Arizona Bankruptcy Lawyer Blog

In 2011 The IRS created what they call a “Fresh Start Initiative” which is a series of new steps to help struggling taxpayers with their tax liabilities. In May 2012, the IRS expanded their Fresh Start Initiative by offering more flexible terms to its Offer in Compromise (OIC) program. These are the “New Programs” that you are constantly hearing about on the radio and late night ads from out of state companies that claim to know the “Secrets” of resolving your tax debt. The OIC program is designed to help the most financially distressed taxpayers to significantly reduce their tax liability. Some of the new terms announced in May 2012, include the following:

• Revising the calculation for the taxpayer’s future income.
• Allowing taxpayers to deduct payments to student loans.
• Allowing taxpayers to deduct payments for state and local delinquent taxes.
• Expanding the Allowable Living Expense allowance category and amount.

One of the biggest changes made to the OIC program changed how the IRS calculates a taxpayer’s reasonable collection potential. Before May 2012, the IRS would multiply a taxpayer’s disposable income by 4 or 5 years depending on the length of time it would take the taxpayer to pay off the offer. After May 2012, the IRS announced that if the offer could be paid in 5 or fewer months, then the taxpayer would only have to multiply their disposable income by 12 months, and if the offer would be paid in 6-24 months then the disposable income would be multiplied by 24 months. This change drastically decreased what a taxpayer would have to pay in an Offer in Compromise. Now if this sounds to good to be true, it just might be. One of the OIC requirements the IRS did not change when expanding their Fresh Start Initiative is that if the taxpayer can pay their tax liability in full through an Installment Agreement or within the statutory period, then the offer will be rejected. This essentially means that the IRS will initially multiply a taxpayer’s disposable income by at least 72 months, and if it shows that the total tax liability can be paid within that time then the offer will be rejected.

While the IRS’s Fresh Start Initiative programs are beneficial to taxpayers, they are not as “streamlined” as the IRS would like you to think. In any event, these programs do offer relief to tax payers from aggressive collection methods by the IRS and those who ultimately qualify for an OIC will be able to drastically reduce their tax debt. At Campbell & Coombs we offer a free initial consultation to see if these Fresh Start Initiatives can help. We will give you straight answers and go over all the options you have for dealing with your tax debt.

Joseph A. Smith has been appointed for a 3.5 year term to act as the Monitor for the National Mortgage Settlement. Mr. Smith served as North Carolina Commissioner of Banks beginning in 2002, and resigned from that position in February, 2012. As Commissioner, he oversaw the licensing and regulation of banks and thrifts. He also helped implement the North Carolina Mortgage Lending Act, North Carolina Secure and Fair Mortgage Licensing Act and State Home Foreclosure Prevention Project. While Commissioner, Smith also served from 2009 to 2010 as chairman of the Conference of State Bank Supervisors. He was an organizer and member of the Board of Managers of State Regulatory Registry, LLC, an organization dedicated to creating a nationwide mortgage licensing system. His Office of Mortgage Settlement Oversight will oversee the Settlement to ensure compliance by the Banks. For additional help in Arizona, please visit: http://nationalmortgagesettlement.com/states.

Here is more information on the historic National Mortgage Settlement with ALLY/GMAC, BANK OF AMERICA, CITI, JP MORGAN CHASE AND WELLS FARGO:

The settlement provides assistance for:

Homeowners needing loan modifications now, including first and second lien principal reduction. The servicers are required to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide.
State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.

Borrowers who are current, but underwater. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide.

Borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the OCC review process. $1.5 billion will be distributed nationwide to some 750,000 borrowers.

Where can you go for help?

For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers.

