Arizona Bankruptcy Attorney Blog

You won't believe this.

I know a lot of poor, starving lawyers who are going to go back to school to learn this job!

One of the best scary movies ever made is a goofy little gem called "An American Werewolf in London", which starred the incomparable Jenny Agutter and some guy.

Oddly, it was really a romance, rather than a scary movie, mostly. Girl meets guy, guy becomes werewolf, girl loses very hairy guy. Great flic!

But some things are scary in the real world.

Like food prices getting much higher, and staying much higher.

And every incremental increase in the cost of living drives families to do what they would far rather avoid: file a bankruptcy so they can afford to provide a decent living for their children. 

And me? Well, I'm a bankruptcy lawyer, not a werewolf.

Although banks can't tell the difference.

When somebody give you advice, and that advice can make them money, that makes the advice a little suspect.

Here's an example: "Doctor, do I need heart surgery now?" "Heart surgery is both very expensive and profitable. Of COURSE you need heart surgery now!"

Don't get me wrong. If you're having a heart attack and a doc can save you, don't be stupid: get to a doc fast!

But you always have to wonder about advice from somebody who has a dog in the fight. If you go to three docs who do (shudder) work on your prostate gland, and one specializes in surgery, one in beam radiation, and one in little tiny radioactive "seeds", what are the chances that their sincere advice may be affected by their own bottom line? And that the first one advises surgery with a scalpel, the second beam radiation treatments, and the third radioactive seeds?

I don't know, either.

So I like reading stuff written by somebody who doesn't have an ax to grind. In this case, the lovely Liz Pulliam Weston. She wrote a nice piece for MSN Money about when it makes sense to file a bankruptcy. 

And she reached the same conclusion that I reached: it's not surprising that so many families eventually file bankruptcy to get a fresh start from overwhelming debt.

It's surprising that so few file.

 

Several of my clients have done very well after they filed a bankruptcy to get rid of overwhelming debt that made it impossible for them to think about being successful again.

And some people have criticized Donald Trump because they've read that he's filed four Chapter 11 Cases.

But, as the beautiful Clare O'Connor tells us in Forbes, those were all corporate, not personal bankruptcy cases.

And did Donald Trump learn anything from his time shepherding Chapter 11 Cases? Well, he learned an important lesson of business: don't personally guarantee anything. 

That's a lot harder for my small business clients, but after a while, they start to figure it out.

And with the commercial lease world melting in Arizona, there are plenty of places that will be happy to lease space without a personal guarantee.

So there you are, among the twenty per cent of unemployed in the United States, watching 10% inflation reduce your food choices to cat food casserole and pasta with pasta sauce (less protein, but more diabetic coma).

But it's okay; you're a gamer and a television and movie addict, and you work enough occasional gigs, or dig far enough into your tiny 401(k), to buy your precious internet access. So you can play, and goof around on Facebook, and watch television and movies on Hulu.

You're poor, but you're addicted to the narcotics of the Internet, so life is good, because your supply is freeeeeeeeee!

Well, you just got a choke-chain placed on your Nirvana-time, buddy.

Ryan Singel talks about caps now being placed on Internet usage by major players, to make those players look better on Wall Street.

Now, what could be good about this?

Uh. Nothing.

Really nothing. 

Note: if you're unemployed, prior to or immediately after filing a bankruptcy, the Internet is now the best bet you have for finding work. So I really, really don't like caps on Internet usage! Because I'm a bankruptcy lawyer!

Well, nothing.

But if there were something good?

It would probably be the following: as the price of oil goes through the roof, along with the price of gold, it may become economically feasible (read: investors can make a profit) to develop various sorts of alternative energy sources.

For instance, my personal guess is that the Chapter 11 filed by Raser Technologies, Inc., was partly because the Geothermal approach to generating power may be getting closer to the cost of producing power with conventional sources of energy.

Nuclear power will always be cheaper, but nuclear phobia will probably prevent building more nuclear power plants in the United States (although not in China, where the policy concerning nuclear power plants is "build, baby, build!").

Note: competing economically with a country that has limitless, essentially free electricity is going to be an interesting challenge for our kids.

But as the price of energy in the United States goes up, various non-nuclear options are going to look better and better over time.

Those will include the shale oil exploitation that's been close to realization for decades; just add high-priced oil, and it becomes economically viable to dig. And to get investors to pay the money to dig.

Windmills will become economically feasible at some point; and there have been attempts to create economically viable solar energy plants since I was a kid, and that was a long time ago.

If I eat enough Vitamin C I may live long enough to see cost-effective solar energy production that doesn't devour the environment with the production process of the solar cells themselves.

And as energy of all kinds becomes more expensive, we'll also get smarter about using it.

And it doesn't take legislation to force U.S. Citizens to do the smart thing. For a long time, that's how you could tell you weren't in Moscow. But now, especially in California, legislatures seem to want to make choices for consumers as though the consumers were too stupid to do that for themselves.

Myself, if I have a choice between a bulb that lasts twenty years and generates light for 1/10th the electricity as an incandescent, I'll go with the super-duper light bulb every time.

Unless, of course, it costs me a thousand times more. And that ability to make choices in their lives made people willing to die to come to the United States.

But I digress.

Eventually, oil will go through the roof, as it is doing today, and it will stay there. The oil-producing nations have been careful to open the spigot and lower prices when it looked as though we'd actually get serious about energy policy in the United States. Because when they can't sell oil to us, where are they? In deep kim-shee, actually.

And the good thing about astronomical oil prices is that they will generate new industries in the United States, from retrofitted insulation for homes, to new home materials that include far better insulation, to deep drilling for shale oil and for coal, and windmill, tide and geothermal factories.

Also note that there's no particular virtue to diversity in energy production. Since energy typically requires huge capital investments, one or more of the alternative energy approaches will prove more economically productive than the others, and the others will shrivel until prices go up again. But building the physical plants to produce gigantic amounts of electricity for the next century will put a lot of people back to work, at jobs that pay well.

I have a dream, and it's pretty simple: the citizens of the United States are all back to work at good-paying jobs, and the United States is the chief producer of actual products in the world, as it was for most of my life, and the U.S. Dollar is as sound as a...dollar!

And as part of my dream, bankruptcy cases go back to historic lows, for the right reason, that our people have good jobs. That may be seen as an odd dream for me, because I'm a bankruptcy lawyer in Phoenix, Arizona.

Another part of my dream? We stop legislating light bulbs.

 

This article in The Wall Street Journal contains one of the competing Chapter 11 Plans in the Lehman Brothers Bankruptcy. 

You know you want to read it.

If you have a lot of time on your hands.

 

I was recently shocked by an implication in an article in the West Virginia Record.

The lead sentence was

"Though wanting custody of her ex-boyfriend's daughter, a Charleston woman has admitted to having no income and very little assets."

The title of the article was "In midst of custody battle, woman files for bankruptcy". 

If you read the article, tell me if I'm being oversensitive or reading too much into the piece.

It sounds to me as though the writer is attempting to attach a stigma to the act of bankruptcy filing, and crowing with delight that the poor woman has no income and few assets.

Now, it's hard to judge intent from text, unless the text is on Facebook and full of emoticons.

But should a woman be punished for dealing with debt in an honest, legitimate way, through an attorney, while she is also attempting to gain custody?

Is the article attempting to imply that she should lose the custody battle because she has no income and few assets? Or does the writer suggest that she should have lied on her schedules, rather than "admitting" no income and few assets?

If you can figure it out, please let me be the first to know.

The dollar is taking a beating. The exchange rate for dollars has worsened; a three-year low on the U.S. dollar index was the news last Friday, and that index has fallen for five months in a row.

And gold is headed up, with no particular end in sight.

I don't know about you, but I'm nervous about a falling dollar and a meteoric rise in gold prices.

If 157 banks failed last year, what does that say about how hard it is to make money during a recession?

Don't be sad.

And whatever you do, don't spend the money in your 401(k) or your IRA to pay your credit card debt.

You need that to retire, or to take care of your children while you look for work.

 

When I was a kid, I read a lot of comic books.

And I carried that habit forward, and bumped into John Dawson from time to time, at comic book stores. John was one of the premier bankruptcy attorneys in Arizona when I was growing into my paws; and he liked comic books, too!

Different folks like different comic book characters for a lot of reasons. After all, they're like novels for people with short attention spans, right? And different people like different sorts of novels.

One of my favorite characters in comic books was always Superman.

He had absurdly great power, and took absurdly great responsibility. And he never seemed to have a dark night of the soul, or to struggle seriously with his position in the world.

His moral compass didn't waiver.

And, given the fact that in some of his comics, he had the power to move suns, it was probably good that he was such a good guy.

Now, some people lose their moral compass as they move forward in life. I've seen some friends go middle-age crazy, with all that it entailed, including the hot new cutie and the red sports car. And I've seen a few friends go under because of Demon Rum, and a couple who made it past that challenge and are better for it.

But, of course, Superman was above all that, because he was written that way!

So it was with a heavy heart that I saw an article telling me that Superman was going to renounce his U.S. Citizenship. 

Ignore the legal issues of how a guy from the planet Krypton gets U.S. Citizenship without going through the naturalization process; I'm going somewhere with this.

I understand that the writers are doing things to try to sell comics, and to increase publicity, and to do things to make a character who was created in 1938 more interesting.

But, you know, if the Man of Steel is going to renounce his U.S. Citizenship, I guess I'm going to renounce the Man of Steel.

I mean, what's next? Is he going to go on a bender, run up credit card debt at a house of ill repute, and then file a bankruptcy without listing his assets in the Fortress of Solitude?

