it will be put off for a little while, as the Government punishes for-profit educational institutions for existing, and puts them out of business, routing the now-reduced flow of students to not-for-profit schools.

But there will be a greatly reduced flow of students as they figure out that they have been chasing a worthless brass ring, and that there's no rainbow at graduation.

And when some bright guy figures out that the future of education is hooking up videos of the very best and finest professors on the internet, and handling the attendance issue the way the Bar Association deals with online attendance, traditional Universities are doomed.

Now, they may not know that today, or they may.

But they'll first ask for bailouts, and when that doesn't keep 'em afloat, they'll tank. Putting it another way, they'll change or die.

And getting an education online will become the norm. Which only makes sense, because the university lecture system came about because of a book shortage; and now we have Kindle!

And I recently ran into a post entitled "100 Awesome Ivy League Video Lectures", at a site called Online Universities.  And you'll see what I mean; if you can learn from the very best at Heidelberg, The Sorbonne, Oxford University, or Trinity College Dublin, the chances that you're going to want to listen to a teaching assistant in a classroom the size of a football field at your local State U. is pretty limited.

Especially if you have to mortgage your future on a high-stakes gamble for economic survival in your effort to attend your local State U. Note that my State U. (ASU) is raising tuition, even though it's making profits, because...uh, why? But I'm sure there's a good reason.

No, actually I'm not. It seems straightforwardly crazy, from a moral or economic perspective.  

So the one good thing that'll come out of this economic depression is this; as competition for students heats up, and students get hip to the higher prices for lower quality teaching assistant scam, some super-duper university will get smart and say, "We are currently a knowledge factory, and we will now become a video factory, with knowledge embedded on each and every video. Because if we can charge a fair price for the very best education...we'll be a filthy rich knowledge factory!"

And the other universities will go out of business until they get with the program.

Which is why I like capitalism.

p.s. there will be an intervening period of time where fear of criticism will keep Universities around the world from playing well on the Internet with classes for fair prices. But the first time a super-duper University wants to get serious about survival in difficult times, that will all change.

p.p.s. Or the second time; no matter.  This one is inevitable.

p.p.p.s. Unless I'm wrong.


O

One nice thing about lawmakers in the United States; they listen to the voters for at least a week, just before the elections. So things only get so bad around here, unless a Lame Duck Congress decides to punish voters for throwing them out.

In Europe, apparently, it's harder to let the Government know just how much you care.

So the laws concerning consumer bankruptcy are much more rotten in Europe! 


 

See, a lot of folks come into my office, and they've read that you can do this or that or the other thing in a Chapter 11 Bankruptcy.

And some of the stuff people think you can do in a Chapter 11 Bankruptcy is actually possible, and some of it is a compound of wishful thinking and Wacky Tabaccy.

The news article in The Wall Street Journal that discussed a possible Chapter 11 filing for Borders Bookstores demonstrates my point.

See, a big bankruptcy case, with lots of resources, gets "finalized" prior to filing. That is, classes of creditors are already set up, loans are in place, and a Chapter 11 Disclosure Statement and Plan are set to go.

First Day Orders, which are common in large cases to permit a large number of housekeeping details (like continuing to pay employees on time, or jacking them around for nine days pay, whichever management prefers), are dusted off and polished to a high gloss.

And the legal fees for a Chapter 11? As a remarkably practical matter, if you have to ask, you can't afford them.

Which is why I bend myself into a pretzel trying to find a combination of approaches that will get the benefits of a Chapter 11 in a tiny business case; but without filing the Chapter 11.

And often it works pretty well.

Bear in mind that being a bankruptcy lawyer, whether you handle consumer or commercial (and I've done a lot of both in thirty years), is a little like being an Oncologist, when the patient is in Stage Four. 

Or a Veterinarian.

That is, generally people walk in with a flat puppy business after it's been run over by an 19-wheeler.

And they say, "Can you make my puppy well?"

And sometimes I can.

But the difference between a tiny business, a small business, and a big business, and the respective sorts of bankruptcy that make sense for them...well, that's why they call it the practice of law.


 

Here's the deal; I get to talk to kids every week who have $130,000 degrees from Prestige University (no, that's not really the name of the school). And $130,000 student loans to go with those lovely degrees.

They have nifty degrees in Woman's Studies, Environmental Finesse, and Pre-Cortez-Invasion Literature; or maybe Philosophy, like me (I got to dig ditches for Pancho Willis when I graduated with a degree in Philosophy, and it taught me a valuable lesson; I don't like to use a pick and shovel in the hot, hot sun).

