Arizona Bankruptcy Attorney Blog

At our office, we've noticed that merely having to list some specific assets cause clients to occasionally worry.

People care about their stuff, it's only natural. We get it. However, we're more concerned about the bigger picture: Getting YOU out from under the suffocating debt that pushed you to seek help in the first place being our primary bullet point.

And helping you is what we do. So we'll tell you the truth.

In these instances we have to be firm about what will happen to a high value asset, like a Rolex watch, and why it's not worth jumping back into the arms of your creditors trying to keep it. Or worse, trying to hide it from the Trustee.

Joseph put it like this:

"But what about my Rolex in my Chapter 7 Bankruptcy?"

Well, what about it?

Bankruptcy is no fun, none. And people who file bankruptcy should look at it the same way they look at a root canal; they should know it's no fun, especially compared to the pre-2005 Chapter 7 Bankruptcy process. And they have to play by all the rules, or risk their discharge or jail time.

Okay, lecture over. So what happens to the Rolex Watch in a Chapter 7 in Phoenix, Arizona, or anywhere in Arizona?

First, the exemption won't cover it; your exemption for a watch is about a hundred dollars, and that'll work fine for a used Timex, but a Rolex, even used, and even not ticking, is probably worth five grand or so.

The exact number is always in flux, because we're in a depression, and because Invicta makes a watch that's essentially identical to a Rolex for about a hundred bucks (it's also water resistant to the same depth as most Rolexes, and they come in automatic, which is what they call a watch that winds itself when your wrist moves)(and no, I don't get a commission on Invicta watches, but I sure like mine!).

That said, it depends. Some people sell their watch (which, at $5,000 or so, won't be exempt) to buy six months of food, fuel and provisions, which are exempt under the statute in Arizona (and by the way, if anybody can tell me exactly what "provisions" are, I'll be very grateful).

They need to list the sale on their statement of affairs, and be prepared to show the bankruptcy trustee exactly where they spent the money. If they sold the Rolex to a family member, or anybody else, for that matter, they must also be prepared to demonstrate that the sale price was more-or-less fair market value (DO NOT sell the Rolex, or the Corvette, or the $30,000 diamond ring, to a relative for a dollar. It's a clear fraudulent transfer, and it will bite everybody involved in the rear)(and DON'T GIVE the Rolex, Corvette, or the $30,000 diamond ring to a relative or anybody else for Christmas; ditto).

Anybody who does any pre-bankruptcy planning must remember the adage, "Pigs get fat, and hogs get slaughtered", which is most of the guidence provided by the caselaw on pre-bankruptcy planning. Both Judge Haines and Judge Curley have written instructive cases on the topic, and I'll post them when I get a Round Tuit (as opposed to a Square Tuit).

On the other hand, if a debtor files and lists the Rolex (and God Forbid they fail to list it, because they're risking their discharge and a jail sentence, and it ain't worth it, because they can just go to Amazon and get their Invicta!), the trustee will politely ask if the debtor wants to buy it back from the estate, or if he just wants it sold to pay administrative costs and creditors.

Some debtors become indignant at this suggestion, saying "But if they know you're broke, how can they request that?"

Well, it's not a request. A Chapter 7 provides an honest debtor with a fresh start, but nobody ever said it had to be a comfortable process (see "root canal", above).

And in general, if a debtor is attempting to discharge five million in debt relating to real estate (a not uncommon Arizona bankruptcy debtor) he probably ought to balance the inconvenience against the prospect of trying to pay the five million; and figure that if the Rolex goes into the estate, it's about the size of a tip. Paid by Jack Benny (this is an old person joke; if you have trouble with it, just move on along; nothing to see here).

Some debtors have pawned their Rolex; they need to list the pawn shop as a secured creditor, and if the amount owed the pawn shop is more than the trustee believes he can get from a sale of the rolex, the trustee might not object to the abandonment of the watch.

Of course, even if it's abandoned from the bankruptcy estate, so that the trustee has no further claim to it, the debtor is going to have to find money to pay the pawn shop to redeem the watch.

In an article from Reuters, Pedro Nicolaci da Costa wrote about a recent unemployment report.

Unemployment was up, with U.S. Citizens filing new claims after losing jobs: 414,000 new unemployment applications filed for the week ending September 3, 2011.

Here's my question of the day: has anybody tracked the relationship between the sheer number of regulations and the number of unemployment applications?

I talked recently to a business owner who had previously employed 150 people in a manufacturing business.

He now employs 25, and one of those is a full-time compliance officer, so he doesn't fall afoul of any of the hundreds of regulations controlling his ability to provide jobs.

I have a theory: my theory is that there is an inverse numerical correlation between the number of words in government regulations and the number of jobs in the regulated sector.

Does anybody have a slide rule? Maybe an abacus?

It would make an interesting study.

Oh, yeah. Do you think a bankruptcy lawyer likes to see high unemployment numbers?

The answer is no.

Consumer confidence is at its lowest ebb since the great recession's depths, according to a CNN story by Annalyn Censky.

And why not?

Unemployment is huge, with the official number hovering at 9.1%.

But everyone who has boots on the ground and at least one friend knows perfectly well that the real unemployment numbers are higher (remember, the U-6 Official Measure of Unemployment is 16.8%, which is overwhelming).

And the real unemployment situation is far, far worse than that.

Because the unemployment figures don't reflect the fact that people who were earning a hundred and fifty thousand a year a few years ago are now earning $12 per hour, with no benefits.

And even though the official inflation numbers are quite restrained, if you go into a grocery store you'll figure out that those official numbers are officially...cooked, you know?

Now, I have a lot of respect for the opinions of ordinary people, because I are one.

