Arizona Bankruptcy Attorney Blog

Bishop Olmstead is a brave man, and has strong beliefs.

In the video above, he responded to prior criticism.

But the criticism that he received previously may be dwarfed by the coming storm.

Because Bishop Olmstead has recently declared that wine will not be available at most Masses in Phoenix.

Many Catholics will be aghast and angry at the decision: after all, the relevant scripture says eat AND drink, and communion is the purpose of Mass.

Even priests are, well, surprised:

"The majority of priests were stunned and aghast at the announcement, and I hear some are planning to meet to see how best to respond. While the bishop has the authority to make this policy change, there is no scriptural, theological or sacramental rationale that makes any sense."

How angry will parishioners be at what many will see as a clear error?

Will it be enough to cause Catholics to seek other Churches, and drive the Diocese into bankruptcy?

Well, he who lives the longest sees the most; but I can't see a way that Bishop Olmstead will avoid reaping the whirlwind for this decision.

Remember my "it's better to be lucky than smart" comments?

Yeah. Neither do I.

But when I read this article about a poor woman with a disabled husband who finally got a job during a depression, it made me very, very sad.

It also made me very, very angry.

I haven't decided what I'm going to do about it, but for starters I want everybody to know about the company that has no heart whatsoever.

And in a world where facebook exists, it's probably a good ideal to avoid doing things that make a lot of people angry.

After all, Old Spice unexpectedly went viral after some funny commercials.

Bad publicity spreads, just like good publicity.

So here's the article that made me cranky; read it, and if it makes you cranky too, ask yourself what you can do about it.

Me, I'm still thinking. But while I'm thinking about it, I'm talking about it, too! Here's the article by Laurie Roberts (and thanks for picking this up, Laurie!):

Laurie Roberts' Columns & Blog

Laurie Roberts is a columnist for The Arizona Republic.

Towing the line on the right to work (or not)

To look at her, Angela Dominguez doesn't appear much of a threat. She's a wife, the mother of four kids. A woman who hit the jackpot this summer, landing a $13-an-hour customer-service job for a local towing company.

Her husband is disabled and can't work, so getting the job at All City Towing was a hallelujah moment -- one that'll allow this formerly homeless family to pay the electric bill without city assistance, one that'll leave them with a little money left over for luxuries. Like school uniforms.

Or maybe not.

The nation's largest towing company -- Dominguez's former employer and the company that holds a city of Phoenix contract worth millions -- is demanding that she quit her new job or be fired. If not, both she and her new employer may be sued.

It seems she must hold the secret Coca-Cola recipe or whatever is the equivalent in the towing business. United Road Towing claims she signed an agreement not to work for the competition for a year.

The Illinois-based company's Arizona lawyer, Robert Mackenzie, sent Dominguez a certified letter on Aug. 25, demanding that she leave her job. Or else.

The "or else" includes threats of injunctions, lawsuits and damages, essentially a promise to cripple her financially "even if URT has not yet suffered any damages as a result of your violation of the Employee Non-Competition and Confidentiality Agreement."

Now, I understand the occasional need for non-compete clauses. They are generally required of people in positions of authority, executives and such who have actual information about a company that could be used by their competitors. But since when are $10-an-hour employees let in on the company secrets?

Dominguez, 36, who says she never signed such an agreement, went to work for URT in 2008. The family had been homeless the previous year, after her former employer closed its Arizona operation. Struggling to rebound, she was happy to get the $10-an-hour job as a call taker. For three years, she worked for URT, the last two as an administrative assistant.

Making it on $10 an hour was tough, she says, but she scraped by, with help from the city's utility assistance program, food stamps and an understanding landlord who never tacked on late fees. Still, after three years, the promised raises never materialized so she started looking for another job, which, in America, is generally allowed.

In June, she went to work for All City Towing, earning $13 an hour as a customer service agent. The extra $500 a month was a godsend, allowing her to meet her bills and even set aside enough for school uniforms for her 12-, 10-, 8- and 7-year-old children.

Well, you can imagine her reaction upon getting URT's letter demanding that she quit: Shock, bewilderment, fear - the 3 a.m. wide-awake-and-wondering-what-to-do kind of fear.
Not even $13 an hour leaves enough left over to hire a good attorney, after all.