Now, your kids had a passion for whatever they were studying, and you let them follow their passion!

I can't decide if you did a good thing by letting them feel good about themselves for four or six years or nine years, or whether you goofed up like no generation of parents before you.

Why didn't you tell 'em that they needed a degree with salable skills attached? Why didn't you insist and demand? You're parents, not buddies!

Now, there are some jobs for folks with interesting degrees, and they are usually at the University itself; perhaps as a Professor!

Oh, that's right! There aren't any such jobs anymore! Because kids are smart, and some parents are smart. So fewer kids are going like lambs to the educational slaughter. It's a little too late for the kids with non-dischargeable student loans who are flipping burgers after their bankruptcy cases, and getting their tiny salaries garnished whenever they are found by the lowlives who bought their student loans.

In the same way that the housing industry was distorted by goofy lending, the education industry has gone sideways, and will soon experience a horrific "correction". That means that schools will either close or ask for bailouts.

And the folks with the worst problems? How about kids with huge student loans and no degrees?

p.s. soon I'll post a couple of cases that set out standards to discharge student loans in a bankruptcy case; and it ain't pretty. 

 

The Los Angeles Times tells us that unemployment remains high (the official number is around nine per cent; my personal guess as to the real number is closer to nineteen).

Now, unemployment is only one of the major factors that contributes to a person's decision to file a bankruptcy case and get a fresh start.

But it is one of the major factors.

There's very little that's as effective as a zero-balance paycheck to push somebody towards a moment of clarity. When they see the numbers clearly.

Note that the precipitating factor may not be losing the job in the first place; the usual push that gets somebody's attention is "You've been served!" or "Nice house you got here; you'll have it for 90 days, unless you come current, because this is a Trustee's Sale Notice!" (And no; you don't get personally served for a Trustee's Sale; generally you get a letter, and a notice stapled to your front door, and a sign pounded in your front yard. Which just about everybody promptly pulls off and out, respectively).

I sort of wish we had the sort of employment that we used to have, when we permitted manufacturing in the United States; but I guess it is a better thing for all the manufacturing in the world to happen in China. Because the government there is, after all, morally superior!

And you may recall, if you are very old, that we won World War II for only one reason; that the United States had far better manufacturing capacity than the bad guys (currently "our allies"). German tanks, for instance, were far better than ours, but we could out-build them five to one! So we did, and they lost!

I wonder what will happen if we go into a serious war with no manufacturing capacity to speak of, and no particular way to get our hands on oil, and we haven't built any nuclear power plants (the kind that are all over Japan and France, where they have zero problems with them).

 

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I love it when good ideas and projects survive the bankruptcy process. Especially in Gilbert!

It's seldom that you see cases where an individual attempts to use one Court in an effort to end-run a Judicial Order issued by another Court.

But this article talks about a Chandler Nightclub that apparently appears in multiple courts, and not just in Chandler; also in the Bankruptcy Court for the District of Arizona.

A Chapter 11 Bankruptcy can be useful as a tool for maintaining the status quo ante while issues are being sorted out.

I love happy endings.

Apparently Powell Volvo is now Volvo of Tempe, after a decision by a U.S. Bankruptcy Judge in the District of Arizona Bankruptcy Court, and a selection by Volvo.

Which is currently located at 6500 East McDowell Road, Scottsdale, AZ.  

I would have called it Scottsdale Volvo, but the company anticipates moving to Tempe Autoplex in May 2011 located at 8060 S. Autoplex Loop Tempe, AZ, which explains the name discrepancy. 

And, yeah, I am easily amused.  


 

I love the Arizona Biltmore Resort; their golf course is adjacent to my law office, and it's so pretty it makes me think I should learn to play golf someday.

But I read an article in AzCentral.com that the Biltmore was in a bankruptcy, which made it the latest in a long line of Arizona Resorts that have...resorted to bankruptcy!

But it made me sad, because the Arizona Biltmore is a beautiful place, and I always enjoy their restaurants, and I've enjoyed the bar conventions and seminars held there.

I was slightly irritated that the Arizona Biltmore bankruptcy proceeding, which affects an important Phoenix landmark, was in New York City, which automatically makes a local backwoods bankruptcy attorney exclaim: "New York City? Git a rope!"

p.s. according to the article I read, it will be business as usual at the Arizona Biltmore Resort, which is a good thing!

One of my genius buddies is named Chris, and he sent me a link to a webapp that may be useful in planning to pay off your credit cards, if a bankruptcy in Arizona is not in your future.

The application is called ReadyForZero, and it will work for some people, and not for others; the application lives on a site called lifehacker.com, which Chris likes a lot.