It's one thing when a bank sends you a letter that says it's going to "charge-off" your debt (note: you'll still get sued for it, eventually, in all probability).

It's another thing when the Feds come knockin'.

And the City of Montebello got knocked recently.

But on another note, you have to wonder who will suffer if access to federal funds are cut off.

Is it the alleged perps? Really? Or is it the folks who were supposed to benefit from those federal funds?

Inquiring minds want to know.

There is little sense of humor these days as to bankruptcy fraud.

The indictments don't take long.

Even if you're a former County Official.

Aside from total bonehead maneuvers, like not listing a creditor or a substantial asset, the worst mistake you can make in your bankruptcy case is simply not filing it.

The reason is the same reason that Napoleon told his officers that they could ask him for troops, or ammunition, or horses, or anything they liked, but time.

Here's why time is your greatest enemy, or your best friend, depending on the situation and the choices you make: if you are paying minimum payments (let's make them $800 per month) and negatively amortizing (the debt is going up, not down, every month), you will never pay off your debt. Never.

And you will arrive at retirement (twenty-five years later) exhausted, broke, and sad. And you will buy titles from Amazon like "How To Cook Catfood Casserole; It's Not Really That Bad!"

If you take eight hundred dollars a month, and put half of it in a tax-sheltered retirement fund of your choice, and you do that for the same twenty-five years, you will retire with more than a million dollars, and spend your retirement laughing and singing, with two Margaritas, one for each hand.

Now, don't trust me. You don't know me, and I'm just a bankruptcy lawyer in Phoenix.

Instead, go find any old free, online retirement calculator on the Internet.

And plug in half the amount you are currently paying for your credit card debt, or any other unsecured debt you may have.

And move time forward by twenty-five years and see how much dough you have, with which you can...well, party!

And play with the time calculation; see how much you have left if you only save for ten years. Or five.

You'll discover that, as Napoleon suggested, time is valuable.

Because if you save longer, you'll have more left at the end, for your retirement.

Which means, in addition, you won't be knocking on the doors of your children and saying, "Remember me? Put a pillow on the couch! I'm heeeeere!"

I was fascinated by an article discussing business bankruptcy and insolvency from the perspective of investors in such cases.

The tone of the article is restrained and lofty; a buyer can afford the luxury of picking carefully among various offerings available in multiple Bankruptcy Courts.

A debtor/seller, on the other hand, is in a constant panic that it won't find a friendly investor, or a friendly buyer. So the tone of a debtor, discussing the same sorts of topics, is a good deal more urgent.

The biggest problem a business Chapter 11 faces, in many cases, is simply a failure of planning.

Entrepreneurs, by their nature, are optimistic. They have a tendency to say, "We'll never need to file a bankruptcy. Eddie at the bank is my buddy. He told me he'd bend the rules to help me with the refinance. I feel sorry for guys in business who don't have the banking relationship that I have!"

And then Eddie tells Jimmy that his hands are tied, and that he, Eddie, can't help.

"They came in and took the file off my desk and gave it to...Sammy! I can't help you any more."

Then a Chapter 11 gets filed, and all the clocks inside the Chapter 11 are ticking, and the poor entrepreneur is stuck in a highly regulated game that he doesn't understand.

And since a good businessman is all about being in control, that's painful. 

If it's at all possible, it is a good idea to plan a Chapter 11 Bankruptcy years ahead; and if you have a Chapter 11 Disclosure Statement and Plan in your bottom drawer as "Plan B", or "C", or "D", along with an impaired accepting class you can rely on, you may have a chance of surviving...Sammy!

And, for that matter, having a Disclosure Statement and Plan and Schedules in your attorneys briefcase when you go in to negotiate with the bank can be a useful tool during show and tell.

Bear in mind that you will never scare a bank by discussing a bankruptcy with the bank. The guy you're talking to may actually welcome a filing, because then it stops being his problem and starts being the problem of the legal department.

So never think that saying, "Either give me what I want now, or I'll file a Chapter 11 now" is going to scare a bank.

Unless you're the largest borrower of that particular bank.

Then your problem is the bank's problem!

So what do you do if you have 43 million dollars in debt because of real estate transactions?

The answer is usually a number following a Chapter; that is, a Chapter 7 or a Chapter 11.

Seth Ward is a Denver Businessman who was a developer, according to the article in Chieftain.com. 

And if your former resume reads "developer", your new resume is often amended to read "debtor".

This will be an interesting case to follow, simply because of the roughly 1.4 trillion in commercial real estate debt that's set for renewal of the loans in the next few years.

And this case will be a template, like a Symphony Orchestra template, for those that come after.

By the way, does your state still have a professional Symphony Orchestra?

Are you sure?

I've been blogging about bankruptcy for a couple of years now, and it surprises me that there's always more to talk about. I expect I'll be explaining bankruptcy topics for at least another three or four years until I've discussed all the topics about bankruptcy that I want to explain.

And more and more folks (including a number of bankruptcy lawyers, who are more than welcome!) have started reading my little bankruptcy blog.

And I love the little "statistics" feature in Blogger, because I can look at it and easily tell how many people are reading my posts on any given day.

This has been my busiest month ever, and I thank you for making it that; we've had 10,000 pageviews this month for this bankruptcy blog, and that doesn't count the syndication viewers, which may be another couple of million.

So thanks for your attention; I'll keep giving you answers to the questions my clients ask me, and I'll throw in all the bankruptcy news that's fit to print!

I present this new story about oil producers discomfort without editorial comment, except to say that relying on the kindness of strangers didn't work out very well, even in Tennessee William's Play!

This article outlines the facts surrounding a company called Vortex Debt Group, Inc., and the facts concerning another debt collection firm (Elite Financial) that agreed to get out of Missouri and make refunds pursuant to a consent decree.

There sure are a lot of debt settlement firms that are getting spanked lately.

Myself, I'll be happy to recommend a debt settlement firm.

If I can ever find one that makes clients happy!

Peter Schiff talks about the economy frequently, and he talks about the recent semi-downgrade of U.S. Debt by S&P. 

And he seems to think that politics might be involved in the continued AAA Rating of U.S. Debt.

I wouldn't know, but he certainly speaks well.

And he also seems to have some concerns about printing money to pay debt; but I have some concerns about that, myself!

I haven't see one recently.

But there is one that apparently works very well.

Unfortunately for Arizona Debtors, the program is in Pennsylvania.

During a depression, former contributors of all kinds have to decide whether to give to a political candidate, to a homeless shelter, to a church, or to a symphony.

Symphony Orchestras often take a back seat in the contribution department.

And on the date of this story by Keoki Kerr, Hawaii is the only State in the United States without a professional Symphony Orchestra.

But I'll bet you it won't be long before Hawaii is not the exclusive member of that club.

Now, is there anything good about liquidations of Symphony Orchestras? Well, from my perspective, no.

It will be interesting to see if anybody decides to telecast some other symphony orchestra's live performances into the concert halls that recently held live music in Hawaii.

And that might be a way to hold onto a tradition that has spanned centuries, and helps maintain an important part of Western Civilization.

Until this depression is over.

It's an ill wind that blows no one good.

Whatever that means.

But a bankruptcy of any business often has a short-term benefit to consumers.

They can buy stuff at much lower prices (liquidation prices) than usual!

Now, some places, like a carpet store I know, claim to be liquidating their inventory, and they've been liquidating for a decade now, so I have my doubts about the effectiveness of their liquidation efforts.

That's not what I'm talking about.

I'm talking about the liquidations at Borders Bookstores stores that were closing, and the liquidations at the Booth Feeds auction, both pursuant to bankruptcy orders.

And the benefit in both categories is the same; lower prices for the consumer, for a little while.

But at the end of the liquidation, there are fewer places to buy the commodities that had been sold by that store.

And just as important, there are more people out of work, joining the chronically high unemployment in the United States today.

Now, it's important that companies have the right to fail. Some business models are just goofy, like a scotch-tape boutique.

And some stores are not run as well as Apple Stores, or Allen Edmonds.

But when too many options are taken away from consumers by a depression, I worry that prices will go up when there are fewer available providers.

That won't happen with books, of course, because the demand for books is very elastic.

But what will happen to consumers if a bankruptcy liquidates the supermarket chain in their neighborhood?

First, they'll get to buy some food on sale.

Then they get to drive farther to pick up their food, and with gas prices today, that will hurt.

Finally, when there's less competition, prices for those specific consumers will go up.

And that would be an ill wind, indeed.

I've filed a few involuntary bankruptcy petitions for creditor clients, back before I shifted to debtor work.

They're interesting, and they are a little odd. They start with an Involuntary Petition, which says that the alleged debtor is insolvent, and the debtor then has the ability to controvert that allegation (to say it ain't true).

And if there was activity in a non-bankruptcy Court prior to the filing of the Involuntary Petition, that tends to get stayed until the issues alleged in the Involuntary Petition are thrashed out, unless the Bankruptcy Court lifts the Stay.

There may be skirmishing about the number of creditors who are needed to initiate the Petition.

And ultimately the debtor, if debtor it is, will normally want to be in a Chapter 11 Bankruptcy, rather than a Chapter 7, because the usual rule is that there is not a trustee appointed to run the business.

Involuntary bankruptcy cases are threatened fairly often by low-on-the-food-chain telephone collectors, but I've never seen an involuntary bankruptcy filed against a consumer debtor.  And I've been a bankruptcy lawyer for thirty years.

An involuntary case I read about recently struck me as unusual: it appears that the debts being alleged in the Involuntary Petition against former billionare Tim Blixseth are tax debts, according to Matthew Brown in Bloomberg Businessweek.