Ally/GMAC: 800-766-4622

Bank of America: 877-488-7814 (Available M-F 7am-9pm CT and Saturdays 8am CT - 5pm CT)

Citi: 866-272-4749

JPMorgan Chase: 866-372-6901

Wells Fargo: 800-288-3212 (Available M-F 7 a.m. to 7 p.m. CST)

Continue reading "NATIONAL MORTGAGE SETTLEMENT" »

In February of this year, the nation’s five largest mortgage servicers agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies. The settlement addresses past mortgage loan servicing and foreclosure abuses and fraud, provides substantial financial relief to borrowers harmed by bank fraud, and establishes significant new homeowner protections for the future. The settlement involves country’s five largest loan servicers: ALLY/GMAC, BANK OF AMERICA, CITI, JP MORGAN CHASE AND WELLS FARGO. Arizona is included in the settlement.
The National Association of Attorneys Generals provides an excellent summary of the Settlement on their website at naag.org. Some highlights of the web site summary are:

Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.
Servicers commit $3 billion to an underwater mortgage refinancing program.
Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
An independent monitor will ensure mortgage servicer compliance.
States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.
Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

We will be reporting more on his historic settlement in future blogs.

After many months of negotiation, 49 state attorneys general and the federal government have reached agreement on a historic joint state-federal settlement with the country’s five largest loan servicers: ALLY/GMAC, BANK OF AMERICA, CITI, JP MORGAN CHASE AND WELLS FARGO. Arizona is included in the settlement. The only state not included is Oklahoma. The settlement will provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It’s the largest multistate settlement since the Tobacco Settlement in 1998.

The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law. The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service. Certain homeowners whose homes were foreclosed on between January 1, 2008 and December 31, 2011 may be entitled to a one-time cash award of between $1,500 to $2,000.

We will be reporting more details on this settlement in upcoming blogs. In the meantime, be on the alert for scammers contacting you about having you hire them to obtain your settlement. Neither the banks nor the Attorneys General will charge a fee to speed your settlement. You should not have to hire anyone (lawyers included) to participate in the settlement.

In the years that I have practiced as a bankruptcy attorney in Arizona, one of the most common things that drives a client into my office in a state of panic is the threats he hears coming from collectors. In response to these fears I think it is important to separate fact from fiction.

Scenario: You are sitting at home watching a new episode of Grey’s Anatomy, trying to get your mind off your troubles for an hour or so. On the show, they have just wheeled a tragically injured single mother into surgery and just at that moment the patient’s vital signs begin to crash. You are on the edge of your seat, and you think to yourself, will McDreamy be able to save this poor soul or not, and if not, what will happen to her adorable, precocious two year old? All of a sudden your cell phone rings and you are so involved with the plight of the patient in this episode of your favorite show that you momentarily forget yourself and answer the phone (even though you have been purposefully avoiding answering all calls from any unknown numbers because you know you weren’t able to pay your credit card bills this month).

“Shoot,” you think to yourself, “I wasn’t supposed to answer the phone.” Of course, on the other end of the phone line is an angry guy shouting horrible things at you. He starts right in with shaming you and moves to insults. He never lets you get a word in edgewise. Anytime you attempt to explain or defend yourself, he is right there talking over you. He doesn’t care that you were downsized from your job and have been unable to find another one. He doesn’t care that you haven’t been able to afford food or pay your utilities either. His insults turn threatening and he begins to tell you that if you don’t give him a payment over the phone right now, he will just go ahead and garnish your bank account. He makes you think that he will be depleting your bank account tomorrow. You plead with him by telling him that you expect to get a positive answer from one of those job interviews that you went on this week, and if he would just give you some more time, you will send in your payment. He ends the call by making you believe that even if you are successful in getting that job, he will just garnish your wages before you even get them. You hang up the phone thinking you are in no better shape than McDreamy’s patient.

So let’s separate the fact from fiction. Can creditors call you and harass you, sometimes insult you, and instill feelings of shame? In most cases they can. So unfortunately, this is not a fiction, but more of a fact. Can creditors hang up the phone with you and immediately garnish your wages or bank account? Absolutely not, this is fiction.