ReadyForZero is a tool that will help people who can pay all of their current living expenses and still have something left over to fund a personal debt reduction program by themselves.

This is clearly not for somebody making fifty thousand a year who is looking at two million dollars in debt; it won't work. For that kind of problem, you are probably looking at a bankruptcy attorney in Arizona, or wherever you may be.

But thanks, and a tip of the hat to Genius Chris!




And remember, if you don't need to file a bankruptcy in Arizona, as so many must to survive and retire, I'm happier than you are!

Thanks to all our loyal fans for watching those uneven educational bankruptcy videos that we have produced.

Counting Channel Views and Total Upload Views, we have now hit ten thousand!

Thanks; now that I know you like 'em, I'll make more!

The American Bankruptcy Institute and the National Bankruptcy Research Center announced recently that consumer bankruptcy filings had dropped in January of 2011, after a year of the highest filings since 2005.

Other bankruptcy experts, in a related Wall Street Journal Article, suggested that there may be as few as 1.5 million bankruptcy cases filed in 2011.

As Peggy would say, "Happy Times!"


  

One of the proximate causes of bankruptcy cases in Arizona is the Notice of Trustee's Sale.

It's not the root cause of the bankruptcy filing; remember that consumer bankruptcy cases are caused by a slow growing issue like credit card debt, and then after the Jenga Tower is weakened, it's pushed over by a proximate cause like unemployment, cancer, divorce, or a lawsuit.

Or exhaustion (which is bad) or a moment of clarity (which is good) on the part of the debtor. 

These days the lead-up to the bankruptcy has often been prosperity; and while that sounds backwards (and you're right, it is backwards!), when people have saved a lot, and are feeling prosperous, they want things to stay that way.

So they find investment advisers to help them track down good investments, to prepare for retirement!

And all the successful investment advisers told prosperous people to stuff money into real estate investments, because the money it was so good for so long!

And then the real estate bubble burst, and Jenga Towers fell all over the United States.

But most people live in hope, which is a nice zip code. Until they can no longer ignore the alligators which have risen to nose level.

And the alligator which normally gets their attention is either the first lawsuit from a credit card company, or the Notice of Trustee's Sale which was hammered into their front yard.

And yes, people just pull those puppies out of the ground and run inside with them, to hide their shame. 

At that point, all but the terminally hopeful tend to seek the advice of a Bankruptcy Attorney in Arizona.

Some people prefer an Arizona Bankruptcy Lawyer, but you get the idea.  It's all the same to me, as long as they comparison shop for credentials, experience and client reviews.

Generally, if the first mortgage has started the Trustee's Sale, the story has some chance of a fairly happy ending. Here in Arizona we have the Arizona Anti-Deficiency Statute, which often keeps a family from needing to file a bankruptcy of any species, and I like it when I find out that the only debt a potential client has is a first mortgage, because the chances are good that they will not need to file any species of bankruptcy.

On the other hand, some folks want more time. I can understand that. And most folks have heard that a bankruptcy will stop foreclosures and trustee's sales, and that's entirely accurate.

But like many things in life, the sizzle is a little better than the steak.

While a Chapter 7 Bankruptcy will stop a Trustee's Sale, it will do so only temporarily.

The usual sequence of events is that the Trustee's Sale starts, and prior to the Trustee's Sale (because the house may be useful in passing the Means Test, even if you aren't making payments!), a Chapter 7 Bankruptcy is filed.

And almost immediately thereafter, the Bank or Mortgage Company files a Motion to Lift the Stay.

Now, there are only two defenses to such a Motion, and they are that the property is necessary for an effective reorganization, and that the property has equity for the bankruptcy estate. 

And as you will see upon reflection, the property is certainly not necessary for an effective reorganization because the case is a Chapter 7, which is not a reorganization! It's a liquidating case, although most debtors get to keep most of their stuff.

And there is almost certainly no equity in the house for the estate; the homestead exemption in most Chapter 7 Bankruptcy Cases in Arizona is $150,000. And yes, I said most; more on that in a later post.

So the Motion to Lift the Stay is Granted by the U.S. Bankruptcy Judge in the District of Arizona Bankruptcy Court.

And now that the Bank has permission, the Trustee's Sale, which is typically continued when a bankruptcy is filed in Arizona, not terminated (which would give the debtor another 90 days, you see?),  now occurs very soon after the Automatic Stay is lifted.

In a Chapter 13, the Automatic Stay and a permanent injunction may prevent a Trustee's Sale from happening at all; but you gotta pay to play.