And the debts seem very small, in comparison with a few hundred million dollar net worth.

That will be an interesting case!

Sarah Gilbert, for WalletPop, tells us that the prices for 11 other things we can't live without are going up.

Normally you'd eat chocolate to deal with the depression you get when you read that kind of story.

But chocolate is on the list of price hikes!

Do you remember why I said that filing a Chapter 11 Bankruptcy was a gift to the musicians in the Philadelphia Symphony Orchestra?

Yeah, neither do I.

But I did! And the reason I said that was simple: if the real reason to file a Chapter 11 was to deal with the pensions of the musicians, there's an easier way. File a Chapter 7 Bankruptcy for the Orchestra. Immediately form a new LLC, and buy the bundle of assets you want (the name of the Symphony, the list of ticket holders and buyers, the list of contributors, the list of musicians, and so on) out of the Chapter 7 Bankruptcy, from the designated Chapter 7 Trustee.

Then start a brand new Symphony Orchestra that is indistinguishable from the old one to the casual observer (that is, the new one will have the same name, the same list of patrons, the same musicians plus or minus a few, and the same venues, re-negotiated for better prices by the new entity). And no debt whatsoever to the musicians for the pension obligations of the old entity, which is now dark and disappeared.

And you know what?

The very next Symphony that filed a bankruptcy filed a Chapter SEVEN Bankruptcy, not a Chapter Eleven (it was the New Mexico Symphony Orchestra).

I get to talk to business owners frequently, and generally there's something that can be done to fix their problems.

But if you intentionally hire illegal aliens, and get caught, and you intentionally fail to pay the IRS (that is, you evade rather than avoid taxes), and you get caught, then Bankruptcy Court would probably not be your cup of tea.

I remember when a gold-and-silver sales company filed a huge (for the day) Chapter 11 in Arizona; it was approximately a minute and a half after the owner asserted his fifth amendment rights that the Bankruptcy Judge appointed a Chapter 11 Trustee to run the case.

According to the allegations in an article by Max Jarman in the Arizona Republic, the owner of Chuy's Mesquite Broiler restaurants in Arizona and California was arrested, and the restaurants were shut down; and the article discussed an investigation involving illegal aliens and tax evasion, and the arrest of the company accountant. 

Now, I'm not suggesting that a Chapter 11 isn't a useful tool for a business in trouble.

But I am suggesting that Bankruptcy Judges are unlikely to have much sympathy for those who intentionally defraud the IRS, or who run two different pay systems, for legal and illegal employees.

A nice young man named Matt Berkus writes a useful educational blog about finances and bankruptcy.

He wrote one piece that's a useful read for anybody who is vacillating on the issue of filing a bankruptcy, and it has title, "Not Filing Bankruptcy Will Cost You Move Than 1 Million Dollars...I'm Not Joking!"

I've addressed this issue previously, but I like Matt's version of the analysis more than mine, so you probably want to look at his article if you're struggling with the decision.

Here's a preview: you can keep doing what you're doing and spending all your disposable income on credit card debt minimum payments, or you can discharge those debts and invest half of those payments every month and then retire a with a million or two, no kidding.

But don't read me on this topic: for today, go read Matt Berkus, and enjoy!

There's a smart article about the national economy that recently showed up on the internet, written by Tom Raum of the Associated Press. 

One sentence in that article got my attention good and proper:

"The government now borrows about 42 cents of every dollar it spends."

If that's true, my hair just got whiter. I can't see that borrowing that much as a good thing. Because if you constantly borrow, like a credit card addict, you will eventually need a bankruptcy lawyer. 

And that scares me.

Some nice people recently told me that they liked my blog. And they gave me a badge.

I really like badges. This is a very nice one, so I'm posting it here for all to see:

I recently blogged about a debt-settlement firm that was the subject of a consent decree.

By merest coincidence, I recently talked to a friend who asked if I had room to employ his daughter, who was now unemployed.

I said, what was she doing before? He explained that she had been working for a debt settlement firm.

I said, I know your daughter and I'm sure she worked hard and did a great job. What happened?

He explained that the company had been sold, and that all the jobs formerly being done here in the United States were now transferred to India. Just like my favorite television show "Outsourced", but without the laughs.

It also struck me that all the unemployed debt settlement company employees would now need to find a debt settlement company.

Or a bankruptcy lawyer.

The idea of avoiding a bankruptcy and doing some sort of warm, fuzzy, cooperative debt-modification thing with creditors makes many people glow!

After all, that's kinda like a work-out, right? With none of the downside associated with a bankruptcy filing in Arizona, or elsewhere.

Wrong, Insolvency Breath!

The reason that debt settlement firms work so poorly is...well, I've never seen one that worked well, that's all.

I get to see people who hired them, got a lot of debt forgiveness, and then owed non-dischargeable tax debt to Uncle Sam, and didn't understand that was a virtually guaranteed side-effect of negotiating debt toward the South.

Or people who have a lot of debt, who hired a debt negotiation outfit, and then thought they could relax. And then got sued by an unpaid, cranky creditor.

I get a lot of refugees from debt settlement firms.

And I notice that the issue isn't local to Arizona; Kavita Kumar tells us that a debt-settlement firm named "Vortex Debt Group" is barred from doing business in Missouri.

AT&T has recently filed for permission to buy T-Mobile.

It gave reasons that included a need to add new capacity to handle the iPhone-related volume of traffic, so there won't be so many dropped calls, says Matt Rosoff, writing for the San Francisco Chronicle.

Now, does that mean AT&T will file a Chapter 11 Bankruptcy?

Of course not; a big business, as opposed to a small business, can make mistakes, see them, and fix them, using big business resources.

That's why I feel sorry for my small business clients when they need to file some species of bankruptcy to start over.

In a small business, you have absolute freedom to make a mistake.

Your first, and your last.

Eventually, I'll succeed in educating debtors that their Chapter 7 Cases are not over when they receive their discharges.

What happens after a debtor gets the Bankruptcy Discharge Order that is the brass ring on the Bankruptcy Merry-Go-Round?

Well, the case is still open, so the Bankruptcy Trustee who was appointed in that case can finish administering it, and in a case with assets, it may be open for administrative purposes for five years.

But that's not today's topic.

Today's topic is the dreaded Random Audit, which can occur in either a Chapter 7 or a Chapter 13 Bankruptcy Case in Arizona.

And I've talked about that in my other blog, and my other other blog, so I won't beat it to death here.

All I'll say is this: if you are a debtor, and you get a letter from somebody claiming to be an auditor in your bankruptcy case, you probably ought not ignore it.

Unless you want to get the Rafael Ventura treatment!

The real rate of inflation scares me; I know that the official inflation rate is a silly fiction. And so does every houswife or husband who goes shopping, because some items in the grocery store have jumped 27% over the past six months.

But I've also pointed out that the price of gold and the value of the dollar are sort of teeter-totter twins. One goes up, and the other goes down, and vice-versa.

That's why it scares me silly when MSN Money discusses predictions that gold is going to go from $1,500 an ounce to $5,000 an ounce.

And maybe Anthony Mirhaydari at MSN Money is right, and maybe he's wrong.

But I'm scared nonetheless; because inflation so high that it makes gold soar to $5,000 an ounce tells me that we can use hundred dollar bills to buy a cup of coffee at Starbucks. As long as it's ordinary java, with nothing fancy.

And bankruptcy cases? Yeah, there would be more bankruptcy cases, all right.

In the vast majority of Chapter 11 Reorganization Cases, there is only one Disclosure Statement (think "stock prospectus" and you won't be far off) and one Chapter 11 Plan, proposed by the Debtor and Debtor-in-Possession.

And in some cases, like the Tribune Co. Chapter 11, there are two plans competing.

And if you've ever seen 'em in action, dueling Chapter 11 Plans are more fun than...dueling banjos!

Why would a tiny little Chapter 11 Bankruptcy be interesting to the national news media?

The Borders Chapter 11 Bankruptcy, for instance, had a direct impact on a lot of people all over the United States, and the debt involved was substantial.

But the Philadelphia Orchestra Chapter 11, now that details are starting to come out, has debts of a size that I would associate with a local pizza chain, rather than one of the "big five" orchestras in the United States.

Maybe the reason there's so much written about this particular Chapter 11 Bankruptcy is simply that people are talking a lot, and that provides grist for the news mills.

And they aren't necessarily talking nicely, and politely; the talk is the sort of communication I normally see when somebody's ox is getting gored.

And for future reference, somebody's ox is always getting gored. You can tell from the volume of the dissent and the vocabulary of the complaints whose ox is getting "the treatment".

In this particular case, the strategy of the case is being openly discussed, and the specific oxen for whom "the treatment" is being proposed are being walked into position for, you know, the goring.

And it will take a year or more (my guess) before we know the exact shape of the final Chapter 11 Plan that's confirmed, if one is confirmed.

And fyi to the musicians involved in the process, and everybody else involved in the process: this is a nicey-nice way to do a restructuring.

A less nice way?

A Chapter 7 gets filed, and then the important assets (which may well be limited to the name itself) get purchased by an angels group out of that Chapter 7 (liquidation) Bankruptcy case.

And maybe there are other assets that might be useful (maybe instruments that could be purchased at liquidation/auction prices?) or ongoing contracts that might be profitable (not the Nero executory contract, apparently, based on the recent article in the NYTimes.com by Daniel J. Wakin).

