If I File Bankruptcy, Will My Annuity Be Taken?

If I File Bankruptcy, Will My Annuity Be Taken?
By Casey Yontz – Bankruptcy Lawyer Mesa

If you have an annuity, and are fling for bankruptcy in Arizona, it is very important to seek the advice of an a bankruptcy Attorney in Arizona, because our bankruptcy laws in regards to annuities are complex.

There is new case law that was decided by the Bankruptcy Appellant Panel, at the end of 2010 (and is currently pending in the 9th Circuit Court of Appeals).  Here is a brief explanation of where everything stands now, and how your annuity could be affected.

To begin, it must be pointed out, that Arizona is a Federal bankruptcy exemption “opt out” state. What that means, is when you file bankruptcy as an Arizona resident, you must use Arizona exemptions. You cannot, in most circumstances, use Federal exemptions.

Arizona Revised Statute Section 33-1126(A)(7) states that an annuity is exempt if the following criteria are met:

“An annuity contract where for a continuous unexpired

period of two years such contract has been owned by a

debtor and has named as beneficiary the debtor, debtor’s

surviving spouse, child, parent, brother or sister, or any

other dependent family member, except for the amount

of any premium that is avoidable by a creditor as a

fraudulent transfer.”

On its face, the exemption appears very straight forward. That is, if you have an annuity, and someone related to you is listed as a beneficiary of it, it will be exempt, or protected from creditors. For years, that is how the exemption has been interpreted.

Since November 2010, however, the Bankruptcy Appellant Panel, for the 9th Circuit, decided that in order for the exemption to apply, the beneficiary must be a “dependent.” So, for example, if you have an annuity, and your adult non-dependent children are the beneficiaries of it, it would be subject to creditors, and the exemption would probably be challenged by the bankruptcy trustee.

If a non-dependent family member is beneficiary of your annuity, all is not lost. Other even more recent case law has determined that in some situations, an Arizona Debtor may use the more “debtor friendly” Federal exemption that would allow this protection, if the annuity is qualified by various sections of the Internal Revenue Code. The ability to use this exemption depends on the form of the annuity. Therefore it is very important to discuss this with your Mesa Bankruptcy Attorney.

If you have an annuity and are considering filing bankruptcy, you need to seek the advice of an Arizona Bankruptcy Attorney who has experience with this situation, because as you can see, this has become a complicated area of law.

Anyone considering filing bankruptcy should seek the advice of an experienced Arizona Bankruptcy attorney. Bankruptcy is not a “straight forward” process. Please don’t hesitate to call us to schedule a free consultation.

The Yontz Law Group, P.C. – 480-355-1377

Bankruptcy in Arizona – What is a 341 Meeting of Creditors, and What Can I Expect?

Bankruptcy in Arizona – What is a 341 Meeting of Creditors, and What Can I Expect?

The Bankruptcy Code maintains that every person or entity, who files for bankruptcy, must have a hearing with their court appointed trustee on the record and under oath. The purpose of the hearing is to gather information, clear up issues, and allow creditors a chance to be heard on the record, if they wish.

The name “Meeting of Creditors” is somewhat inappropriate however, because in most consumer cases (Chapter 7 & Chapter 13) creditors rarely attend this hearing. In fact, of the literally hundreds of consumer bankruptcy 341 hearings I’ve served as attorney of record on, I’ve only had a creditor attend a hearing twice. The first was for something personal (client owed a friend money) and the second, the creditor’s attorney simply entered their appearance. This meeting should be renamed, the “Trustee Hearing” which is what we call it anyway.

What will be asked?

The trustee or the trustee’s attorney assigned to your case will conduct your hearing. They will first look at your ID and Social Security card to be sure that you are the Debtor.  If you forget either one of these items, your case will be continued, and you’ll have to come back another time.

You will be sworn in. The trustee will ask you to raise your right hand and swear to tell the truth, under penalty of perjury.