Dominguez says All City's managers have never asked her about URT. Even if they had, she says she doesn't know anything confidential.

URT, which operates in Arizona as Shamrock Towing, Fast Towing and All Valley Impound, declined to explain what a $10-an-hour employee might know that would put the company at risk. Or why it's fair to close off options for low-level employees who apparently have no way of earning a decent living unless they leave. But the company did provide this statement:

"Arizona law recognizes and enforces these agreements and they are typical in industries where sensitive sales and marketing information is provided to employees such as Angela," Edward Arensdorf, senior vice president for URT's West Region Operations, wrote.

Jeff Dunn, general manager of Tempe-based All City Towing, says he has no intention of firing Dominguez - nor does he expect her to sign a non-compete clause.

"I don't know what knowledge she could possibly have that could threaten their business," he said. "If they're giving a $10-an-hour employee that knowledge, that's crazy."

That's also something for the Phoenix City Council to think about. URT's towing contract with the city expires on Nov. 30. Why on earth would the city -- meaning its taxpayers -- want to do business with a company that hires lawyers to stop its $10-an-hour employees from finding better jobs?

Dominguez says she liked working for URT, but the last straw came this spring, during a talk with her son.

"My middle son Roman told me, 'Mom, can you just get a job that you can take us to McDonalds once a month?' " she said. "I mean, it seems so little but for it to come out of my son's mouth. That's pretty sad, that I couldn't even provide them a Happy Meal."

The question these days isn't whether she can provide them a Happy Meal but whether she'll be able to provide them with any meal.

Once URT is done with her, that is.

(Column published Sept. 20, 2011, The Arizona Republic)

The Evening Standard recently published a piece suggesting that the Global Economy, something I think of as The Worst Idea Ever, is heading toward a rough landing.

And when I say "landing", I'm really talking about a place seven or eight feet underground.

Why?

When countries are intertwined economically, and some countries (Greece is the current poster child, but many others are among the usual suspects) keep borrowing and spending on early retirement and big pensions for some of their citizens, and the countries don't make the money to support such lavish government spending, bad things happen.

In specific, the wheels come off the wagon.

Of the world economy.

Because when countries keep borrowing beyond their ability to pay back debts, they eventually hit a point where there is no more money to borrow.

And then things get bad. See Greece, for instance, which is currently the poster child for "bad".

I'm only a simple backcountry bankruptcy attorney, but it's clear to me that when the Chinese Economic Miracle sours, and the phonebanks of India fall silent, and all of Europe is dragged into the economic black hole by Greece, Italy, Spain and Ireland, bad things will happen in the United States.

And the article in the Evening Standard also points out that the United States has been bailing out banks for some time now, and the Bank of America may need a new round of bailouts.

And is the Bank of America too big to fail?

Or only too big to bail?

I have another bankruptcy blog (actually, I have several. Fickle, I guess).

But I like my Bankruptcy Crossroads blog particularly because I built it myself, with my own little hands. So I have some foolish pride about it.

Now, a bankruptcy blog is just a platform to write articles about bankruptcy and insolvency, so I shouldn't be all that proud. But still.

And here are the top ten most-liked bankruptcy posts from that bankruptcy blog this month.

I hope you like them!

And I can count. Really! I just threw in an extra post, as a bonus!

There are a bundle of insolvent cities in the United States.

Some file bankruptcy, some don't.

We'll get to compare how the residents of those cities fare.

My guess is that the folks who live in Harrisburg will be downright cranky that they didn't file bankruptcy when they had a chance, instead of dithering, and dithering, and dithering, with some dither sauce.

At this point, Harrisburg is facing bond defaults, missed payrolls, and a takeover by the State.

None of those would make me a happy camper if I lived in Harrisburg, I think.

On the other hand, things are pretty rosy, by comparison, in Central Falls. Payrolls are being met, and the bond payments are being met, as well.

Elections will be won or lost in the future by politicians who promise to file, or not file, bankruptcy for cities.

Imagine the campaign speech:

"My friends, if I am elected, I will immediately put this city in a bankruptcy! I promise!"

Private enterprise uses the word "billion" with a "b" far more than the governmental "trillion" with a "t".