And at the conclusion of that relative quick Chapter 7 Case, there would be a new entity with the same name, a new board of directors (probably the folks who provided the dough for the acquisition of the assets and name at a liquidation price) and no pension obligations whatsoever owed to the musicians. And the entity that was the subject of the Chapter 7 would cease to exist entirely once the assets were fully administered; the legislative history to the Code tells us it's to prevent "trafficking in corporate shells".

So part of the delicate dance of a Chapter 11 confirmation process is a straightforward discussion; do you want your ox to get gored, or shall we take it directly to the chopping block?

Your choice, Roscoe! 

Most folks go for the goring, and nobody likes it; sometimes it's called a "haircut", but there aren't any nerves in the hair shafts.

The process always seemed a little more painful to me when I watched it than a haircut, you know?

And even if it takes massive skill and enormous effort to get a Chapter 11 confirmed, the folks whose hair gets cut seldom see the treatment as a gift.

But compared to their treatment in a Chapter 7, it is a gift indeed.

Philly.com relates that a global shock went through the global music community when the Philadelphia Orchestra Chapter 11 was filed.

I've told you that I was surprised, not by the filing, but that any orchestra in the United States had not filed!

The Philadelphia Orchestra is one of the "big five" orchestras in the United States.

But that wasn't the reason that I decided it was a pretty important development.

It was the six hundred and twenty-two articles written about a little tiny Chapter 11 Case!

But there's this issue, also; the orchestra filing was a leading edge case. Pensions were one of the driving forces that made musicians oppose the filing. And as the happy hippy generation ages, that issue will increasingly fuel bankruptcy cases.

Of the business, and of the retiree.

You may wonder why the price of gold and consumer bankruptcy in Arizona are related.

It's simple; the more inflation drives down the value of the dollar, the more the value of gold increases; and you can see that relationship in this article from Frank Tang at Reuters about rising gold prices.

Straightforward; there's no way to cook the statistics about gold prices. They are what they are.

Now, the rate of inflation can be cooked by clever statisticians, but the real inflation rate is hovering around 10%, which means that everybody, this year, got a 10% pay cut!

And another way to look at it is to review the bundle of goods that are going up in price, some by 27%.

Try telling the spouse who goes to the grocery store that there's no inflation!

And how can you tell if bankruptcy is your best option?

Well, in close cases I tell consumers to use a series of calculators to see how long it will take them to pay off their unsecured debt, and we talk about how close they are to retirement, and we talk about whether their debt is negatively amortizing, and a lot of other issues.

But if their minimum payments for all their costs of living are five thousand, and their income after deductions is three thousand, the issue is not so much "what are my options?"

The question really becomes, "When is the more-or-less optimal time to file, and can we pass the Means Test sooner rather than later?"

    

This is an interesting article by Boyd Erman about Greece, and its excessive debt, and the suffering of the Greek Citizens because of that debt.

And the upcoming disasters in Greece.

What I found especially interesting is that the phrase consumer bankruptcy found its way into the article; comparing national bankruptcy to consumer bankruptcy surprised me, but I suppose it's not that different.

Either way, the overhead is too big, and the debts don't get paid, and bad things happen.

And it's really, really no fun.

   

An article at KTAR.com asks the question, do rising gas prices threaten the recovery?

It's a very nice article by reporters Sandra Haros and Bob McClay, and it reminded me that when gas prices get high enough, there's a thriving cottage industry in siphoning gas out of gas tanks!

But to threaten a recovery, there has to be a recovery.

And with absurdly high unemployment rates, and inflation running at 10%, but coffee going up by 27% in recent months, I have to ask the other question.


Where is the recovery?

And I may be a bankruptcy lawyer in Arizona, but that doesn't make me want a depression to destroy the hopes and dreams of multiple generations.

And because I talk to so many decent people, and smart ones, who burned through their entire retirement funds trying to make payments on credit cards after their jobs were outsourced, or downsized, or laid off, that it breaks my heart.

And I can see that the Happy Hippie Generation of the late 60s is going to be the Cranky Where-is-my-Retirement Generation of...Now.

Because inflation just reduced social security (if inflation makes everything cost 10% more this year, that's like a 10% decrease in social security payments, right?), and that reduction will continue. And continue.

And ordinary folks who can't play the statistics game can tell that inflation is currently out of control just by watching the numbers when they go to the grocery store.

And folks will stop wanting to retire, and start hoping to find a new job, so they can buy food.

   

It always surprises me when some blog entries get so much traffic, and other articles I expected to go viral get so little.

But you're the boss, because I may write 'em, but you read 'em!

And, by the way, thank you!

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To call the Means Test mechanism "diabolical" would simply be an accurate description.

The Credit Card and Banking Lobbies are good, and they write statues (like the 2005 Amendments to the Bankruptcy Code) that do what they are supposed to do, like making the bankruptcy process more dangerous, more expensive, more unpleasant and more onerous.

So a couple with two jobs, when reduced to one job, can't pay credit card debt, right?

Just makes sense.

So that couple should be able to file a Chapter 7 Bankruptcy right away, right?

Wrong, Insolvency Breath!

Instead, that couple is in the shooting gallery of every creditor known to mankind until that couple passes the Means Test, and can then file their Chapter 7 Bankruptcy.

Why don't they pass right away, when their income goes down?

Because that would make too darn much sense!

The Means Test is a six-month rolling LOOK-BACK, which means that the instant they lose a job, the Means Test STILL COUNTS the PRIOR six months of income in its evil calculator.

And one month after the firing, the couple will calculate, in their Means Test, one month reduced income and five months of the old income.

Get it?

If you don't, don't worry about it.

But that still leaves them bobbing on the water like a sitting duck, and potentially getting sued during the six months it may take them to pass the Means Test.

Now, we may be able to help you pass the Means Test a little faster, or not. Depends on you.

And I've written a little about what happens if you get sued prior to passing the Means Test, and what you might do if you are sued prior to passing the Means Test.

Don't panic, and don't ignore the Summons and Complaint.

Well, according to this site, the Governor has now signed HB 2412 into law.

This version of the statute of limitations makes substantive changes to the rights of creditors and debtors, and doesn't "clarify" anything; it changes those rights, in a way hostile to debtors and favorable to credit card companies.

Previously, if there was a written contract, the statute of limitations was six years, and if no contract existed or was produced, the statute of limitations was three years on the "open account".

I remember the good old days; I remember when the United States was the production center of the entire world, and when we had jobs.

I talk to people frequently who want to work and can't find work. Or they can find work, but the work they can find is at a quarter of their prior pay.

And then 10% inflation makes the reduced income smaller still.

And when an ordinary consumer stops being able to pay credit cards on time, their credit takes an instant ding, and then their rates go up, and they start negatively amortizing, which simply means that even though they're making payments, their debt keeps increasing inexorably.

Which is the reason that ordinary consumers normally start looking for a bankruptcy lawyer in Phoenix, or Scottsdale, or Mesa, or Chandler, or Gilbert, or anyplace else in Arizona.

But what if you were the formerly-greatest economic power in the world, and your credit rating was dinged?

According to Alan Purkiss for Bloomberg, the Philadelphia Orchestra may be filing a Chapter 11 Bankruptcy presently, so it doesn't run out of money to pay musicians.

Some musicians have opposed the filing because they're worried that their pensions may be modified in the process.

What is surprising to me is not that so many orchestras have filed Chapter 11; it's that some have not.

During this depression, small businesses of all sorts have experienced a massive reduction in gross revenues, and businesses that sell services that can be deferred have been the hardest hit.

Let's suppose you haven't paid your credit card debt for a while, and you've seen a lot of "charge offs" on your credit report.

Should you breathe easy?

Never breathe easy. You've seen scary movies, right? It's only after you relax that the bad guy with the butcher knife shows up!

Here's why: on some days, and on some facts, the statute that governs credit card debt might be

12-548. Contract in writing for debt; six year limitation

An action for debt where indebtedness is evidenced by or founded upon a contract in writing executed within the state shall be commenced and prosecuted within six years after the cause of action accrues, and not afterward.

On another day, it might be ARS 12-543, which applies a three year statute of limitations:

12-543. Oral debt; stated or open account; relief on ground of fraud or mistake; three year limitation
There shall be commenced and prosecuted within three years after the cause of action accrues, and not afterward, the following actions:
1. For debt where the indebtedness is not evidenced by a contract in writing.
2. Upon stated or open accounts other than such mutual and current accounts as concern the trade of merchandise between merchant and merchant, their factors or agents, but no item of a stated or open account shall be barred so long as any item thereof has been incurred within three years immediately prior to the bringing of an action thereon.
3. For relief on the ground of fraud or mistake, which cause of action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake.

OR the Arizona Congress may just decide to pass HB 2412, which would make the statute for credit card debt in Arizona six years.

Or the Court having jurisdiction over the matter may find a "choice of law" clause in the twenty page tiny type contract written by the credit card company, which says that any debt with it is controlled by the law of the state with the longest statute of limitation in the country.

After all, credit card companies have very smart, experienced, resourceful and dedicated lawyers; not very compassionate toward you, of course, but you knew that.  

Or the Court might decide that you had acknowledged the debt, by writing a letter to the credit card company that said, "I know I owe it, but I can't pay because of the cancer, and losing my job, and my hair, and my wife, and my family, and my house and all."

By the way, as a practice pointer, it's probably a bad idea to write a pity pitch to a huge institutional creditor; they have none. And, yes, really. They are rotten enough to use that letter against you.

Tear stains on the paper and all.

No, I'm not kidding.

There is an interesting new case on this issue, and here you can read much of that opinion.

Well, probably not.

Here's one of the contenders for a car that would radically cut the use of oil from countries that hate us and want us dead.