In a Chapter 13, you will typically propose a Plan wherein you will cure the default over a reasonable time period, and stay current during the life of the plan.

If you want to keep the house.

On the other, other hand, since it's two hundred thousand dollars underwater, why would you?

 

It saddens me that there is so much news coverage for big kid bankruptcy cases like W.R. Grace, and so little for consumer bankruptcy cases in Arizona and the rest of the United States.

Since I'm an Arizona Bankruptcy Lawyer, and I've always handled consumer as well as business bankruptcy cases (okay, thirty years isn't "always", but it seems that way to me), consumer cases are every bit as interesting to me as business cases.

For one thing, you'd better be right the first time in a consumer case. Since 2005, even a trivial goof-up can cause an automatic dismissal of a Chapter 7 or Chapter 13 case, which is one of the reasons my hair has gone white. 

For another thing, a business normally has more resources, although the demographic of bankruptcy cases has now come to include high-wage-earners, because everybody invested in real property in the same way that everybody invested in stocks during the Great Depression.

And consumer cases are as different from one another as people.

Oh, well. The one thing that was reported extensively is that the number of consumer bankruptcy filings has gone up every year since 2005 (The Great Bankruptcy Drought).

 

So this guy had a house teed up for a short sale, and there was this big second that wasn't going to get paid.

So the guy, who has only one big debt, says to the second position lender: "How about if I kick you some dough, because if you sue me for the second, there's only one solution, and that's The B Word. And I'd just as soon do the right thing, and not have to file a bankruptcy."

So the Arizona Lender says, we won't approve anything, and we won't take a penny less than the entire amount. And we'll sue you and our lawyers will rack up big legal fees. Either you pay us the entire big second mortgage amount or we're happy to see you file a bankruptcy!"

Lemmie ask you something; does it sound to you as though the lender has the best interests of its shareholders in mind? Or its lawyers?

Inquiring minds want to know.

And maybe it was just a personality conflict with the lawyers (this wasn't one of mine), which sometimes does happen. Or perhaps the lender just didn't believe that this guy would file a bankruptcy.

Sometimes the law firm has to see the schedules, AND get a check with a restrictive endorsement, before they see the light; and sometimes, not even then.

Oh, well; it's what makes my practice interesting. No two cases are ever exactly alike.

Like snowflakes.

 

One of the top ten questions that clients ask me is how long a Chapter 7 will take, from start to finish. Many are astonished to hear that a no-asset, ezee-peezee (by comparison with my other cases) Chapter 7 will take around a year, and if there are assets, four years is not uncommon.

Chapter 13 Cases, once they get an Order Confirming the Plan, which may take quite a while or may be quick as can be, come in two flavors as well: three years or five years, depending on whether you passed the Means Test.

When I get a Round Tuit, I need to check statistics to see how many folks who qualified for a Chapter 7 filed a Chapter 13 instead, locking themselves into indentured servitude for three years. The number can't be very large. Can it?

Then there are the Big Boys; the Chapter 11 Cases. A Chapter 11 doesn't just seem like it takes forever. Here's a discussion in Bloomberg of a case that, after a decade, looks like it may get to a Confirmation Order soon! But then it has to make it to consummation of the plan, and that's the part where many, many Chapter 11 Cases die. I don't expect that to happen to W. R. Grace and Co., but it happens to a lot of Chapter 11 Cases.

Now, the only reason this time difference is important in the consumer bankruptcy universe is that some folks don't meet the Means Test, and therefore cannot file a Chapter 7 (mind you, many enterprising potential debtors find a relationship with God a year before filing, and are able to contribute 15% of their gross income to their Church, and therefore knock 15% off their Means Test calculation, and thereby pass the Means Test!), and some folks have a debt level high enough that they do not qualify for a Chapter 13 (see 11 USC 109).

Those folks may be consigned to a particularly stressful portion of Bankruptcy Hell; the Personal Chapter 11 Case. And as you can see from the above, a Chapter 11 may spend more time in pre-confirmation than the life-span of a Chapter 7 and a Chapter 13 Bankruptcy, combined!

There are a lot of reasons I don't particularly favor a Chapter 11 for small to medium sized debtors; it takes a long time, and it costs a lot in legal and other professional fees. And while I've done personal Chapter 11 Cases, and gotten them confirmed and consummated, they weren't all that much fun for the debtors, although the results were ultimately satisfactory.

I talked to a nice guy a year ago who had just come out of a personal Chapter 11; he said he had been billed less than a million in legal fees, but more than a half million.

And he was less than overjoyed with the result he obtained for his dough; and I didn't blame him!

For that, he should also get egg roll!