In order for a creditor to be able to garnish you, he must first serve you with a complaint and summons. If you do not answer the creditor’s complaint within the statutory time frame, that creditor can get a default judgment against you for the amount that the creditor listed in his complaint. The creditor can then file a writ of garnishment and get a court order which would allow garnishment of your bank account or your wages in order to satisfy that judgment. All of these things take time and court action. It can’t happen overnight and it can’t happen unless the creditor has first followed the steps outlined.

The Writ of Garnishment, is what grants the creditor the legal authority to notify your bank of the Garnishment Order. The Garnishment Order allows the creditor to garnish or take everything you have in your bank accounts up to the amount of the judgment with the exception of $150.00. If you are employed, the creditor will also send the Writ of Garnishment to your employer. After receiving the writ of garnishment order, your employer will be required to withhold a maximum of 25% of your net income per paycheck and send it to your creditor. This is called wage garnishment and it will continue until the entire judgment is satisfied.

Now that we have overcome the fearful fiction of collectors, remember that the attorneys at Campbell & Coombs, P.C. have successfully represented many people through the bankruptcy process and successfully protected their bank accounts and wages from garnishment. It is important to speak with an experienced bankruptcy attorney to ensure you are not buying into fearful fiction but combating that fiction with knowledge and truth. You can even tune back into some television without fearing a collection call, because just like McDreamy, you’ve got knowledge and skill on your side.

As an Arizona Bankruptcy Attorney, I am frequently asked by my clients, “will filing bankruptcy affect my job.” They are worried that the filing of a bankruptcy will cause them to be fired from their job or that the bankruptcy will cause a demotion. These clients are also worried that the bankruptcy could prevent them from being hired for a job in the future. Both the Bankruptcy Code itself and my 33 years of experience as a bankruptcy attorney show that these fears are unfounded.

The Bankruptcy Code specifically addresses the issue of jobs and bankruptcy. Section 525 of the Bankruptcy Code specifically prohibits discrimination in any form, including termination, by your current employer if you file a bankruptcy. While you could be laid off for some other reason, bankruptcy cannot be one of these reasons. If your employer did try to affect your job due to your filing bankruptcy, that employer would be subject to a bankruptcy court action for contempt and damages. Campbell& Coombs, P.C. is equipped and ready to file such an action should one be required. However, in all my years of bankruptcy practice in Arizona, I have never had and an employer terminate, demote or discipline any of my clients for filing a bankruptcy. This makes logical sense. After all, who would your employer rather have as an employee: The New You after a bankruptcy who is off to your fresh start and not worrying about all your past debts, who can devote all your attention to your job, or the Old You who is constantly being called at work by creditors, who cannot sleep at night while worrying about the bills, or whose paycheck is being garnished leading to extra work for your employer? I know that if I was hiring you, I would want the New, Well Rested, You after bankruptcy as opposed to the Stressed Out, Sleep Deprived, Attention Deficient You before bankruptcy.

Additionally, I have never had any of my bankruptcy clients turned down for a job because of a bankruptcy. Section 525 of the Bankruptcy Code also prevents governmental employers from discriminating against you solely because of your bankruptcy. While this bankruptcy code section currently does not apply to non-governmental employers, I have yet to see non-governmental employers engage in such bankruptcy discrimination in their hiring practices. My clients are often worried because employers sometimes check credit reports when they hire someone. Once again though, you must contemplate, who is going to make the better impression: the Old You with many past due bills showing along with court judgments, or the New You who took charge of his or her life and fixed the problem by filing bankruptcy.

Whether or not to file bankruptcy is a major decision for you and your family to make. Be sure to get the advice of an experienced and caring bankruptcy attorney, and don’t be misled by bankruptcy myths like the one that says you will lose your job if you file for bankruptcy. If you would like more information about bankruptcy click on the link to our website.