It looks funny, because it's designed to eliminate drag.

Now, you'd think that a government that wanted to cut the use of foreign oil and encourage recycling of materials would embrace this car and make its way smooth.

And I'd love to see the United States become the leader in fuel efficient cars (gas or electric) that are fun and safe to drive; and there's no rational reason we couldn't produce these simple vehicles right here in the USA, creating value, and jobs for U.S. Citizens.

And will I hold my breath?

Uh, no.

And why would I want to see jobs created in the United States? Well, I'm a bankruptcy lawyer; and I'd like to see fewer folks forced to file bankruptcy because of unemployment!

p.s. innovation and production capacity made our County great; if we can reduce the barriers that permit small companies to innovate, we can generate jobs, and that will be a good thing!

I know you think I'm a little pushy, or nuts, when I tell you to list all your assets and cooperate with your bankruptcy trustee.

And there's a reason for that: I never want to pick up the Los Angeles Times and see an article like the one about Lenny Dykstra and bankruptcy fraud, but starring one of my clients.

Because I like my clients!

 

I had to talk about this article about inflation nearing 10% again.

The irony that a site at CNBC called "Fast Money" had the brains and other organs to talk about real levels of inflation (which is apparently a big secret, except to those who buy things with devalued money at the grocery store), made me laugh myself silly. Which is probably a symptom of clinical depression, in the context of 10% inflation.

Why is it ironic? Okay, it's not as funny when I explain it, but it's ironic that a site called Fast Money explains how your money gets spent faster because it's worth less. 

And to do the site and the executive producer justice, this isn't the first time that site has had straight information.

And the quality of analysis on Fast Money is excellent; for instance, the article which discussed the pay cut that Americans have experienced is useful.

And if you put the 10% inflation article together with the pay cut article, you will understand that this is a depression, and that you are not imagining that things are getting far, far worse for the middle class. Because a 10% pay cut in the one remaining breadwinner in the household makes things a little bit difficult.

And, of course, those on a fixed income got a 10% pay cut, too.

Inflation is fair. It breaks everybody's heart. Which is not exactly the lyric to the song, but you get the idea.

It's not your imagination.

Inflation is running about 10%. 

And for that article, we can thank John Melloy. 

When you're Number One, everybody is a critic.

Google made 2.8 billion with a "b" in profit in the first quarter!

It missed estimates by a smidgen, and some analysts had egg on their faces.

Big deal.

Android is a long time-horizon play, like Microsoft's Operating System.

And Facebook is real competition for Google, sort of.

On the other hand, Facebook hasn't yet decided how to monetize it's gigantic traffic; it'll get there, of course, but not for a good long while.

And Facebook will help Google stave off anti-trust concerns the way Apple helped Microsoft.

And remember, 2.8 BILLION. With a "B"! First quarter!

As long as Google has the magic algorithm that's better than anything else at finding relevant, fresh content, and as long as we believe that it has the magic algorithm, Google is here to stay.

And Android? Oh, yeah. It's making inroads in the mobile computing market, so Apple had best pay attention.

Overall, Google is as likely as...words fail me. I routinely see the dark side of every possible situation, because I'm a bankruptcy lawyer in Arizona, but I expect the United States to declare bankruptcy before I see Google file.

This is an interesting time in our country.

And by "interesting", of course, I mean "awful".

Unemployment figures are improving partly because discouraged workers aren't even looking for jobs anymore; while that's a bad tactical approach, I can understand being so depressed that all you want to do is to pull the covers over your head, and stay there all day, except for bathroom breaks.

And there are those who say that during a depression, women suffer more than men, because they are laid off more often or are forced to get by on lower wages, because of wage discrimination.

Carrie Lukas has written a provocative piece for WSJ.com indicating that when apples and apples are compared, there is no male-female wage gap.  Maybe she's right, maybe she's wrong.

I get to talk to couples every day in which the wife is making more than the husband, who was previously the principal wage-earner in the family, before this depression hit.

And so far, none of those potential debtors has seen that as a good thing.

My hope is that the economy gets better very, very quickly, so that we can get people back to work, and so real unemployment drops, and so families can cope with rapid inflation.

I get to help people a lot, and that makes me happy.

I can help them because people bring me simple and complex debt issues, and I can generally find some way to skin that cat.

And a lot of the folks who have vacillated about whether they should or should not file bankruptcy in Arizona eventually reach the correct decision and come in to see me, and they usually leave happier than when they came in.

And every now and then I talk to somebody who has a real problem.

You remember that old saw: "if money will fix it, it's not a problem."

Because money will fix a lot of problems, but not the death of a spouse or a child. Or cancer.

Or old age and poverty.

I wish I could fix those, too.

Suzanne Kapner has reported in FT.com about the hard line that bank regulators are taking with banks and mortgage servicers.

In specific, banks have been told not to foreclose on homes when there are mortgage modifications in process.

It strikes me as too little too late.

But maybe better than nothing. Watch this space for further developments.

Why am I pessimistic about the prospects for what we might call real justice in connection with bad actions and giant banks? Well, as with the current version of the bankruptcy code, banks have great lobbyists, and folks who are busted have...well, a new perspective on life.

Well, punt! Or bunt! Your choice!

Dawn McCarty for Bloomberg recently wrote a short story about a lucky little Casino; it's lucky because it has an exit plant already planned in its Chapter 11 Bankruptcy.

Dawn provided us with the numbers we need if we want to see how things are going for the Little Casino That's Lucky: "In re Fiesta Station Inc., 11-51205, U.S. Bankruptcy Court, District of Nevada (Reno). The case will be jointly administered with the main case, In re Station Casinos Inc., 09-52477, U.S. Bankruptcy Court, District of Nevada (Reno)."

Is there a lesson here for folks with less than a billion dollars in debt?

Absolutely, and it's a difficult lesson for some people.

The correct sequence is to have a plan, and then work the plan.

Many folks get confused, and want to FILE A CHAPTER 11 RIGHT NOW! That's because it makes them feel as though they are doing something, and it temporarily reduces their blood pressure, and makes them feel as though they are in control.

But without a plan, they are not in control: and they figure that out fairly quickly, at the same time they figure out that a Chapter 11 Bankruptcy Case has more procedural requirements than a dog has fleas, starting with the monthly reports; and it has tight time schedules for actions to be taken, including the exclusivity period for a Chapter 11 Disclosure Statement, which is about as much of a pain as a stock prospectus in the outside world.

Because a disclosure statement serves a purpose similar to a stock prospectus; it permits a hypothetical reasonable creditor to decide whether that creditor should vote for or against the plan.

Chapter 11 Bankruptcy Cases are the ultimate "Don't try this at home, kids" kinda bankruptcy.

My associate, Nikolina Kovacevic, returned from some First Meetings of Creditors recently and told me there was a gentleman at that hearing who was in a Personal Chapter 11 that he had filed himself, because he couldn't pass the Means Test, and he had too much debt for a Chapter 13.

We all decided we would light an extra candle for him on Sunday.

Because he's going to need all the help he can get.

Practice Pointer: if you don't make it under the debt limits for a Chapter 13, you might consider whether negotiating with a particular creditor can let you slide under that particular limbo bar at 11 USC 109; it was a common practice back when Chapter 13 Cases had real value for debtors, before the 2005 Amendments.

Maybe. It depends.

Now, Country Clubs themselves have been hard hit by the Depression; the Wall Street Journal reported on the Country Club Crash a couple of years ago.

So if you have or had a membership in a failed Country Club that's out of business, of course you get to keep it, because of the Rule of Lead (as opposed to the Golden Rule): you can keep an asset in your Chapter 7 Bankruptcy if the asset is utterly worthless. Mind you, you can also keep property in a Chapter 7 Bankruptcy if it's exempt, or if it's over-encumbered (at least, the trustee won't want an over-encumbered asset, like a car that's worth ten thousand with a lien for fifteen thousand. But you'll still need to make some sort of peace with the secured  creditor if you want to keep that car after the Bankruptcy Discharge Order is entered in your file).

And you'll see that Discharge Order sixty days after it's entered, or thereabouts, because that mailing is not a high priority at the U.S. Bankruptcy Court for the District of Arizona.

But a Country Club Membership used to be a hot asset in a Chapter 7 Bankruptcy Case in Arizona, because such a membership might have cost $50,000 to buy, and required big monthly membership payments.

So, thought the trustee in one case, "I should be able to take that Membership and sell it for big bucks!"

But no, insolvency breath!

Generally, Country Clubs these days have a waiting list; a member says, I want to sell, and they go on the waiting list!

It's a very, very long waiting list.

And it can take years, and years, and years to get to the top of the list.

And under the terms of many such Country Club Contracts, that's the only way such a membership can be sold.

Leaving the asset essentially worthless to the Bankruptcy Trustee appointed in the Bankruptcy Case.

And so, under the Leaden Rule, if it's worthless, the debtor gets to keep it! As long as they can make the monthly payments on an ongoing basis, and as long as they want to continue as members.

And since jurisdictions differ, and Country Clubs differ, your results may differ!

I was surprised when a client asked me the question, "If the U.S. Dollar becomes worthless, what effect will that have on my Chapter 7 Bankruptcy case?"

I explained that if the U.S. Dollar becomes worthless, she will have bigger problems on her plate than whether she gets her bankruptcy discharge. Like whether she gets to keep a wheelbarrow to get her paycheck (cashed into greenbacks) to the grocery store in time to beat a new price increase.

