What is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy in Arizona

Chapter 7 bankruptcy is probably the most frequently filed chapter of bankruptcy in the District of Arizona. An individual or entity filing for chapter 7 or the “Debtor” is usually seeking a discharge order from the court, which essentially bars any creditor from attempting to collect on qualified debt. The chapter 7 discharge applies to Unsecured debt. Which is most credit card debt, medical debt, personal loans, some tax debt, payday loans, etc which are not secured by property.

Chapter 7 bankruptcy is often referred to as straight forward or simple. It’s not. There is no such thing. The fact is, it can one of the most complicated chapters of bankruptcy in, especially if there are assets involved, there is a business involved, or if the individual’s income level is too high or possibly too high to receive a discharge.

There are many things to be careful about when filing a chapter 7 case. For example, you are only exempt a certain amount of equity in your home, in your car, and other personal items you may own. Your income is a major factor in determining whether or not you can qualify for chapter 7 bankruptcy. Your retirement accounts must qualify if they are exempt. If you have a potential law suit, it could become property of your creditors. You’re only allowed to have certain amount of cash on hand on the day you file. The list goes on.

In any event, Chapter 7 is more complicated than one may think. It absolutely essential to use an attorney when filing chapter 7 bankruptcy, or any chapter of bankruptcy.

If you have questions about bankruptcy or the bankruptcy laws in the state of Arizona, please feel free to contact us: 480-355-1377

Taxes and Bankruptcy

I’ve been doing this job for quite a while now and have talked to countless potential clients and debtors. In my conversations with potential bankruptcy debtors, a common topic is the misunderstanding of how taxes are treated in bankruptcy.

Most people I discuss bankruptcy with are under the impression that there is no way to get relief when it comes to taxes. This is simply not the case. In fact, in some situations it is possible to get 100% relief from taxes owed, of course, depending on the circumstances.

There are many options for tax releif in bankruptcy. It’s possible to disharge tax debt, it’s possible to pay a portion that is not dischargible and discharge another portion. There are many different scenerios and options.

They say you can count on death and taxes. Yes you can count on both, however, you may be able to escape one, and not the other. If you take anything away from this post, it should be that when it comes to taxes in bankruptcy, there are options. It is very case specific as to what those options are. So if you’re considering bankruptcy and have taxes owed, give me a call and we’ll figure it out.

 

 

Bankruptcy – Family Members as Creditors

Most often, I write about bankruptcy issues when I see a debtor in a problem that if dealt with properly before a bankruptcy case has been filed, could have been avoided.

Today was one of those days. At the mundane 341 meetings, I saw at least 2 debtors walk blindly into the trustee’s question; “have you recently paid back a family member for a debt?” Both times the debtor got nailed, and they didn’t even know it. The attorney’s silent cringe, and the trustee’s “gotcha” facial expression told all. At least to me. But I’ve been doing this for way too long. The debtor had no idea. Their thinking was probably that is was ok to pay a family memebr for a debt before filing. But it’s not.

I can only assume their attorney either didn’t deal with the issue pre-filing, or had no idea of it. But as an attorney, this is something that you can’t avoid knowing. So I can only assume that in-experience was the issue.

Payments to family memebrs before bankruptcy is an issue in bankruptcy that if not addressed appropriately pre-filing, could cause big problems, and it probably did for this debtor, because the amount paid was large.

The payment to family member problem raises a few issues in bankruptcy. At the top of this list is: 1. is you family member a creditor? The second: 2. Is it going to be a problem that you paid them instead of your other creditors. 3. If you paid them a lot, where did you get the money?

First, your family member is considered a creditor in the eyes of the bankruptcy court. They will be treated just like Wells Fargo and Chase.

Second, it is an issue if you paid your family member back a debtor before you filed your bankruptcy case. All creditors in bankruptcy must be treated the same. So if you’re paying your Uncle Bob back instead of Bank of America, there is a problem. If you did this within a certain time period and then filed, there is a chance that every dime you paid your Uncle Bob could be reveresed by the court, and then divided evenly amoungst your creditors.

I cannot stress enough that these are issues that can be dealt with before filing your case. If you have this sort of issue, you need to talk to an experienced bankruptcy lawyer. Today I saw 2 different lawyers that let their clients get nailed with this. Now these clients are probably going to have to cough up all the money they paid their family member.

Don’t let this happen to you. Be honest and forthcoming with your lawyer, and make sure that the bankruptcy lawyer you choose has lots of experience in bnkruptcy.

Call us for a free consult. 480-355-1377.

 

Inheritance and Bankruptcy

There are many different chapters of bankruptcy therefore there are many differnt ways that the bankruptcy court will deal with a debtor who is inheriting from a will, trust, or estate. One should absolutely discuss inheritance or the possibility of inheriting with their bankruptcy attorney. An inheritance could be at risk of being attached by creditors.