As an Arizona Bankruptcy Attorney, it really breaks my heart to see people come into my office wearing a scarlet letter that is both self imposed and imposed upon them by the judgments of their peers. Society tends to attach this scarlet letter to a bankruptcy filer that, more often than not in these financial times, need not be so attached. While society ought to realize that, often, circumstances beyond an individual’s direct control can lead that person down the road of bankruptcy, for the most part, even in 2011 it often does not. For some reason, even in present times with all the reports of job loss and the downturn in the economy, there is still something about bankruptcy that causes many to make snap judgments and to stay behind walls of ignorant bias.

There is no doubt that there is an argument that some people in the past have run up large credit card bills all the while just planning to do a Chapter 7 liquidation bankruptcy to wipe out all their unsuspecting creditors. Additionally, there is no doubt that this is not laudable behavior. However, the danger comes when members of society assume this is what ALL people who file bankruptcy do. This stigma often prevents good people who find themselves in circumstances which are beyond their control, circumstances where bankruptcy could definitely save their financial present and future, from seeking out bankruptcy at all, to their great personal and financial detriment. The truth is that any one of us could easily be one divorce, one illness, one job loss, or one judgment away from finding ourselves staring at a potential bankruptcy. That being the case, it is imperative that we let go of stereotypes a bit and embrace reality.

In order to get past the stigma and stereotypes associated with bankruptcy it can be useful to really break down the circumstances that might lead a smart, capable, and responsible individual to look to the Bankruptcy Court for relief from debt. I will even use an extreme example by selecting Sonja Morgan, New York socialite and member of the cast of Bravo TV’s Real Housewives of New York City to make my point.
Ms. Morgan is a smart, attractive, New Yorker who by many accounts seemed to have it all and have it all together. These adjectives describing Ms. Morgan ought not to change simply because she elected to exercise her constitutionally protected right to bankruptcy protection. This is especially true when so many of the reasons that lead her to bankruptcy were very much beyond her direct control. Unfortunately the media and those in society are judging Morgan and looking down their noses at her causing her emotional distress.

At one point in time, Ms. Morgan was married to an heir of J.P. Morgan, a famous American financier, and probably thought she would be in love and financially secure for life. At some point, like more than 50% of Americans, Ms. Morgan’s marriage was not successful and she was forced to face life as a single woman with a daughter. To that end, Ms. Morgan explored some business ventures and hoped to make an investment in a movie she thought would launch a successful future. Ultimately, that movie investment failed and she was saddled with a, reported, $7 million judgment as a result (which was recently upheld by the United States Court of Appeals). The cumulative effect of a divorce and the failed investment lead Ms. Morgan to file for bankruptcy protection in November 2010, with her debts exceeding her assets.

You may not have much sympathy for Sonja Morgan at first blush, but what I am hoping to demonstrate is her humanity. Divorces happen to more than 50% of Americans. A divorce, a bad business decision, job loss, or illness can happen to any of us and these are the very things leading people to bankruptcy in these economic times. Hopefully Ms. Morgan remaining smart, capable, and together after her bankruptcy filing can be a relatable face for others who find themselves in similar circumstances. By filing for bankruptcy protection Ms. Morgan did what she needed to do to stop the bleeding, to protect her and her daughter’s home, and to give her the chance to reorganize and work with her creditors.

Sources: Judge Orders 'RHNYC' Star Sonja Morgan to Shell Out $7 Million

Real Housewife of N.Y. Sonja Morgan Files for Bankruptcy

In Bankruptcy and in life, a lesson you learned in the sand box, “honesty is always the best policy,” absolutely holds true. Federal Bankruptcy law requires that you include every asset that you own on the day you file your bankruptcy case, as in addition to every debt that you owe to any entity or to any person. You may not pick and choose which assets to list or which debts to include, you must include everything. However, just because you list an item of property on your bankruptcy schedules and statements that are filed on your behalf with the Bankruptcy Court does not mean that you will automatically lose that item of property to the trustee administering your Bankruptcy case. To the contrary, it is very possible that your state has a law on the books that would shield that particular item of property from being lost to your bankruptcy trustee, thereby making it "exempt."