Those who have lived through hyperinflation in Germany (pre-World War II, in the Weimar Republic) and in Zimbabwe today, often indicated that they would have preferred it if their cash did not require the wheelbarrow treatment (famously, in the Weimar Republic, a man was robbed. The thief took the wheelbarrow. Not the piles of paper money).

Recently, award-winning anchor Simon Hobbs wrote in CNBC about the "Toxic Dollar", and that article made me a little anxious. In fact, it turned my hair white! 

On the other hand, I suppose bartering for free-range chickens and especially nice pieces of cactus to eat might be an interesting way to spend time!

And I suppose, if we're lucky, we won't have hyperinflation; but it might be nice if we decided to stop printing money, because the more we print, the less each dollar is worth.

Here's the graph I was talking about, from CNBC and Simon Hobbs:

Videos about bankruptcy are probably fairly helpful for anybody asking herself the question: "Should I file a bankruptcy?"

And I've produced some bankruptcy videos, many of which you can see here, or you can watch a bunch of different bankruptcy videos here, powered by THELAW.TV and ABC 15 (those in this second group are much shorter). For the second group of videos, I spent a lot of time under hot, hot lights, so I had a little less energy to be attitudinal!

The video I checked out this morning made me laugh, because I was obviously a little sideways about having to unwind a fraudulent transfer for a lovely couple prior to filing for them. It made me sad, because that was a lot of wasted work, unwinding a stupid, obvious fraudulent transfer and then doing some legit pre-bankruptcy planning to reach a similar result.

And here's the video that made me think I'd had just a little too much coffee that day:

The last time I talked about this topic was just before the year 2000, when a lot of folks, including me, were very concerned that some computer chip issues might cause serious malfunctions when we moved from 1999 to the year 2000.

I lectured about that for the American Bar Association and the Arizona Bar Association, and it was an interesting topic; and because the issue got so much publicity, an awful lot of defective computer chips were replaced, and we sailed right through. But it had been speculated that without the remediation that took place, the Bankruptcy Court might have stopped functioning.

And I had no sense of humor about that.

But this is now, and there has been some suggestion that the entire Federal Government might shut down in the event of a budget stalemate in Congress.

So, if there's a stalemate in Congress, and the Federal Government goes on life-support, will we still be able to file bankruptcy cases?

I have answers from two sources, and I will share those answers.

I went to a "knock three times, secret-handshake" bankruptcy guys meeting the other day, and the issue arose: can we still file bankruptcy cases if the Federal Government shuts down? The answer from the inside was that the filing of bankruptcy cases is considered an "essential activity", and therefore it will continue even during a government shutdown.

I searched a little further, and came upon a notation in a different district, same topic; same answer.

So for the time being, be of good cheer.

We will still be filing bankruptcy cases while the world grinds to a standstill around us, and proud to be of service!

I have posted below the information I found on the Nevada Bankruptcy Court Website:

Possible Government Shutdown

The U.S. Bankruptcy Court will remain open and in operation, in the event there is a government shutdown. All updates regarding the operation of the U.S. Bankruptcy Court will be posted to our website.
Please see the United States Courts web site for current court news:
What Happens to Courts if the Federal Government Closes? (external link)

Greece is the birthplace of democracy, and much of Western Civilization's glory can trace its history back to the Golden Age of Greece under Pericles.

Lately, on the other hand, a socialist government in Greece has driven the country toward bankruptcy, and that bankruptcy was averted by a bailout from other European Countries and by a government austerity program that included increasing taxes and retirement ages.

As Margaret Thatcher was reported saying, and probably didn't say, "The only problem with socialism is that pretty soon, you run out of other people's money!"

But it's natural for people to resent it when they were promised free money, and that free money is taken away; kinda like the Grinch at Christmas.

So the journalists in Greece have protested by going on strike.

Now, I don't mean to be unkind, but I'm not sure that the journalists involved fully understand the nature of a strike.

Putting it a different way, you can live a long time without a newspaper; now, if the firemen go on strike, that's a different matter. Or the police. But journalists?

Unless, like China, Greece has built an electronic wall to keep outside information from leaking into the Worker's Paradise, people in Greece can hop on the internet and get their journalism from any source they want.

Including Arizona!

p.s. the journalists also fail to grasp one simple truth; you can give free money to people all you want, just by running a printing press. And that has consequences, which can be seen in Zimbabwe. It's not as though the Zimbabwe Ten Trillion Dollar Bill has zero value; clearly, it has value. If you go to Amazon, you can see that a Zimbabwe Ten Trillion Dollar Bill is worth...95 cents!

Well, you won't find me arguing about it. I'm a Phoenix Bankruptcy Lawyer! And I represent debtors!

Especially if Bankruptcy Judges can use that approach in Chapter 7 Cases as well as Chapter 13 Cases; there's no particular reason to restrict the power of cram-down to a Chapter 13 context. After all, Bankruptcy Judges are able to use a similar power in connection with automobiles and redemption (see 11 USC 722) in Chapter 7 Bankruptcy cases.

Besides, a fair number of folks who would need such relief would have debt levels above those at 11 USC 109, and would therefore be unable to qualify for Chapter 13 Bankruptcy Relief.

Abigail Field has written a provocative article about cram-down for DailyFinance.

According to a recent article in the Timesunion.com, Daniel Gukeisen was arrested after fleeing because "he feared for his life". 

Mr. Gukeisen, a former prosecutor and well-known "media darling" Phoenix Bankruptcy Lawyer, had been convicted of manslaughter in connection with the stabbing death of a man outside his home.

I had a "study hall" period at North High School in Phoenix, and it was boring and not much fun.

On the other hand, I actively enjoyed going to the movies, which was one of the major kinds of entertainment in what was then a small city in the back of beyond; Phoenix has grown a lot since I got here about 56 years ago.

And since I want the best-educated bankruptcy clients on the planet, I have turned to video as a supplement to my bankruptcy blog, and my other bankruptcy blog, and my other, other bankruptcy blog.

In fact, I have a separate, free-standing bankruptcy video blog, but people apparently go by preference to youtube.com to watch our bankruptcy videos.

Still, I can tell that many potential bankruptcy clients know far more than they did before I started having them watch videos as part of their bankruptcy homework. And I know that because they ask better questions when they come in to visit with me.

And they seem far more relaxed when they have a good idea of what their bankruptcy case is going to hold for them, step by step by microscopic step.

Now, some folks won't read and won't watch videos either; that's fine with me. Those folks live in a state of constant surprise and amazement, and that has to have it's own quiet charm; but they get a little excited from time to time because they didn't watch their videos, and therefore don't know that it's perfectly normal to get a letter from the trustee right after the case is filed in Arizona.

Now, it's not easy to figure out how to get videos made if you're a lawyer in Arizona; if you're a bankruptcy lawyer, and you've been doing this for a while, you are likely pretty busy. I've stayed pretty busy, for instance, during this Depression. And since I've been doing this for the last thirty years or so, a lot of folks know that I try to get a good result for my clients.

Still, that left me trapped in my office, wondering who to call to help me with my bankruptcy video education project. There was no question that I needed help, by the way: take a look at an early, self-produced effort:



And still, it's better to be lucky than smart.

Because I met Marius through dumb luck, kinda the way I met Nicolina Kovacovic and Heidi Bell,  but those are stories for another day.

When I met Marius Ciocirlan, he was providing moral support to a friend who was asking about bankruptcy options here in Arizona. During the discussion, I discovered that Marius was a film student at Arizona State University. I also learned that he had an idea for a social media technology product that would make him the next Bill Gates.

Note: when he comes into his fortune, I hope he's still my buddy; all friends are good. Incredibly wealthy friends are even better!

When I found out that he was a film student, I immediately asked if he could help me educate debtors all over the country with educational videos about bankruptcy; he said that he would.

They say a picture is worth a thousand words, but you'll see immediately exactly why I know that Marius Ciocirlan will be a success in the film industry: if he can make me look good, he can make anybody look good:

Okay, I know that its just my white hair showing, but I'm not very happy with "couponing" as a word.

That said, I'm not just happy, I'm overjoyed with the idea of a fresh start for my consumer bankruptcy clients. Remember, the defining characteristic of a good result in a consumer Chapter 7 Case in Arizona is that the client dumps the debt, and keeps the stuff or the value of the stuff (if it's necessary to convert non-exempt property to exempt property on the eve of filing, like selling the jet-ski for fair market value and using the proceeds of the sale to buy six months worth of food, one of the Arizona Bankruptcy Exemptions.

But Laura T. Coffee wrote a cute, funny, intelligent article about a subculture I never studied in Sociology 101; the extreme couponing subculture (and my spellchecker doesn't like that word, either).

Here's why I'm talking about this in a bankruptcy blog: when my clients get the brass ring which is the reason they filed a bankruptcy in the first place, the Bankruptcy Discharge, I want them to take their fresh start and have a wonderful life after bankruptcy.

Here's where this all comes together: after the discharge, in many of my cases, people discover that they have some money left at the end of the month. My hope for them is simple; that they enjoy half of it, and put the other half in a tax-sheltered retirement fund of one kind or another.

Why not put all of it in there? Well, because people who work very hard, and don't ever get any goodies, tend to get depressed, and to fall off the turnip truck. That's a bad thing.

But I suppose that if they are interested (and everybody needs a hobby, after all!) in extreme couponing, they might have even more money left over at the end of the month.

And that would be a good thing!

p.s. remember, there are some debts you can't dump in a Chapter 7; and I know you know that, because you subscribe to my blog, but I just needed to remind you!