The most common types of bankruptcy are chapters 7 and 13. In chapter 7, 99.9% of the time, the Debtor is looking to get a discharge order from the bankruptcy court which would relieve the Debtor’s obligation to certain debts. Most often than not, these debt’s are “general unsecured non-priority” debts. When you seek this type of relief, the bankruptcy court allows you certain exemptions, that is, items that may not be attahced by creditors. Inheritance does not get an exemption. If a debtor has or will inherit from an estate, will, trust within 6 months of filing for chatper 7 or 13, this must be disclosed to the bankruptcy trustee appointed to the bankruptcy case.

The worst case scenerio is that a creditor, or creditors will attach a debtors entire inheritance. This unfortunately happens when a Debtor is inadequately represented, or if a Debtor foolishly decides to represent him/her self.

Just this morning I had a phone call from a prospective client who filed chatper 7 representing themselves, and did not disclose the fact that they were intitled to inherit from an estate. The Debtor received a discharge, and the case was closed. Later the bankruptcy trustee had the case reopened, and is now looking to recover the inheritance. THis could have all been avoided had the debtor discussed the case with an Ariozna bankruptcy attorney.

If you have any concerns about inheritance and you are considering bankruptcy, TALK TO AN ATTORNEY who is experienced with the bankruptcy code.

Here at the Yontz Law Group, we’ve dealt with this situation many times and can answer any questions you have about bankruptcy.

Call 480-355-1377 for your free consult.

 

Bankruptcy – What is the Automatic Stay?

Bankruptcy – What is the Automatic Stay?

The automatic stay, is one of the most important functions of filing a bankruptcy case. The automatic stay is the protection that you receive from the US bankruptcy court from your creditors. The automatic stay, “stays” or “freezes” most creditor action when a bankruptcy case is filed.

For example. If your wages were about to be garnished, and you filed a bankruptcy case before the creditor had a chance to attach your pay, the filing of the bankruptcy case would stop the garnishment.  If you house was going into foreclosure, and you filed a bankruptcy case before the foreclosure date, the filing of the bankruptyc case would stop the foreclosure. Another example; assume your car payment was so far behind that it was about to get repossessed. If you file a bankruptcy case before the car is taken back by the creditor, the filing of the case would stop any repossession action by the creditor.

The automatic stay in bankruptcy is very powerful. Not only can creditors not take action such as foreclosure or repossession, but creditors cannot attempt to collect from you while there is a pending bankruptcy case. It is essential to bankruptcy and there are severe penalties for creditors who violate the automatic stay.

Like any rule, there are a few exceptions. For example with the automatic stay, sometimes it is not in effect if there are multiple bankruptcy filings within a certain amount of time.

At any rate, any one facing a foreclosure, repossession, wage garnishment, or even collection attempts, should consider contacting a qualified Arizona bankruptcy attorrney for protection. Please call us at 480-355-1377.

Chapter 13 Bankruptcy and Mortgage Arrears

Chapter 13 Bankruptcy and Mortgage Arrears

One of the major reasons people file for Chatper 13 bankruyptcy protection is because they are significantly behind on their mortgage payment. Sometimes the individual is expecting a foreclosure notice, sometimes they have already gotten one. Either way, chapter 13 bankruptcy is an excellent way to protect your house, and keep it out of foreclosure.

As soon as you file a chapter 13 bankruptcy case, your house is protected. So if you had a foreclosure date set on the house, as soon as you file, that’s null and void (unless there are recent multiple bankruptcy filings).

The process is usually that you file for protection, then immediately after, start making your regular mortgage payment. In chapter 13, whatever you are behind gets lumped together and put in a chapter 13 bankruptc plan. You will make a payment to a bankruptcy trustee. That payment will pay off the arrearage. So what happens is that when the plan is done, you are now current on your home.

Many enter into chapter 13 for various reasons. But is is an excellent way to save your home if you experienced a period of finanical difficulty and got behind on mortgage payments.

Feel free to contact our office if you have any questions about this. 480-355-1377.

Chapter 13 Bankruptcy and Vehicles

Chapter 13 Bankruptcy and Vehicles

Chapter 13 bankruptcy is an excellent way to keep your car and pay it off at a reasonable interest rate. Almost everyone has a car. And nearly everyone has a car payment. Sometimes we get that car we’ve always wanted and then wham! Something happens and we’re searching for a way to continue being able to afford that car.

If you’re in a situation where you’re struggling to make car payments as well as making ends meet, Chapter 13 bankruptcy is an excellent option to consolidate debt and get your car paid at a reasonable interest rate.