But for a start up, a billion dollars is a lot of money.

A bankruptcy joke may be in the transmogrification process.

The gag used to be "how to make a small fortune? Start with a large fortune, and open a restaurant!"

Then it became, "...and start a dot-com!"; then it was "and invest in consumer real estate!"

The newest iteration seems to be "and build solar panels!"

And the newest poster child for that gag is Solyndra, which has announced that it will file a Chapter 11 Bankruptcy Case.

Solyndra is the third solar company to file a bankruptcy in August of this year, following Spectrawatt Inc. and Evergreen Solar Inc.

Now, there was a half a billion dollar loan guarantee made by the Federal Government on behalf of Solara, and there will probably be political fallout from this bankruptcy.

There will also be more bankruptcy cases, simply because 1,100 employees are now laid off, and that will give rise to more bankruptcy cases.

The City of Freemont, California will also feel a pinch, because stuff rolls downhill. A company that was spending a billion dollars was paying Freemont Restaurants, and there will also be more foreclosures and defaulted rental agreements in Freemont, because when the spigot is turned off with no warning, everybody in the vicinity is left holding the bag.

It appears that the bankruptcy was filed one step ahead of regulators, because the half-billion dollar Solara loan was the subject of a subpoena from the Energy and Commerce Committee.

There is now something that's been called "The Solara Effect", which is the reluctance of investors to jump into solar energy start-ups.

Because investors aren't dumb!

Terry Collins wrote a nice article for the Associated Press about Vallejo and it's emergence from Chapter 9 Bankruptcy.

But reading the article did not give me a warm, fuzzy feeling.

There was discussion of a report that was ignored by the City Council, which report predicted the bankruptcy unless Vallejo changed its free-spending ways.

The part of the article that scared me was the wistful way people talked about the free spending past, and the rueful tone addressing the stay-inside-the-budget present.

See, with a governmental entity of any kind, there's just no excuse for needing to file a bankruptcy.

You KNOW in advance what your income is going to be. You KNOW in advance what the costs are going to be, and you KNOW your historic debt.

You OWN a bean-counter or twenty, and their job description certainly ought to include figuring out when you're in the zone of insolvency, and beating the drums and sounding the alarms.

But the seductive power of giving away other people's money is just too much for politicians, apparently.

Now, I'm a lawyer. A bankruptcy lawyer, to be specific.

And lawyers are trained to be able to argue either side of any argument.

So I can make excuses for Vallejo and talk about how nobody expects tax revenues to go down.

Except.

All you have to do when tax revenues go down is to cut spending immediately, and intelligently (for heaven's sake, don't cut cops and firemen and garbagemen and teachers first. That's just stupid).

Ordinary people have to live within their means.

Why not cities?

And while we're at it, why not countries?

p.s. so it'll be harder for Vallejo to borrow in the future? Well, does anybody think that's a bad thing? Really?

When you're a newspaper publisher and revenues drop like a rock during a depression, you'd naturally expect your bank to work with you, especially if you'd had a long and productive working relationship with that bank.

Wrong, Insolvency Breath!

Robert Chandler, Publisher of the Bend Bulletin, had some cranky things to say when Bank of America talked about how much it had tried to help the newspaper.

One phrase in the article that I particularly liked was ""They tried to work with us all right--by doubling our interest rate."

See, banks don't like defaults. And big banks really don't like defaults, because once they charge off a loan (an internal bank accounting activity), they have to reserve against that bad loan, and they can't loan as much money.

And if a bank loans less money, it makes less interest on that un-loaned money.

And it makes less profit.

And since banks are for-profit institutions, they tend to be real hard drivers in a negotiation, and sometimes seem irrationally aggressive.

Here's why.

Banks don't care.

They don't have emotions.

They don't care if people will lose jobs when a business closes; that's not their problem, mon.

So if you're on the wrong side of a default with a bank, the bank is not going to be warm and fuzzy.

Practice Pointer: a bank starts warm and fuzzy during a negotiation, in order to get more collateral and additional personal guarantees, and a payment plan that starts small and ramps up to an unpayable amount (they've got your records, right? they know what you can pay!) And that means that when the unavoidable default arrives, the bank is holding all the aces.

Just a thought.

p.s. if you hear the words, "We're from the bank and we're here to help you," you will probably not have a very good day.

Let's suppose you're an embezzler.

Well, it stands to reason that you won't be able to scrape off your debts incurred by embezzlement, because consumer bankruptcy under Chapter 7 is designed and intended to provide an honest debtor relief from overwhelming debt.

And so it often goes. As it does in this article about Dawn Solomon, for instance, by Leslie H. Dixon.

Turns out that milking a healthcare system is pretty easy, at least for Dawn; she skedaddled with four million dollars from MaineCare, and was ultimately discovered, and then she was prosecuted, and then she filed bankruptcy.

Her ordinary, garden-variety debts have been discharged; it's a little misleading to suggest that she was "granted" a discharge, because that's a fairly automatic process in the U.S. Bankruptcy System.

And there was unintentional bankruptcy humor in the article, which points out that an Attorney General spokesperson repeatedly declined to answer how the money would be recovered.

Let's think about this for a minute. A currently unemployed health care provider is sitting in a prison cell after filing a bankruptcy. Her real estate holding company is also in Bankruptcy Court.

If you were asked to bid for the restitution judgment against Dawn Soloman, would you pay a lot of dough?

Yeah, me neither.

Unless Dawn Soloman comes out of prison and becomes the world champion Sugar Baby, my guess is that the four million dollars in debt is gone forever.

There are a lot of other debts that will, in most cases, survive the bankruptcy process. They include HOA Fees incurred post-petition, tax debts that aren't quite ripe enough, and student loans unless (in most jurisdictions) you pass the dreaded Brunner Test.

And you really don't want to be so bad off that you pass the Brunner Test.

I recently read an article about Spa One, and that article told me that the Spa One locations had "suddenly" closed.

I never hope that any business files a bankruptcy, and sometimes it's not a good idea to file a bankruptcy for a business.

Why?

Well, if you file a Chapter 7 Bankruptcy for a business that has a lot of very angry customers, especially customers who paid for something they didn't get, or who were charged for services they didn't get, the bankruptcy case can get interesting.

"Interesting" is a bad, bad word in the context of a bankruptcy of any kind. "Boring" is my favorite word.

Mind you, I am listed in the Guiness Book of World Records as the "World's Most Boring Man", but that's a story for another day.

Today's story, however, has a moral.

If you continue to take money from spa members by automatic withdrawal after you close the doors of a business, whether the closure is temporary or permanent, you get a lot of very cranky customers.

If you file a bankruptcy on a day when your customers are still cranky because they'd paid for something they couldn't use, like a closed spa, your First Meeting of Creditors will have a strong resemblance to a scene from "The Hunchback of Notre Dame", involving people crying, shaking with anger, and screaming "Burn the Witch!".

This applies to 341 Meetings of all sorts, including cases where contractors owe money on houses they didn't finish, wedding planners who didn't plan after they were paid, and caterers who didn't cate.

And while I'm going to hope that the business reopens immediately and makes all the profit in the world, the smart money always bets against that when a business stops responding to complaints from the Better Business Bureau.

SpectraWatt was a one-year wonder, and as a spin-off from Intel, opened like Gangbusters, and quickly hired more than a hundred workers.

Then everything went wrong with the local economy, the State Economy, the U.S. Economy, and the World Economy, and then the specter of competition raised its ugly head.

Seems like there are some countries where solar gets bigger subsidies and there are lower costs of production.

So after getting real big real fast, SpectraWatt hit the wall, and has been trying to find a buyer.

But this is a depression, or something that walks like a depression and quacks like a depression, so no buyer came forth; so a Chapter 11 Bankruptcy became the exit strategy of choice.

"Due to various operational issues, disputes with vendors and others, and most recently, deteriorating market conditions in the solar cell industry, the Debtor has idled its manufacturing facility, closed its operations in Oregon, retained only a skeleton staff, and has been marketing its assets for sale," said CEO and Chief Restructuring Officer Brad Walker.

And while the schedules list about $34 million in assets and more than $38 million in liabilities, my guess is that there was a lot of optimism associated with valuing the assets.

When you buy a horse, it costs a LOT. When you have to sell a horse fast, everybody looks in its mouth, and tells you it's long in the tooth. And it's about half-lame and half-blind. They'll take it off your hands, but only because they like you.

And that's the nature of selling during hard, hard times.

Oh, yeah. The saddest thing is that taxpayers coughed up huge economic inducements. Those appear to be yesterdays news.

You know?

I have a buddy named Rick Cook, and he wrote an e-book called "Shift Happens".

I was impressed by the book, partly because Rick's discussion of the paradigm shift between old-style publishing and new, instant electronic publishing is a great story, and Rick tells it well.

So, having been impressed as well as inspired, I am announcing that I will, not may, publish my first e-book about bankruptcy on Amazon within thirty days of this announcement.

I'm only doing this to keep me honest.

Because I have a fair number of blogs, ranging from a health and longevity blog, to bankruptcy blogs, to blogs that try to help baby lawyers set up and market their baby practices, there is some chance that if I don't set up a target, and stay on target, that the book-publishing project will take a seat behind the blogs.

But now that I've picked the date, the rest should be easy!

I like all my Arizona Bankruptcy Blogs, but one that I'm very fond of right now is my Bankruptcy Crossroads blog.

It has more topical discussions about news of the world, and municipal insolvency, and how "Sugar Babies" are finding "Sugar Daddies" to help out with non-dischargeable student loans.

I guess it was inevitable that an economic depression would have bad effects, but I was never creative enough to think that anybody would suggest online gambling to fix governmental insolvency, or that pretty young graduates would list themselves on "Seeking Arrangement" to find rich, old guys.

Between the gambling and drug use and what some would describe as prostitution, it seems to me that things are a little darker than I would have imagined a few years ago.

And I've read that Greece was extremely progressive in the area of online gambling.

But it was also addicted to spending, so that didn't, in the end, help either Greece or its citizens.

What do I hope for the rest of the year?

Well, I hope that news in bankruptcy is that we have many fewer consumer bankruptcy cases in Phoenix, and Scottsdale, and Mesa, and Glendale, and Chandler, and all over Arizona.

But I don't think I'm going to get my wish.

Now, you'd think that I'd be delighted with online gambling, because it will lead addicts directly into bankruptcy, and you'd think that I'd be delighted that Sugar Babies will file bankruptcy to discharge their credit card debts so that more of the Sugar goes to student loans, and you'd think that I'd be happy that governments are borrowing and spending at a rate that the next municipal bankruptcy cases will make Central Falls look like a piker.

Faithful readers know that you'd be wrong.

A College Degree: How Much Is It and Is It Really Necessary?: MyFoxPHOENIX.com

I was interviewed last night on topics relating to the value of a four-year college degree and the dischargeability of student loans.

While it was a little late, given my old-guy early bedtime, I enjoyed it.

Every single person I talked to at local Channel 10 was absolutely wonderful!

To say that they are all nice to their guests is a massive understatement; and calling me a bankruptcy expert may have been a bit of an exaggeration, but it certainly made me feel warm and fuzzy.

I love giving TV interviews on bankruptcy topics. Of course, I always worry that I'm going to forget what I was saying, or focus someplace else than the camera.

When Central Falls filed a Chapter 9 Bankruptcy, the receiver made some hard, and necessary, decisions.

Frankly, it shouldn't have taken a receiver or a Chapter 9 Bankruptcy to figure out that a town of 18,000 people shouldn't take on debt of $80,000,000.

But I digress.

Ultimately, borrowing became an addiction in Central Falls, and a little tiny town can't print money or raise taxes to fix the problem.

That's for two reasons.

One is that if a tiny city prints lots of money, that's counterfeiting. It is punished by law, because printing lots and lots and lots of worthless money harms everyone.

Right?

The reason that Central Falls couldn't raise taxes enough to cover the shortfall is...Oh, come on! Look at the numbers!

If you lived in Central Falls and your city tax bill was high enough to pay your share of $80,000,000, what would you do?

So would I. And that would leave poor Central Falls a ghost town.

So the city didn't try that route.

Creditors wouldn't budge, so Central Falls had one option, which is also the reason there are so many consumer bankruptcy cases these days.

But there are some nice things that have come out of the Central Falls Bankruptcy.

One is a wave of volunteers to help out with the library and similar services.

And that's a good thing.