I know that 1.4 trillion dollars doesn't sound like a lot anymore (heck, pretty soon we'll have 100 trillion dollar bills like those in Zimbabwe!), but 1.4 trillion dollars worth of commercial real estate debts are coming due in the immediate future right here in the USA. 

And half of that secured debt is underwater. That is, the dirt is worth less than the loan.

And lending regulations are much, much tighter than when the loans were made, making it harder for the bank make the same loan again.

And the borrowers are now less creditworthy, because everybody is these days! 

And the banks themselves have less dough to put on the street, because they've already "charged off" a ton of loans, and leverage works both ways with our banking system; the more deposits, the more the bank can lend by a factor of about 14. The more charge offs, the less the bank can lend, by a factor of about 14.

Now, I don't want to be Mr. Doom-and-Gloom-Guy, but don't you think somebody should be working on a solution for that particular Niagara before we go over without a barrel?

Just a thought.

On the other hand, I guess it doesn't really matter. Just a lot of Single-Asset Real Estate Chapter 11 Cases dopplering on in!

Generally, people understand that banks are smart, or at least have good lobbyists.

And it makes me sad when people believe what they want to believe: that they can keep collateral without paying for it.

Now, there are a very few cases where, for instance, the second mortgage is completely underwater, and there's no equity in the house above the first mortgage amount, where a second mortgage won't immediately start a trustee's sale, because even if they scrape the debtors off title, the second mortgage will still be taking subject to the first mortgage.

And sometimes, the second mortgage might even be willing to sell a lien release to a debtor.

But if the second mortgage is completely or partially secured, and the debtor isn't making payments, the second mortgage holder will eventually get around to filing a trustee's sale, and 90 days thereafter (in Arizona), the debtors will no longer have an interest in the property.

Lately I've talked a lot about reaffirmations, the most confusing area of the law at this point; apparently every single Arizona Bankruptcy Judge has a slightly different procedural approach. I'll detail them all, every single one, soon. At least a couple have forms that they want a debtor to sign, in connection with reaffirmations, before they'll set a reaffirmation hearing, and I'll post those forms soon.

Remember, the Holy Grail of Reaffirmations is not a reaffirmation agreement signed by a Bankruptcy Judge: it's an In re Mustafi Order! The optimal result is that the Bankruptcy Judge deny the reaffirmation request, or vacate the reaffirmation hearing, and enter an order pursuant to In re Mustafi.

One of the Judges even enters a Mustafi-PLUS order, but that's another article for another day.

Here you go!

Top Ten Most Popular Bankruptcy Articles of the Week!

• The Arizona Bankruptcy Exemptions, Assembled by the Bankruptcy Court for the District of Arizona

  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 Arizon...
• Bankruptcy Arizona: How Do I Fill Out the Bankruptcy Schedules, Bankruptcy Statements, and Bankruptcy Lists: How Do I Fill Out the Forms?

  This is designed to help my clients fill information into their forms. This is not legal advice for somebody in New York, or anybody else, b...
• Barry Bond's Friends Say that Too Much Money Was a Problem; See How Lucky You Are?

  I just read a nice article in the Christian Science Monitor about Barry Bonds, who is the target of more criminal prosecutions. Apparently ...
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  Different Bankruptcy Judges, Different Bankruptcy Procedures!

  We're fortunate to have a particularly good bankruptcy bench in Arizona. Our Judges come from a lot of different backgrounds, but all share...
• 4Kids files Chapter 11; in Dispute with Yu-Gi-Oh!

  My kids are old enough that I don't know either of the players in the 4Kids Chapter 11; neither the debtor and debtor-in-possession, nor the...
• Don't Relax too Early in your Bankruptcy! A No-Asset Case Can Turn on a Dime!

  No asset cases are the majority of those filed in the District of Arizona Bankruptcy Court. . They aren't really no-asset cases; but the Ch...
• Bankruptcy as an Exit Plan

  I recently talked to a highly intelligent young man who had a bundle of issues left over from a failed business or two. And he was really, ...
• We're Not Number One! A Celebration, Of Sorts, For Lawyers! And Small Business Owners in AZ and Elsewhere!

  This is just a recap of a post on my Just for Lawyers blog, but it has this relevance to my small business owner clients: the general popula...
• 

  I Love It When People Agree With Me: Why Apple Will NOT File Bankruptcy!

  I love this nice article about another Apple advantage in the iPad wars! Because the writer and I both agree that Apple has non-technologic...
• My 100% Arizona Bankruptcy Discharge Guarantee! 100% Bankruptcy Guaranteed!

  Every now and then I'll see some bankruptcy lawyer in Cleveland or Denver offering a money-back guarantee about something that is pretty str...
  
  

A Phoenix bankruptcy attorney, Daniel Ray Gukeisen, has been convicted of manslaughter in Maricopa County Superior Court, cause no. CR2009-005838.  He was a client of my friend Alex Morris, a leading online marketing expert employed by Findlaw.

Larry Debus was Gukeisen's criminal defense attorney; Larry is a fine attorney.

Surprisingly, Gukeisen was not present for the reading of the verdict, and a warrant has been issued for his arrest.

Here is a screenshot of a video of Dan Gukeisen when he was a media darling and successful internet marketer for bankruptcy; I found this on Alex Morris' site about Arizona Lawyer Marketing.

TV Celebrity - Arizona Bankruptcy

My kids are old enough that I don't know either of the players in the 4Kids Chapter 11; neither the debtor and debtor-in-possession, nor the litigant Yu-Gi-Oh!

But I know this: when somebody is beating you in litigation, sometimes the only way to stay alive to keep up the fight is to file a Chapter 11 Bankruptcy, because even though it's very, very, very expensive (did I say very?), it's sometimes the only game in town.

You'd think that after you turned out the lights in your bankrupt business that you'd also turn off the water.

But you'd be wrong.

We here in a desert are particularly sensitive to wasting water, you know?

I just read a nice article in the Christian Science Monitor about Barry Bonds, who is the target of more criminal prosecutions.

Apparently he has friends who believe that too much money is the root of some evil.

I recently talked to a highly intelligent young man who had a bundle of issues left over from a failed business or two.

And he was really, really smart; he'd done a ton of homework, and knew in advance that he qualified for one of the means test exceptions, which made me happy.

He had a workable game plan to scrape off the two million in debt, and get back to work as a productive citizen.

I love it when that happens.

I also thought he had a nifty turn of phrase, which I had not heard previously; talked about his bankruptcy as "an exit strategy" from his failed business.

And I thought about it, and darn if I didn't agree with him.

My office communicates with our debtor clients as much by email as by telephone.

And my Arizona bankruptcy clients fill out their forms online; when they are really, really complete, the client presses "send" and the entire package of data goes to Heidi or Nina for initial review, and then to me for final review.

We no longer accept bankruptcy clients if they don't have a computer hookup, because I no longer have a room full of employees typing away on non-correcting typewriters and using white-out on eight flimseys between sheets of carbon paper; we no longer do "big box of pieces of paper" bankruptcy cases, because that's a seriously hit and miss way to do things (the client drops off a big box of bills and collection letters and lawsuits and exits like Wile E. Coyote).

On the other hand, it appears that some "consumer credit counseling" companies see folks without a computer as victims.

I don't know any other way to describe the differential on the fliers I just received: "1st Course Credit Counseling $30.00 Internet $50 telephone".

It's a small thing, but it bothers me.

Buying back non-exempt assets is pretty boring. Non-exempt assets in a Chapter 7 Case in the District of Arizona Bankruptcy Courts are usually nothing special, and may include "excess equity" in a car, or in a house, or a Beanie Baby Collection worth $5,000.00, or a wedding ring that's worth a little too much.

But when the debtor is a quarterback named Mark Brunell in his own personal Chapter 11 Case, and he proposes that he'll sell some assets to pay creditors, and himself purchase items like his 2010 Super Bowl Ring, that's a lot less boring.

How do I know it's not boring?  Because a lot of articles are being written about it, as we speak!

I'm seeing a lot of folks who are worried about the future, and particularly about retirement.

That's good, because it's better late than never when it comes to thinking about retirement. Strangely, in today's Arizona, contemplating bankruptcy and thinking about retirement may be similar or identical activities.

I just read an intelligent article by Alan Fram in USA Today about retirement. 

It resonated with my experience, because I see people coming into my Phoenix Bankruptcy Office who never in their lives figured that there was a bankruptcy in their future.

Here's the most important thing I could possibly tell an individual with hair the correct color: do not dip into your retirement funds to pay credit card debt. It's probably a bad idea to dip into them to pay for anything.

After that, it's just details. Mind you, the body of bankruptcy law and practice in Arizona involves a lot of details. But having something to save is the first part!

No asset cases are the majority of those filed in the District of Arizona Bankruptcy Court. .

They aren't really no-asset cases; but the Chapter 7 Bankruptcy Trustee has reached a conclusion that there are no non-exempt assets in the case which will realize, after costs of sale, at least $800 for the estate (note that newer bankruptcy trustees on the panel may be a little more frisky, and may be willing to administer a case for less dough; they'll keep that up until they figure out that they have overhead).

Now, sometimes a Chapter 7 Trustee takes his or her vitamins, and has lots of energy. In those cases, it's not unusual for a Trustee to issue a No-Asset Report about a Chapter 7 Case, and that tends to cause undue rejoicing in some clients, because they think that the bankruptcy case is now over.

It's a good thing to avoid rejoicing for six months to a year if you get a premature or quick No-Asset Report from the Bankruptcy Trustee appointed in your case.

Because if it seems too good to be true, it probably is.