What happens in Chapter 13? Basically you pay your “monthly disposible income” to a bankruptcy trustee over a period ranging anywhere from 3 to 5 years. The money you pay to the bankruptcy trustee goes to creditors. What creditor gets what funds, depends on the nature of the creditor. In chapter 13 bankruptcy, secured creditors get paid before unsecured creditors. So if you had a vehicle loan and file chapter 13, the lender for the vehicle would be paid before, say, a credit card.

Let’s look at an example. Assume Bob has a car he’s owned for 1 year and owes the bank $25,000.00 at 9% for the vehicle. Assume Bob also has $50,000.00 in credit card debt. In this situation, Bob could file chapter 13, make a monthly payment to a bankruptcy trustee, and pay his vehcile off at a 4% interest rate, rather than a 9% interest rate. At the end of his bankruptcy plan, not only would Bob’s car be completely paid off, but the $50,000.00 credit card debt Bob had would be discharged as well. This works out great for Bob, because not only is he out of that horrible credit card debt, but he’s also paid his car off fully, and he’s only paid $2,622.35 in interest at 4%, rather than $7,034.61 in interest at 9%.

Note: I’ve seen many monthly chapter 13 plan payments that are less than the individual’s actual vehicel payment.

If you’re in a difficult financial situation and have a car that you don’t want to lose, consider all of your options. Consider Chapter 13 bankruptcy. Feel free to contact us for a free consultation with an Arizona bankruptcy attorney. 480-355-1377

Will Chapter 7 and Chapter 13 Bankruptcy Discharge Medical Bills?

Will Chapter 7 and Chapter 13 Bankruptcy Discharge Medical Bills?

I’ve been getting this question about bankruptcy a lot lately for some reason. So much so that I feel it’s time to write a blog post about it. I don’t know what bad information about bankruptcy is going around now, but I’ve had several clients and potential clients mention that they’ve heard recently that medical debt is not dischargible in bankruptcy. This is incorrect.

In bankruptcy, medical debt is considered a non-priority unsecured debt. As a result, a chapter 7 discharge would apply to medical debt. So if you file chapter 7 bankruptcy, qualify, and fulfill all court requirements, the discharge would apply to the medical debt. If you file a chapter 13 bankruptcy and successfully fulfill all court requirements and complete all plan payments, the discharge (assuming it wasn’t a 100% chapter 13 bankruptcy plan) would apply to your medical bills. Of course, all adversarial considerations would apply to any discharge. However, assumming that there are none, medical debt is absolutely dischargible in chapter 7 and chapter 13 bankruptcy.

Feel free to call 480-355-1377 to speak to an experienced Arizona bankruptcy attorney.

I’m Filing Bankruptcy, Can I Keep a Credit Card?

I’m Filing Bankruptcy, Can I Keep a Credit Card?

 

Basically, no. When you file bankruptcy, no matter if it’s chapter 7, chapter 13, or chapter 11, you must list ALL debts. You cannot leave any debt off of your schedules. ALL DEBTS MUST BE LISTED. Even if you owe money to a family member or friend, technically they have to be listed. The bankruptcy code mandates that all creditors be treated equally (depending on the class of the debt), and when you sign your bankruptcy petition, you do so under penalty of perjury, and stating that ALL debt has been listed.

 

 

Many are tempted to leave off a credit card, or some other creditor when filing bankruptcy. Don’t do it. If you want to pay a certain creditor, there is nothing wrong with making arrangements with the creditor once your bankruptcy is over.

 

 

Contact a qualified bankruptcy attorney if you are considering bankruptcy. Call 480-355-1377 to schedule an appointment with us.

Bankruptcy and Your Tax Return

Bankruptcy and Your Tax Return

 

It’s the most worderful time of the year. Tax season? Probably not. But it is the time of year that most of us are looking forward to filing returns and getting some money back for their hard work. If you’re considering bankruptcy, however, take a step back before you send the return to our Uncle Sam.

 

 

The beginning of the year is usually the toughest time for a lot of people. The holidays are over, and most have overspent. People in an already bad financial situation have usually made their situation worse during the holidays. A lot of times it’s the holidays that make people realize they should consider bankruptcy.

 

 

Here’s the conundrum, your tax return is at risk. Yes, you could lose your tax return if you hurry up and file bankruptcy at the beginning of the year. So what do you do if you need to file bankruptcy at the beginning of the year, and you’re getting a substantial tax return? Not to sound cliche, go see an experienced Arizona bankruptcy attorney. We’ve been dealing with this for years. Matter of fact, we deal with the same issue, every year, countless times. You don’t have to lose that return. There are several options for you.

 

 

Feel free to contact my office if you want to talk to a lawyer who has dealt with this issue more times than can be counted. Call 480-355-1377 to schedule a free consult with an experienced Ariozona bankruptcy attorney.