Arizona Bankruptcy Attorney Blog

This differs a bit from lender to lender, and from time to time. But, in general, the mortgage company or bank won't start a trustee's sale in Arizona until you miss three payments; and once the trustee's sale starts, it runs for 90 days, under the statute.

So in most cases, you can miss six payments prior to losing your interest in your house, and prior to having to move out. You may be able to stretch that to seven or eight payments if you file a Chapter 7 Bankruptcy a few days prior to the date scheduled for the trustee's sale.

Please DO NOT wait to see me until one day prior to the sale, and ask me to file a Chapter 7 Bankruptcy for you in four hours.

Because I want you in my office a full sixty days prior to the trustee's sale, because if you don't pass the means test then, we'll have to work on Plan "B".

And even if you clearly do pass the Means Test, I want your paperwork to be as complete and accurate as possible, and that takes a certain amount of time!

I noticed that my buddies at THELAW.TV built me a new Youtube.com page, and it's populated with a hundred educational bankruptcy videos.

That was downright nice of them!

The issue of whether a person can represent himself or herself comes up from time to time.

The rules are pretty straightforward in Arizona Bankruptcy Cases. You can certainly represent yourself.

Bear in mind that lawyers have a saying: the lawyer who represents himself has a fool for a client.

And you cannot represent your spouse in a bankruptcy case, because you are not an attorney (unless you are, in which case, nevermind!).

And you, unless you are an attorney who can practice law in District Court in Arizona, cannot represent your corporation in Bankruptcy Court here.

Uh. Yes. Heck yes. Heck yes with exclamation points.

I know that hope springs eternal in the human breast, but it's a bad idea to leave any debt, of any sort, off of your bankruptcy petition and schedules. If a creditor doesn't get actual notice by the drop dead date, that creditor may well not be affected by your Bankruptcy Discharge Order.

And if all of your other debts have been discharged, there's more available to that creditor when he sues you and garnishes you and liens your house. And that doesn't count the debtor's exam, which is less fun than a root canal!

And "charged off" doesn't mean you won't be sued on that debt; it's just an internal accounting phrase used by banks, and it has some bearing on how much money a bank can loan. It has no bearing on whether the bank can, or will, sue you.

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.

 

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.

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.

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!

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)

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.

There's a nice MarketWatch article by Johnathan Burton, and it discusses the easiest, most predictable way to become a millionare.

Of course, it works best if you start when you're 25, because then your temporal lever is the longest you can make it.

On the other hand, if somebody has hair that's the correct color, there's a 50/50 chance that their earning potential is at it's highest; there's also a 50/50 chance that they have a walker and an oxygen bottle, but that's a story for a different blog.

And the other issue that can postpone saving at any point in a lifetime is excess debt, especially unsecured debt.

And that's why I suggest that people who are contemplating bankruptcy in Arizona and are unable to make up their mind go track down a free, online, credit card payoff calculator to see how long it will take to pay off the debts at your current rate.

I just talked to a very intelligent young man of about 25; he and his wife had two very young kids, and both work long, hard hours.

And why do I say he's intelligent? Well, he'd already used a credit card payoff calculator to figure out that at their current rate, it will be 20 years until they can pay off their credit card debt. And at the interest rate that they're charging, will cost a total of...a fortune!

So he wanted to talk to an AZ Bankruptcy Attorney to understand his options; fortunately, he'd also looked at a bunch of my bankruptcy videos, so he already understood most of the process pretty well.

I really like smart clients!

 

There's a nice article in the Wall Street Journal about new proposed mortgage lending rules.

Do you think they'll do any good?

I don't.

I'm old enough (my hair is finally the right color, you know?) that I've now seen it all, twice.

Once I saw land prices in Arizona drop into the basement when the tax laws in the United States were changed without a grandfather clause; a few decades ago.

One of the stupidest things Washington ever did, and the effects were interesting.

Aside from sending a lot of business to Arizona Bankruptcy Attorneys, one side-effect was that bankers all became incompetent and dishonest overnight, because Congress couldn't accept the fact the it had caused that real-estate disaster by fiddling with the tax laws in monumentally stupid ways.

And a roving gang of prosecutors scoured the country for bankers who were in failed banks, which failed because of the tax changes, so they could prosecute 'em and thereby get some poster children for the premise that it wasn't the fault of the tax law changes. 

That last bit, the business with the random criminal prosecutions of bankers (who were among the most conservative and honest citizens you could ever meet) meant that for years and years and years, lending in the United States was very, very careful.

And then somebody who was new on the job got a promotion for loosey-goosey lending, and a new cycle began.

When somebody builds an economic system without risk, it will also be an economic system without reward.

