Arizona Bankruptcy Attorney Blog

Many people can't make up their minds whether they should file a bankruptcy, but they can't make payments on their credit cards and pay for their mortgages, so they stop making payments on the credit cards (because, after all, the roof over your head is important when the weather starts hitting 117 degrees!).

Or they get fired, can't pay their credit cards, but won't qualify for relief under Chapter 7 of the Bankruptcy Code and the Means Test, because the Means Test is a six-month rolling look-back.

In both cases, people are curious about the date when they'll get sued by credit card companies and banks.

The answer is: it depends.

Some people go years without being sued, and some are sued three months after they stop making payments.

The reason is that internal lender policies determine when a credit card company will sue you, and those internal policies are subject to change over time.

Some companies are very quick on the trigger, and some are pretty relaxed and easy-going.

Frankly, it always surprises me when credit card companies sue, because that virtually guarantees that the defendant is going to file a bankruptcy.

And since the credit card company has to pay a hefty filing fee for the privilege of suing in an Arizona Court, it seems counterproductive to me for a credit card company to be quick on the trigger.

But some are, and some are not, and some are fast in one case, and slow in another.

Bear in mind that the statute of limitations is pretty substantial for unsecured credit card debt in Arizona, so that the plan of out-waiting a creditor is generally not a smart idea.

And when a credit card goes stale, the bank will generally sell the debt to somebody further down the food chain for pennies on the dollar, and they retail the bundle of debt further down the food chain, and eventually suits are filed by somebody.

And if they aren't filed quickly, they frequently get filed just prior to the lapse of the statute of limitations, because by then high interest rates and penalties, and fees on the fees on the fees, have transformed the ten thousand dollar debt into a seventy-five thousand dollar debt, and it makes more sense to sue on that amount, in any case.

But don't wait until you're sued to talk to me; and certainly don't wait until you're being garnished!

When should you talk to me?

On the first day you even consider taking money out of your retirement funds to pay your unsecured debt.

Seriously.

I just read a perfectly good general discussion of bankruptcy filing increases, and the reasons that the author believes that bankruptcy rates are rising.

I liked the article just fine. Sure, I disagreed with the semi-snide remark that the stigma of bankruptcy is mostly gone, because every day of the week I get to hear people sob their hearts out, because they've finally spent the last cent of their savings to pay credit card debt, and now their shame about bankruptcy is gone only because they have no choice. It's bankruptcy or cat food, or in some cases, bankruptcy and then an upgrade to cat food.

It does have a pretty good balance of omega 3s, and a good amount of protein, after all.

And by the way, as to strategic defaults, that's a scarecrow invented by mortgage companies and banks, and they should be ashamed of themselves for slandering the people who lost money on a consumer real estate bubble that those same mortgage companies and banks profited from and encouraged! That's simply a way of blaming the victim to make themselves look less...guilty, you know?

But it troubles me when I look at a title and then look for the information promised by the title only to discover...it's not in there!

Don't get me wrong; the guy writes well, and he's a smart guy, and I absolutely agree with his conclusions that people should have insurance against the disasters that can wipe out a nest egg, and that you should know the exemptions in your state, as well as the Federal Exemptions.

But when I dive into an interesting title, I want to see the information that I'm looking for someplace actually in the article!

p.s. I've been a bankruptcy lawyer in Arizona for thirty years, and I know, with the certainty that comes only from vast, deep experience, that nobody files a bankruptcy for fun. That's a cruel slander of people who have been hurt badly by fortune, by the economy, or by events in their lives like divorce and cancer. To try to make them seem to be the bad guys in this story makes me a little...testy.

You know?

p.p.s. Note that sometimes it's not the author who provides the teaser title to get you in; the bad guy in this story may be the editor! 


  

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Automobiles use up more time in a Consumer Chapter 7 Bankruptcy than they should.


Prior to the Barf Act of 2005, a debtor could use "ride-through" to hold onto a car that did not exceed the exemption limits (and could pay the bankruptcy trustee a lump sum to settle with the trustee if it did exceed the exemption limits).