Some people attempt to come up with wild schemes that would make an unexempt item of property exempt or make that unexempt item of property "disappear" altogether. If you are tempted, please understand that it is NEVER a good idea to attempt to “game” the system and “sell” items of property to friends or family members just so those items are not technically titled to you or technically owned by you on the day you file your bankruptcy case (presumably to attempt to shield these items from your Chapter 7 or 13 Trustee who will sell those items of property for the benefit of your bankruptcy estate and your unsecured creditors). This type of game playing can end very seriously, as it did recently for an Iowa couple who will now spend some time in prison for bankruptcy fraud.

According to the attorneys who prosecuted Gerald and Fay Schuerer, this couple attempted to defraud their creditors out of approximately $380,000.00 of assets that the couple “sold” to friends and relatives with the understanding that the items would be reacquired by the couple after the bankruptcy case was filed. This type of dishonesty absolutely does not pay. Both Mr. and Mrs. Schuerer will spend time in jail, pay substantial fines and assessments to each defendant that was harmed (their creditors), and pay $394,984.00 in restitution to the United States Trustee. As a result of their dishonesty, the Schuerers are much worse off than they were before they filed for bankruptcy. No possession or item of personal property is worth the true price you will pay should you engage in this type of "gaming" activity.

As an Arizona Bankruptcy attorney I find it imperative to always be truthful and forthcoming when it comes to your actions before filing bankruptcy and in the listing of your assets for the purpose of filing your Arizona bankruptcy case. When you file a bankruptcy case you are asking the Federal government to grant you relief from certain types of debts that you owe so you are no longer responsible to pay these debts. The government will grant you this relief with the understanding that you will pay the government the price that it requires for this relief, that price being your honesty.

Sources: Amana Husband And Wife Sentenced To Federal Prison For Bankruptcy Fraud

Most people filing for bankruptcy would prefer that the entire process be kept under lock and key. Unfortunately, it is a matter of public record, so if anyone wanted to know whether you filed for bankruptcy, they could do so rather easily.

Even if there were a way to keep the bankruptcy from the public eye, there are scenarios that require the disclosure of the bankruptcy filing to friends or family members no matter what. The most common are:

1. If you lent money or gave money or assets to a friend or member of the family, you would probably need to disclose the loan or the gift to the bankruptcy court, thus making it public record. The family member or friend that received the gift or the loan would probably be contacted by the trustee.

2. If the family member or friend lent you money, they will have to be notified as a creditor during the bankruptcy case. There is no ability to "leave out" creditors. Your entire financial picture must be disclosed.

Can you really "repair" your credit score? Sure...but... if you are considering this option and are going to hire someone to help you do it, be aware of the following:

1. If the credit repair company guarantees the removal of all negative marks on the credit report even if they are true, they are selling the proverbial "bridge". Credit reporting agencies aren't required to remove correct information. They are required to remove correct and negative information after a 7-10 year period. (Credit 7 years, Bankruptcy 10 years). Often, the process used to "remove" correct info will cause the credit reporting agency to remove it temporarily, but once the creditor realizes that it is gone, they will simply update the account, if they hadn't already.

2. If the credit repair company asks you to create a new identity and thereby a new credit history...run away. This is illegal, but it also doesn't work. You will still owe the debt and can be sued.

3. It is illegal for a credit repair company to charge you upfront fees to help repair the credit report.

In the end, remember that if it sounds to good to be true, it is. Talk to an experienced attorney about your credit report before making any serious decisions.

If you are considering bankruptcy and have an asset that may be of value and that may not be exempt in that bankruptcy case, it would be wise to speak with an experienced bankruptcy attorney before you transfer it to another person or entity.

Transferring assets to anyone prior to filing bankruptcy can result in the loss of the bankruptcy discharge, the loss of the asset or even jail time and fines under certain circumstances. In other words, the law has already "thought of that".

Congress enacted specific provisions in the bankruptcy code (see sect. 548) which allows

Continue reading "Don't Give Away Cash or Property to Family and Friends Prior to Filing for Bankruptcy" »