It will look a lot like Moscow used to look.

And I kinda like the idea that here in the United States we have choices when we go to the store.

 

Okay, there's been a discussion of the reasons that businesses aren't hiring in Arizona on KTAR. And uncertainty caused by government regulation is high on that list, which doesn't surprise me much.

What may surprise you is that when a Tsunami of new jobs hits Arizona, which will happen in two to six years, there will be a corresponding increase in the number of consumer bankruptcy filings.

Why, you ask?

And I admit that it's counter-intuitive if you aren't an experienced bankruptcy lawyer in Arizona.

But here's the skivvy: people do not, as a general rule, file a bankruptcy when they lose a job. They file when they find a job.

This was true before the BARF Act, and I learned it from Chief Judge Caldwell when we were discussing the copper towns that had just shut down; I said we'd have a lot of bankruptcy from those. He said that we'd have a lot of bankruptcy cases, but not until the copper mines opened up again.

Because then they had something to lose.

And besides, when somebody loses a great job, it will probably be a few months before they pass the Means Test!

Well, no.

We don't have a salesman. I'm not just old, I'm old-fashioned. And I don't think a salesman has any place in a law office.

I know perfectly well that the large bankruptcy mills and the small offshoots of the largest bankruptcy mills all use salesmen, and until the salesman works to "close" you, you don't get to talk to a bankruptcy attorney.

In some law firms, the pressure on a potential client to make a decision today is astonishing, and a lot of folks are simply not prepared for the range of closing techniques that the sales guy is willing to use on them, including taking their driver's license and debit card on some fake premise and not giving it back until you sign the retainer agreement.

I didn't believe that could happen at a law office. Until I heard the same story the third time from a refugee who had escaped from The Bankruptcy Mill of Doom (da-da-da-dummmmmmmmm!).

Here's where it gets complicated: a bankruptcy lawyer has to look at the totality of the circumstances presented by the potential bankruptcy client.

And if the case shouldn't be a bankruptcy case, he needs to tell the clients exactly that, even if the firm loses a fee because of it.

And I am delighted to send a potential client out the door if bankruptcy is the wrong decision for them because, frankly, I have plenty of folks banging on the doors because I'm been a bankruptcy attorney in Arizona for a very long time, and now it's almost like Ghostbusters: "Who Ya Gonna Call?"

And do I really turn clients away if they ought not file? Well, yeah!

Sometimes there are collateral costs of filing bankruptcy that make the process a bad business decision. Recently I turned away a lovely couple who wanted me to file a bankruptcy for them because I could have gotten them to pass the Means Test notwithstanding their high income, but they only had about 25% as much unsecured debt as their yearly income.

I could still have filed for them, of course, if there were special circumstances, but the balance tipping fact for me was discovering that they had a substantial personal injury cause of action which they would have lost if they had filed.

So I discussed ways to negotiate their debt down, noting that they needed to consult their CPA about probable tax forgiveness consequences, and pointed out that they might be able to benefit from a short sale, or even a walkaway, because they only had the one mortgage on their principal residence, and the Arizona Anti-Deficiency Statute might well protect them.

Lovely people; but the first thing about being a lawyer is remembering to think like a doctor, who in the Hippocratic Oath swears first, to do no harm.
And I found a pretty version of the Hippocratic Oath on Wikipedia, so enjoy! 

  

You have to wonder about a bunch of evil creditors who'd take away a guy's last Super Bowl Ring, just because he defaulted on a loan and filed a Chapter 7 Bankruptcy. But such brutal lenders exist.

And I was at first inclined to say that they were too intense in their collection efforts against Charlie Bach, but then I read somewhere that Super Bowl Rings were worth twenty thousand dollars or more!

Then I read an article suggesting that Super Bowl Rings were worth more like five thousand dollars, and it was a very well informed article.

But that was a different design of Super Bowl Ring, apparently. Which still leaves me a little confused about their actual value.

And I find my humor where I can these days, because the United States is still in a depression. But for some reason I find it ironic that it's easier to get a good value on a Beanie Baby Collection than a diamond wedding ring or a Super Bowl Ring.

Bear in mind that a Super Bowl Ring is not exempt in Arizona, but even if it there were an Arizona Exemption Statute for Super Bowl Rings, it would still be lost to Charlie; an exemption does not protect property against a properly perfected security interest.

Now, you may wonder what a Super Bowl Ring looks like. I certainly did, after all the excitement about them. So here's a picture of a Super Bowl Ring; actually, it's a picture of TWENTY-SEVEN Super Bowl Rings, and according to The Boston Globe, they were stolen. I'm left with this question: who would buy 'em?


(Saugus Police Department Photo)