Arizona Bankruptcy Attorney Blog

We tell clients this repeatedly.

Why mention this? It's simple: If a creditor (like a bank, for instance) has direct access to your bank account (as banks often do), then you can consider your checking balance dumped into the rancor pit as your creditor laughs their trademarked Jabba the Hutt laugh above you.

You know...

The pit? The one with a Rancor in it? From Star Wars?

Okay, let's put it this way then: If you owe money to a bank where you also store money in a savings or checking account, there's all kinds of technicalities that allow them to siphon the money out of your account without your knowledge or approval. If you owe money and have not made payments they will seize the opportunity, it's a proven fact. It is what they do.

If you're already filing a Bankruptcy then you may have glossed over some of the information you've been given because there's a lot relating to a bankruptcy that's occasionally hard to digest. This isn't one of those things you can sit around to consider; this is an immediate call to action that should have you setting up a bank account elsewhere ASAP.

You can't afford to wait for someone to remind you that you might want to keep your money, so take care of it before the bank makes it a moot point.

If you're still looking into your options to resolve your financial issues and Bankruptcy is on the list, you MUST keep this in mind. DO NOT bank where you owe money if you are filing a Bankruptcy in Arizona (or anywhere else for that matter), because the bank will swim around in your funds like Scrooge McDuck in his money bin, take photos of themselves with YOUR money and leave a bunch of zeroes lying around in your account.

In order to file a Bankruptcy, you'll have to stop paying your creditors and that includes credit cards. Often people will hesitate because they've worked so diligently to protect their credit score and bank accounts to date that doing things like not paying sounds ludicrous or dishonest. If you have misdirected feelings about protecting an unsecured creditor (this counts for ANY unsecured creditor) you need to stop paying them anyway prior to filing because failing to do so means that creditor will be sued by the trustee, which is a bigger hassle for everyone involved. Even the creditor that you were trying to protect.

If there's just one thing you take to heart from this, let it be that you won't be banking where you owe money when you file Bankruptcy. You need a bank account just on general principle, but you need a bank you can rely upon to store money instead of taking it.

It just depends on how much you care about keeping your money.

The poor folks in Harrisburg, PA have had it pretty rough.

Massive flood damage that led to an exodus of over 10,000 people, huge unemployment and a big investment that never panned out.

They are taking the matter into their own hands in dealing with over 300 Million Dollars in debt.

There appears to be some dissent in the ranks, including the Mayor who insists that the city council went over her head and that the Bankruptcy is going nowhere.

More as it develops!

I ran into an article indicating that there are benefits to be had if you charge some kinds of transactions on your plastic.

Remember, though: don't charge things on your credit cards within 90 days of filing your bankruptcy. That's because of a presumption of non-dischargeability if you do!

Putting it another way, don't use your credit card within 90 days of the filing of your bankruptcy! Not only does it look bad, but you'll probably get to pay the charges within the 90 days back!

The practice of running up credit card amounts has been referred to as "loading up" by experienced bankruptcy lawyers for many, many years. Try to avoid it!

It never ceases to amaze me how much credit card companies are doing to send me business.

Let's think about this for a minute; I'm a bankruptcy attorney in Arizona, and people of all sorts come to me when they reach the conclusion that their debt is overwhelming.

And now major banks announce that if you miss a payment, they'll run interest at 30% on your account. Forever.

Now, with unemployment at record levels, and inflation at 10%, and gas prices through the roof and rising, I'm impressed by the "let's pile on" mentality of the banks.

And it used to be that if a lawyer sent another lawyer a client, a small gift might change hands; a box of candy, or a box of cigars, or a bottle of scotch.

I just can't think what I should send to the banks as a "thank you" gift for sending me so many clients.

I know!

I'll find some of those valentine-shaped boxes of candy, and send those to the banks.

Because, after all, the banks are clearly in need of...a heart.

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".

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.

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

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

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

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

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

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

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

 

The Federal Trade Commission protects you by explaining the mandatory pre- and post- consumer credit counseling classes.

Feel safe yet?

 

So does it help to sue a creditor for harassment?

Here is a smart Judge discussing the standards and the law for one such claim.

Sometimes it doesn't pay to try to do the right thing, and to offer a deal, and filing a bankruptcy works better; serves 'em right, too!

This only applies if you're one of our heroes in the military, but I read it and wanted to spread it around.

And if you are one of those underpaid, under-appreciated heroes, and you're in harm's way, all I want to say is, God bless you and keep you safe, and reunite you with your loved ones soon!


 

I touched on this issue recently.

Your bankruptcy filing will stay on your credit report for a long time. It may be a decade, and if you file a Chapter 13, it may be longer, because your case will last five years in cases in which you didn't pass the Mean, Mean Means Test.

Now, I'm not a credit expert; I'm an Arizona Bankruptcy Attorney.

But the topic of credit repair comes up in my office from time to time, because that's a topic that relates to your life after bankruptcy.