And as soon as you file your tax return, or receive the tax refund that you expected to lose, and then expected to keep, the Trustee files a Withdrawal of Report of No Assets, and asks to have the case reopened, which the Judge will most certainly do.

So if it looks like Miller Time a little early in the case, stick with Folger's for another six months or so; because the Trustee may have just not noticed that you were on track for a tax refund.

It's hard to be a Chapter 7 Bankruptcy Trustee!

And no, that's not irony.

Frequent readers already know that I read my own obituary last week, and it was just a little unsettling.

And this morning I got a notification, which I've posted below, that my personal favorite Borders Bookstore was closing because of the Borders Bankruptcy.

Is Mercury in Retrograde, or what?

We are closing our Borders store at 2402 E. Camelback Rd. in Phoenix. Thank you for making this your bookstore for so many years.

I recently heard back from some clients who were off doing some bankruptcy homework in preparation for filing a bankruptcy; we had found a way that they could file under Chapter 7, so they were pretty happy.

I suggested that they talk to some folks to see what it would cost (written estimate) to bring one of their cars up to "excellent" condition per Kelly Blue Book, and what their house was worth, and what their wedding ring was worth, and a few other projects just to get them tidied up and ready to go.

When they came back to see me, they had gotten some bankruptcy advice from a bankruptcy expert who wasn't an attorney; he was a mechanic. Or maybe a real estate appraiser. Or something.

And the advice he gave them was simple: don't list your valuable thingamajig because the trustee will take it away from you in your Chapter 7.

Now, I've talked about pre-bankruptcy planning in several places, and I've lectured about it for several bar associations. There is always some risk associated with it, because "pigs get fat, and hogs get slaughtered", but both Judge Haines and Judge Curley have written instructive opinions on the topic.

But this is the one piece of free advice that may be more valuable to you than any other: if a buddy, who filed a bankruptcy back in 1950, tells you that you shouldn't list an asset, or that you should sell it and stick the proceeds in a box under your bed, he's not really your buddy.

Or at least, he's not a very smart buddy.

Now, I enjoy hearing questions, and many questions revolve around what you get to keep in a bankruptcy because of the Arizona Bankruptcy Exemptions. And certain Federal Exemptions. And the fact that some assets are over-encumbered. And the fact that some assets (your 43d largest string ball in the Western Hemisphere) are worthless, along with your heavily-used Antimacassar collection.

But one question I never spend too much time on is this one: "Is it a good idea to hide my assets, sell them to my sister for a dollar, or give them to my parents, just prior to filing my bankruptcy?"

The answer is always simple, and short, unless I'm being a smart-Alec that day: no.

Legitimate pre-bankruptcy planning, in which non-exempt assets are converted to exempt assets prior to filing, always has some risks, and you have to do it correctly, including selling for fair market value and listing the transfer on your schedules.


  

Since I've been a bankruptcy attorney in Arizona for a long time now, I didn't think I'd get many more questions that surprised me.

But last week I was talking to a highly intelligent, well-educated couple with a complex bankruptcy problem, and as we were winding down our first half-hour "getting to know you" meeting, he asked me "Are you a Bankruptcy Mill?"

I'm Irish (and English and Scots and American Indian and probably more into the mix), so sometimes when I'm surprised, my face shows that I'm surprised.

"I'm sorry, what did you say?" My eyes were a little bigger than usual, because I was...surprised.

"I didn't mean to offend you, but I needed to know because I heard that it's a bad idea to hire a Bankruptcy Mill."

Well, at least he got that right.

Here's the drill; a bankruptcy mill processes cases, not people. If you think "HMO from Hell", you won't be far off.

Does that mean a HMO can't take care of a splinter or a sinus infection? Of course not; I just wouldn't want to visit an HMO waiting room if I had liver cancer on top of my congestive heart failure. I suppose if I took a book it wouldn't be all that bad.

But a bankruptcy mill is defined by several items:very expensive television advertising, the expense of which then requires a salesman to make sure that everybody who comes in signs on the dotted line, and lawyers who see potential debtors right after they have signed an agreement put to them by a sales guy.

So, no, Eddie, I am not a Bankruptcy Mill. I'm an Arizona Bankruptcy Lawyer, and have been for about thirty years. And some of my clients think I did a good job for them.

I'm just a guy with white hair in Arizona with a bankruptcy blog; and I'll be happy to fix your problems. If you want me to.


   

I love this nice article about another Apple advantage in the iPad wars!

Because the writer and I both agree that Apple has non-technological advantages that Android won't overcome!

Which is another reason we won't have repeat of the Apple vs. Microsoft Wars of the past, even if more folks start using Android; and yet another reason that Apple will NOT go bankrupt!


  

Making educational bankruptcy videos is a lot of fun, but it's not nearly as easy as it looks.

I have a lot more respect for weathermen and women, who stand there and talk, and make it look easy.

It is not easy; at least not for me.

The lights are hot, the cameras notice that I forgot to shave that spot, and my allergies kick up and I need to gulp some tea just when I'm getting to the good part.

But you've now looked at the videos 10,000 times; actually, now we're at more like 11,000 views, but that's close enough for government work!

And I know the real reason people go to watch the videos; if I had a choice between watching an old guy with white hair talk, or Heidi the Bankruptcy Angel or Nikolina Kovacevic or Sean Whatshisname, I know who I'd rather watch.

I'll be making more videos soon, because Arizona Bankruptcy Law and Practice keep changing, and you need to know as much of it as you can stand.

And I'll subsequently tell you all about my videographer, Marius, who is now going to the big leagues in New York City and will be doing great things. And congratulations, Marius! 

You want to see some classy bankruptcy and insolvency blogs?

Go to the FindlayJames Website. It's an UK Company, so it's not available to most of my readers, but I love the look and syntax of the website. Or blog. Or whatever it is.

Maybe it's a website with a lot of articles about bankruptcy and videos about the way they do insolvency advice in the United Kingdom.

Whatever the case, one of my next blogs or websites will look a lot like the FindlayJames website; except that the guy talking will have much whiter hair, of course!

Uh, no.

That would be no.

Now, as much as I like a title like "Android Is Destroying Everyone", because it's so reminiscent of The Terminator, it goes too far, I think. And thank you, Henry Blodget, for that nifty title.

Yet, all businesses must deal with competition, and all businesses adapt or die (prices were at 50% off today at the once-hugely successful Borders Bookstore at Biltmore Shopping Center on Camelback in Phoenix).

But Apple knows there's competition; and Apple lives to innovate.

And most important, brick and mortar business models work for Apple because Apple understands some fundamentals of providing service to customers. Which is why the Apple Store at the Biltmore is a riot of Apple-loving buyers every day it's open, and the Borders at the Biltmore is closing.

Frankly, any business can die; small businesses generally don't make it to the five year mark because of undercapitalization or the simple burn-out of the principal business owner. And you can trust me on this one: business owners are just plain tired when they bring their business to a bankruptcy lawyer in Arizona to give it a decent burial. Or to try to get rid of the debt that makes running it a nightmare.

Still, Apple is still an icon, and it has shown the ability, time and again, to re-invent itself and adopt a better idea; as long as that continues, it will continue to prosper.

Besides, you know perfectly well that Apple will, if pressed, simply build a table that swings both ways. It can't be all that hard to build a full-featured, great-screened Android tablet, because Barnes and Noble did it!

We're fortunate to have a particularly good bankruptcy bench in Arizona.

Our Judges come from a lot of different backgrounds, but all share a common quality: they try hard to do what the law tells them to do.

And when you're really smart about bankruptcy, and really knowledgeable about bankruptcy, and you're really, really experienced in bankruptcy (for instance, when you're a Bankruptcy Judge in Arizona!), you may have opinions about bankruptcy!

And the ways those bankruptcy cases, whether Chapter 7, 13, 12, or 11, should be handled. 

Now, you can find some of those opinions at the website for the District of Arizona Bankruptcy Court, and I'll be posting those here when I get a Round Tuit.

But the real reason that it's good to know the territory is simple: because they have opinions, the various Bankruptcy Judges in the District of Arizona like to do things in different ways.

In specific, while the ultimate goal may be the same, the precise procedures used by our Judges concerning reaffirmations is different, Judge to Judge to Judge.

So I'll also be posting General Orders, to show how they differ, and materials demonstrating specific Judge preferences, including different forms developed by the Judges to help them make decisions.

So watch this space for further developments!

p.s. Practice Pointer for Phoenix Bankruptcy Lawyers: Whether you sign the Reaffirmation Agreement or not, and whether you represent your bankruptcy client in Arizona for purposes of reaffirmations (as set out in your retainer agreements and your 2016 (b) statements), it is prudent to appear with your client at any hearing on reaffirmation set in Judge Curley's Court. If you advise your client that it is not in their best interests to pursue the reaffirmation agreement (which I do, almost universally), there is a reasonable chance that Judge Curley will either deny the reaffirmation or vacate the reaffirmation and enter an in re Mustafi-type order. 

I will scan such an order and post it when I get a Round Tuit! 


  

Kim Karapucci has reported on the possible Jefferson County Bankruptcy, which, if filed, will be the biggest-ever Municipal Bankruptcy to date.

I have to ask why any Municipality would ever reach this point. It's fairly easy to predict income if you're a municipality. You have plenty of beancounters on your payroll.

It's also pretty easy to find out how much you spend, right?

And the alternatives that politicians are discussing include raising taxes, or perhaps even...cutting costs!

It would be funny if it weren't so sad, because parents sometimes have to tell kids that they can't buy them a bike because they lost a job, or they were sued, or somebody got sick.

Apparently politicians have a lot harder time telling people that they gave away money which didn't exist.