And if consumer confidence is at the lowest point since the Great Recession, you know this for a fact: there was never a question about a double-dip recession.

It's never gone away.

How do I know?

I just count the people coming into my office, and look at the price of coffee, and then look at the price of a car in a 1975 magazine and compare it to the price today.

Things are bad, and I hope they get better fast.

But any attempt to fool consumers into spending money they don't have to bail out the economy when that's economic suicide for consumers isn't going to work.

Consumers are pretty smart.

So, you've figured it out, right?

You're never going to get to retire.

There are articles like this one by Rachel Louise Ensign in the Money Section of WSJ which suggest that some seniors may need to keep working.

My scientific analysis of this situation tells me that the actual number is going to be much, much closer to "all" than "some".

And that's because inflation is raging, and jobs are in short supply, which means there are more applicants than jobs, which in turn means that when you do find a job, you'll be working for peanuts.

Don't get me wrong; peanuts are nutritious, and even though they are actually a legume, they're nutritionally similar to tree nuts.

No kidding.

And I'm also not kidding about my entire generation having the privilege of continuing to work for a very long time.

Now, experts in retirement sometimes suggest that you enter into retirement debt-free.

How to do that?

Let's talk.

I periodically get to listen to people talk about their money problems.

But not more than a dozen times a day.

And even though the current economic climate of unemployment and inflation is brutal, it affects different people in different ways.

For instance, some families come apart at the seams. Bankruptcy cases are often associated with divorces, before or after.

I don't handle divorce cases; I'm a bankruptcy lawyer, and have been for thirty years or so.

But I recently read a horrifying statistic: it suggested that in a quarter of suicides, money troubles were the precipitating cause of the suicide.

Now, I know that a change in circumstances is traumatic. In specific, I was interviewed for a television show recently and the guest who was on prior to me ran a job placement business.

He told me that a very few years ago, he was placing people in jobs that paid between a hundred and a hundred and fifty thousand dollars with frequency.

Then there were just no jobs available, period.

Then there were jobs, although not a lot of jobs; but they were all in the 12 dollar an hour range.

That's a pretty brutal drop; and the unemployment statistics don't begin to express the psychological brutality of a shift from a hundred thousand a year job to a 12 dollar an hour job.

Sometimes people have to start over, and they just don't want to do that. Because it looks to them as though there's no way out.

The bankruptcy laws, as amended in 2005, even have a tendency to punish charity, because the means test may make it hard to help support your unemployed, adult kids and yourself, and qualify for bankruptcy. Or not; it depends on the facts of the case.

But this much is true; where there is life, there is hope.

So if there appears to be no way out whatsoever, at least consider how much better you'll feel when you're debt free.

Hopefully, that will lift some of the depression that has caused more deaths than it should have; even one is too many, after all.

Even the sort of famous and the sort of rich can make a bad decision. The recent suicide of Real Housewives Russell Armstrong had an economic component because he was suffering economic hardship.

Remember, people. Suicide is forever. A bankruptcy is a big fat pain in the behind, but it comes, and it goes away, and then you may very well feel better.

Also remember; there are hotlines and other resources if life looks too bleak.

I guess I'm still typing because I'm afraid I've failed to say something that will keep one more person on the right side of the grass.

I'm stopping now; please remember that there are alternatives to ending it all if you're worried about your debt.

The Jefferson County Commission hired bankruptcy counsel.

It didn't make a decision to file a Chapter 9 Bankruptcy, but it hired a specialist who knows how to handle this sort of case, because Kenneth Klee worked on the Orange County Chapter 9 Bankruptcy Case about a decade ago.

It never ceases to amaze me that the simple act of hiring a serious, experienced, credentialed, and well-reputed bankruptcy specialist has effects.

Kinda like hiring a particularly fast gunfighter for your side of the corral.

See, when a litigator says that his clients are going to file bankruptcy, the usual response of opposing counsel is "Yeah, yeah, we've heard it all before."

But when those folks go and hire a real bankruptcy lawyer, that increases the chances of settlement dramatically.

And sometimes (not always) that means the bankruptcy doesn't need to be filed.

Also note that in consumer cases, the best show-and-tell exhibit for a settlement conference are draft bankruptcy schedules, meticulously completed.

On the other hand, once the potential debtor has filled out the schedules, that means they have also crossed a psychological Rubicon, and are much more likely to say "Forget the settlement; let's file!"

Have you ever wondered which, among the millions of bankruptcy cases filed in the United States, were the Top Ten Bankruptcy Cases?

Me, neither!

But The Hollywood Reporter has kindly listed the biggest and the baddest of the Chapter 11 Cases, and I was a little surprised by their Top Ten Bankruptcy List.

Note: when big bankruptcy cases get filed, people lose their jobs. There will be a huge increase in self-employed people in the United States until this depression goes away, and until the real levels of unemployment drop below 16%.

Now, I've been a self-employed ditchdigger, and I liked that far less than being a bankruptcy lawyer.

But second to being a bankruptcy lawyer is being a self-employed author. My guess is that many people in the United States will become e-authors and make millions of dollars in the eeezie-peezee world of e-books, now that my buddy Rick Cook has let that cat out of the bag.

And no, I don't get a piece of the action when he sells his new e-book entitled "Shift Happens".

But I may make him buy lunch!

I like to blog, and I was curious about WordPress as a platform.

It intimidated me at first, but after I played with it a little, I decided that I sort of like it!

Take a look at my Bankruptcy Crossroads Blog, and let me know what you think!

The Justice Department of the United States has stopped opposing same-sex couples filing joint bankruptcy petitions.

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!