Remember, in a Consumer Chapter 7, after you pass the swinging pendulum blades of the Mean Mean Means Test, you still have to decide what to do with the car.

You will have filed a statement of intentions, and you may or may not have indicated that you want to reaffirm on your car.

Now, the law is one thing, and local practice is another.

To see how it often gets handled in Bankruptcy Court in Arizona, take a look at my educational bankruptcy video, "Unexpected Compassion". 

And bear in mind that the treatment you get may be like that, or it may be different, because there are fewer guarantees in Bankruptcy than before the 2005 Amendments.

Think "none".


  

The concept of the strategic default is kind of silly.

Every economic action by economically rational individuals is "strategic" unless they've had too many Martinis. Which is part of the Las Vegas strategic approach to milking the wallets of people at the slots.

But it's also been suggested that anti-deficiency statutes "embolden" consumers to walk away from their houses.

Just so you know, I have a box of tissues on my desk. The most common reason the tissues get used is the realization that the debtor's house is history. Ordinary citizens aren't "emboldened" by statutes; they read statutes so they can make informed decisions.

Even Hammurabi understood that. Hence the Code of.

But here's a nice discussion of the anti-deficiency statutes in Arizona; they are a bit on the convoluted side, and as this article points out, no single strategy fits all, because of the convolutions.

And because the statutes are convoluted and funky, making decisions based on them is always a little more problematic than anybody would like.

I'll post the most recent versions of those statutes when I get a Round Tuit.

We have a free-market system here in the United States.

Sorta.

When a command economy is in charge of things, it responds slowly and awkwardly to events and needs to grab other people's money on a regular and increasing basis to function: recall the Soviet Union, for instance.

Here in the United States, we won the Cold War for one simple reason: they had a top-down command system, and we had a bottom-up market system. We produced our way to victory in the Cold War.

That was then, and this is now.

So even though the United States is today the bastion of liberty and wealth for the rest of the world, increasingly large portions of the economy are coming under the control of a top-down command system, including the medical-care and insurance segments of the economy.

A market system ultimately produces the most wealth and the most happiness for the largest number of people for a simple reason: resources go where they make people the happiest. We know that because when people vote with their wallets, like they do, they'll buy the things that makes them happy, and make decisions not to buy the other stuff.

A government that makes decisions based on the lobbyist with the biggest contribution or the best photo-opportunity will not result in the most happiness for the most people.

Why am I so sure that a free-market economy works to make people richer and happier? Well, Cubans keep trying to make in into the United States; U.S. citizens, in general, don't want to make it into Cuba, unless they smell opportunity for real estate development or cigar production and sale.

Now, almost by definition, politicians are lousy businessmen, because they aren't businessmen at all.

And since Rome, giving stuff to some people, when you took it away from somebody else on some theory or another, has been a great way to buy votes.

However, if you promise to give away money you haven't swiped from somebody else yet, that may make you, you know, insolvent.

See California and Illinois, which have promised to give gigantic amounts of money to retirees from money it didn't have.

And those states are now looking down the barrel of insolvency because of terrible decisions made by politicians, who were throwing promises of retirement money at people in order to buy votes.

Individuals in a free market are supposed to make decisions to maximize their own economic positions. It's part of the structure of a free market economy.

And at this point, the Federal Government of the United States is making a fair amount of noise about punishing people who have made rational economic decisions to walk away from homes that have become black holes in their wallets.

And if, as I expect, the Federal Government bails out both California and Illinois for making decisions to give away money that they didn't have, and punishes individuals for making good economic decisions, that will give rise to one inescapable conclusion.

That the Federal Government likes bad economic decisions, and dislikes rational economic decisions.

And if that scares you as much as it scares me, well, you must be paying attention!

And one issue as a practice pointer is the following: will a Federally-obtained deficiency judgment be subject to a discharge in a bankruptcy?

Well, as of today, I would expect it to be.

But that's for today.

So now I can see one more possible reason to file a bankruptcy sooner rather than later.