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.

 

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.

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.

Arizona Bankruptcy Explained – If I File for Bankruptcy Can I Save My House?

When you file a bankruptcy case you get what’s called the “Automatic Stay”, or automatic protection that halts creditors from taking action against you or any of your property (note that the automatic stay does not go into effect in some instances where there are multiple bankruptcy case filing within a certain period of time).

So while you may be able to stop a foreclosure dead in its tracks, whether or not you can save your house, rather than just delaying the foreclosure process, depends on a number of things. At any rate, the bankruptcy case must be filed before the foreclosure date, and the creditor noticed, in order to stop the foreclosure.

If there’s a foreclosure date and you’re filing a chapter 7, really all the chapter 7 can do is stop the foreclosure process temporarily. If you want to save the house, you will independently have to come to an agreement with the creditor, or pay back your mortgage arrears before you lose the protection of the Automatic Stay.

If there’s a foreclosure date and you file a Chapter 13 bankruptcy, your arrears are usually put into a chapter 13 plan, and paid off within a period of time, thereby saving the home.

By, Casey Yontz – Bankruptcy attorney in Mesa, Phoenix and Tempe Arizona

 

Series: Arizona Bankruptcy Exemptions Explained – Arizona Bankruptcy Homestead Exemption

The Arizona bankruptcy exemption states that a bankruptcy debtor(s) may exempt:

“Interest in real property upon which debtor’s house

 

sits, condominium or cooperative, mobile home, or

 

mobile home in which debtor resides plus the land

 

upon which the mobile home is located in the amount

 

of $150,000. May not be doubled by husband and

 

wife.”

This means that you may have $150,000 equity in your residence when you file bankruptcy, without having to turn any funds over to creditors.

Examples of how this works in the real world:

Example 1 – Chapter 7 and the Arizona Homestead Exemption.

Assume you own a home. Assume that home’s fair market value is $200,000.00 and you owe $150,000.00 to the bank on a first mortgage. This gives you exactly $50,000.00 in equity. In this example, if you file for chapter 7 bankruptcy protection in Arizona, you could claim the Arizona Homestead bankruptcy exemption for your home, and protect your $50,000.00 of equity.

Example 2 – Chapter 7 and the Arizona Homestead Exemption.

Assume everything in the example above, however, assume you own your home free and clear, with no mortgage. In this scenario, you would still claim your Arizona homestead exemption, and you would still be able to protect $150,000.00 equity. $50,000.00 would be left unprotected and available to creditors. The Result; either you would have to sell the house, keep $150,000.00 from the sale, and turn over $50,000.00 to creditors, or come up with some sort of acceptable payment arrangement of the $50,000.00 to your creditors.

Example 3 – Chapter 13 and the Arizona Homestead Exemption.

Assume everything in the above example. In this scenario, you would still protect the $150,000 you have. In this example, you would have 3 or 5 years to pay at a minimum, $50,000.00 in your Chapter 13 bankruptcy plan.

The Arizona bankruptcy homestead exemption is widely considered fair and perhaps generous compared to other jurisdictions. Bankruptcy being a theory of equity, the exemption is rooted in the policy that debtors should be able to maintain a standard living environment when facing harsh economic conditions.

By, Casey Yontz – Bankruptcy attorney in Mesa, Phoenix and Tempe Arizona

Bankruptcy Exemptions in Arizona: What is the Arizona Vehicle Bankruptcy Exemption?

Bankruptcy Exemptions in Arizona: What is the Arizona Vehicle Bankruptcy Exemption?

The Vehicle Bankruptcy Exemption in Arizona:

A.R.S. 33-1125(8) provides that a bankruptcy debtor(s) may exempt;

“equity in one car not greater than $6,000. If debtor (or

debtor’s dependent) is physically disabled, the fair

market value of the motor vehicle must not be greater

than $12,000. (Equity is the fair market value of the

motor vehicle minus debt to secured creditor).”

 

This bankruptcy exemption applies to the debtor, the debtors spouse, and the dependent (s) of the debtor(s). Both you and your spouse are entitled to one $6,000 exemption each, which can be used on two separate vehicles, or both used on one vehicle.

Examples:

Assume you and your spouse are filing a joint bankruptcy case in Arizona, that you have 2 vehicles, one valued at 5,500, the other valued at $6,000. In this situation, you both could use your vehicle exemption on each of the vehicles, and they would not be available for creditors.

Assume that you and your spouse have 2 vehicles one valued at $10,500, and another valued at 22,000, with $25,000 owed and a perfected lien on the vehicle for the amount owed. In this situation, both spouses could combine their $6,000 exemptions on the vehicle valued at $10,500, and would not have to use an exemption on the vehicle valued at $25,000 because there is a lien on the vehicle, giving them no equity in said vehicle.

Debtors need to be careful using the Arizona Vehicle Bankruptcy Exemption, and should always seek the advice of competent Arizona bankruptcy attorney.

 

By: Casey Yontz, Arizona bankruptcy attorney in Phoenix, Mesa and Tempe

Bankruptcy and Inherited IRAs

Bankruptcy and Inherited IRAs

In a recent US Supreme Court decision, the Court held that inherited IRAs will not be considered “retirement funds” and therefore exempt under federal bankruptcy exemptions.

The theory is that it is the policy of the court to protect individual retirement funds. Once these funds are transferred from the retiree the retiree’s beneficiary, they are no longer considered retirement funds.

It is still unclear whether or not such funds would be considered exempt if the beneficiary were the retiree’s spouse.

At any rate, those facing bankruptcy who have an inherited IRA or any other type of inherited retirement funds, should be very cautious when facing bankruptcy. Bankruptcy is a very specialized area of law, and therefore potential debtors should seek the advice of only experienced bankruptcy attorneys in their state.

by: bankruptcylawyersmesaaz.com