The following are the most typical questions asked:

  1. Please state your name for the record
  2. What is your address?
  3. What is a good day time telephone number?
  4. Have you lived in Arizona for the better part of 180 days before the filing of your bankruptcy petition?
  5. How long have you lived in Arizona?
  6. Have you filed bankruptcy before?
  7. Are you personally familiar with all the information listed in your petition and statements?
  8. Does it list all your assets?
  9. Does it list all your debts?
  10. Do you owe anyone child support of spousal maintenance?
  11. Are you entitled to an inheritance of any kind?
  12. Are you expecting an award from a law suit?

At the end of the hearing, the trustee will ask if any creditors are present. 99% of the time there are none. The trustee may also ask something specific about your case. For example if any documents are missing, the trustee will ask for them (usually a bank statement or the like). In most cases, the trustee hearing is very straight forward.

Most law firms designate an attorney (usually a new attorney) to go to your hearing with you, regardless of whether that attorney worked with you on your case or not. I disagree with this practice.  An attorney who has never seen your file until the hearing, has no business representing you there.  Even though the 341 hearing is straight forward, the attorney you worked with, or an attorney who has personal knowledge of your case, should be there with you in the event of an issue arising.

How Do I Protect a Co-Signer? Will Chapter 13 Bankruptcy Protect My Co-Signer?

How Do I Protect a Co-Signer? Will Chapter 13 Bankruptcy Protect My Co-Signer?

Of course, many people have co-signers on a car, truck, ATV, etc. When faced with a period of economic hardship, many will not even consider bankruptcy when they have a co-signer on a debt. This is because, it is the common perception that bankruptcy will not protect a co-signer, and said co-signer will be left “holding the bag.” This is NOT TRUE. Bankruptcy can indeed protect a co-signer.

NOT CHAPTER 7 BANKRUPTCY – If you file Chapter 7 bankruptcy, the creditor can proceed against your co-signer, according to the terms of the original contract that you and the co-signer entered into, once the bankruptcy is over. If one of your major concerns is to protect a co-signer, then you should consider Chapter 13 bankruptcy.

CHAPTER 13 BANKRUPTCY CAN PROTECT A CO-SIGNER. You can protect your co-signer to the extent that the Chapter 13 payment plan proposes to repay the debt, and if certain conditions are met. The debt must be a consumer debt, that wasn’t incurred pursuant to a business transaction, and the co-signer cannot have been the sole benefactor of the debt.

If you file Chapter 13 bankruptcy, as long as you are making the required Chapter 13 planned payments, creditors cannot collect, or even attempt to collect from the co-signer. The purpose of this provision of Chapter 13 is to allow you to repay the debt without creditor pressure.

At the Yontz Law Group, we are more than happy to meet with anyone to explain their options. Contact an experienced Arizona Bankruptcy Attorney here.

Contact the Yontz Law Group, for a free consultation with a bankruptcy attorney in Phoenix, Mesa, Gilbert, Apache Junction, Chandler, or throughout the state of Arizona 480-355-1377.

Bankruptcy and Credit Card Debt

Bankruptcy and Credit Card Debt

As a bankruptcy attorney in Arizona, one of the most common problems I’ve seen in the hundreds of bankruptcy cases I’ve handled is credit card debt.

I would estimate that in 9 out of 10 cases I handle, there is a significant amount of credit card debt owed (anywhere from $10,00 to $100,000). It’s nearly impossible for the person/couple to pay off these cards, because of a changed financial situation and the high interest rates that a lot of credit card companies charge.

I often wonder how credit card companies expect people to ever pay off a card at a 20% – 30% interest rate, which is often times the rate I see. It just doesn’t make sense. (I often also wonder why the creit card company recklessly allowed such credit).

When a client has a significant amount of credit card debt, and other non-secured debts (e.g. personal loans, medical debt, etc.), I first see whether or not the client, based on their income and family size, will qualify to file for Chapter 7 bankruptcy protection.  Chapter 7 bankruptcy, virtually wipes the slate free of credit card debt, and other non-secured debt. It is a “one and done” filing, and not a re-payment plan like Chapter 13 bankruptcy.

Chapter 7 is perhaps the most useful tool someone with primarily credit card debt, or other unsecured debt, can use to discharge their debt, and start over again.

If you have a lot of credit card debt, you don’t have to work the rest of your life to pay high interest rates. You have options. Here at the Yontz Law Group, we are more than happy to meet with anyone to explain their options. Contact an experienced Arizona Bankruptcy Attorney here.

Contact the Yontz Law Group, for a free consultation with a bankruptcy attorney in Phoenix, Mesa, Gilbert, Apache Junction, Chandler, or throughout the state of Arizona 480-355-1377.

If I Short Sale, Will I be Liable for the Difference of the Sale and What I Owe???

If I Short Sale, Will I be Liable for the Difference of the Sale and What I Owe???

If your home is “under water” or “upside down” and the lender approves a short sale, the difference of what you owe on the note (your loan) and what the home actually sells for, is waived by the lender, unless you agree to be responsible for it.

For example, assume you originally bought your home for $200,000, and now it’s worth $100,000. The lender approves a short sale, of $100,000, making the short sale difference $100,000. After this sale closes, you have no liability to the lender for the $100,000 short sale difference, unless you agree to pay the $100,000 back to the lender.

If you’re short selling, you MUST READ THE SELLER APPROVAL DOCUMENTS CLOSELY. Be cautious of what realtors are telling you. Remember, they are not attorneys. If you are considering a short sale, it is always recommended that you seek the advice of an experienced attorney in Arizona, who is familiar with this area.

Restoring Your Credit Rating After Bankruptcy

Remember that the financial circumstances that lead to the bankruptcy filing are what damaged your credit. The fact you filed bankruptcy stays on your credit report for 10 years, and it becomes less significant the further in the past the bankruptcy is.

The truth is, post bankruptcy, you are probably a better credit risk after bankruptcy than before. If you are proactive, there is no reason why you cannot get back into a great credit score within 1 to 2 years time.

Two years after a bankruptcy discharge, debtors in Arizona, and most of the country are eligible for mortgage loans on terms as good as those of others, with the same financial profile of those who have not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past

A few recommended actions to help rebuild your credit post bankruptcy:

Rule of thumb, always be aware of your financial situation moving forward. Remember what got you into financial hardship before.

Save. Open a savings account, be a regular saver. Take a percentage of your paycheck and make yourself put it away.

RESIST! The urges to buy things you don’t really need!

This may sound easy enough, but pay all of your bills on time. No exceptions.

Talk to your banker, and tell them you want to reestablish your credit. A good banker should be able to help you find ways to do this. Perhaps he/she will suggest something that you’ve never thought of.

You will get solicited by credit card companies to take out a credit card. They know that you have time limits to file bankruptcy again, and are therefore not as much of a risk. Be careful because the interest rate might not be the best. You may want to take out a card with a decent rate and keep a small balance on this card. Make sure you pay off what you spend on it every month. One of the things that helps your credit rating is having credit available that you’re not using. That’s why you should have a small balance on the card, rather than a 0 balance.

Get a copy of your credit report. Usually credit accounts that are absolved with your bankruptcy are not removed from your credit report immediately.

Have derogatory credit items removed from your credit report. Sometimes items discharged in your bankruptcy can be removed from your credit report. Send a copy (not the original) of your bankruptcy discharge papers along with a letter to all 3 of the credit bureaus asking them to remove these items.

Have a strong documented rental history. Underwriters (the people that actually sign off on your loan’s approval) will look very hard at how you have paid your rent as they are going to replace it with a mortgage payment of equal or greater size. It is very important to be able to document your rent payment history very specifically.