And every now and then I get to talk to somebody who is a professional in the mortgage industry, who needs to scrape off two hundred thousand in debt, or twenty million, depending on the day.

While I'm not a credit expert, those guys actually are, because they get paid when they find a way to get somebody a new mortgage.

So I ask them questions, the same way I quiz somebody who visits me and works as a telephone bill collector, or a credit manager at a car lot, because I want to know what they can tell me about conditions at the front lines in the Debt Wars.

And the last series of mortgage guys I talked to were consistent in the songs they sang; they told me that some banks wouldn't play, but that in general it took two years after a bankruptcy until somebody would qualify to buy a new home, if their income and other metrics met the relevant standards.

If I were filing a bankruptcy tomorrow, I would first get ten books from Amazon with titles like "How to Develop a Super-Powered Credit Score" (note: that's only an example; as far as I know today, a book with that exact title does not exist).

Then I would read them and relentlessly execute the plan that emerged from the ten books.

And after I filed a bankruptcy, and made some surplus income, I'd save like a crazed weasel, because retirement is good.

But that's just my suggestion; feel free to ignore that, and save, or not.

Your choice!

I only wish.

Putting it a different way, people have a remarkably high tolerance for harassment, annoyance, and depression. They often deeply feel that their current inability to pay on a regular basis as a personal failure, and so they see being punished by extremely persistent bill collectors as a reasonable thing. 

Some folks deserve more compassion than others.

Generally, they were playing "ostrich" while their creditors were playing "blitzkrieg".  That's a bad mismatch. They had their pockets picked by judgment creditors who garnished entire bank accounts, as well as 25% their net salaries (if the creditor is a garden variety creditor, and not owed child support, for instance).

Ordinary, garden-variety judgment creditors can only garnish a maximum of 25% of your net wages, and the Judges who preside over the garnishment paperwork aren't unkind; if you ask them (by checking a box and showing up at a hearing), they will usually reduce the amount being garnished to 15% on the basis of "hardship", which it is, of course.

Of course, if you didn't pass the means test, maybe that extra 10% garnishment is a good thing!

Sometimes your evil creditors (one word) can be your best friends, if you are just a smidgen over the means test; after all, if a judgment creditor is garnishing 25% of your net, and you were a hundred dollars over the means test, that suggests that you'll be able to file a bankruptcy soon!

So congratulations on your garnishment! Now let's make it go away, right?


 

Let's consider this for a few moments.

If you need to file a bankruptcy, you need to file a bankruptcy.

If you need to file a bankruptcy, you are often the subject of a trustee's sale, a lawsuit or five, and at least a million harassing creditor phone calls.

Do you think you have good credit after you start getting the phone calls from credit card companies? Or after your first lawsuit? Or after the trustee's sale gets going?

Now, I'm not a credit expert. There's enough for me to try to stay current on in connection with Arizona Bankruptcy Law without trying to learn an entirely separate and different area of law.

And I don't want to be a credit expert! My clients have told me, over the years, how much they hate the companies that they have hired to do credit cleanup, and I don't want to be hated! They hate the companies that do credit cleanup, by the way, because they take too much time and do an inadequate job, at least according to my clients.

But I know this much about credit: the rules change from time to time, and the fact that you need to file a bankruptcy means that you need to file a bankruptcy (I have talked from time to time about the Joseph C. McDaniel Rule of Bankruptcy Inevitability in this blog).

Everybody has emotions about something (you heard it here first).

With some folks, it's the diamond ring. With some, the Harley-Davidson. With some, the house (fewer of those lately; I think people are figuring out that a long term commitment to a house that will always be underwater makes little economic sense).

And some people have emotions about their credit scores.

Many people start their discussions with me by telling me how much they used to make and how high their credit scores used to be.

And I usually tell 'em it doesn't matter; I love 'em no matter how much they make, and no matter what their credit scores may be.

But instead of fearing the result if you file a bankruptcy, displace fear with knowledge!

Spring for a few books on Amazon about how to clean up your credit, and figure out how long it takes after a bankruptcy to get great credit.

Clients coming back after their bankruptcy discharges have told me that it took them about a year to get a score high enough to get a great rate on a car, and others have told me that it took them two years to be able to get a new mortgage.

That may have changed, because the rules change.

But if those are important to you, talk to a car salesman and then to a mortgage broker, bearing in mind that they use (shudder!) closing techniques, and they'll try to sell you stuff just because you're standing next to them; they can't help it!

Or go to Amazon and get ten books on credit repair, and replace your fear with knowledge!

A new batch of videos has started coming back from Marius, and I really like the quality of the videos he's put together for me.

This one is about pre- and post- consumer credit counseling, and I guess I slip and release the secret: I think it's dumb as a stump.

But you have to do it anyway, before we plan to file for you, or I can't file for you!

And you have to do it right after we file for you, or you won't get your discharge!

Sure is another pain in the neck!

And here's the video: