July 14, 2015

The Truth, The Whole Truth, and Nothing But the Truth!

The attorneys in our firm have over 100 combined years of practicing law in the arena of bankruptcy. We’ve heard different stories from prospective clients and we have met with some disturbing proposals. These disturbing proposals likely come from a mis-perception that many people have about the relationship between a client and their attorney. We’ve all heard about client confidentiality, but how many people really know what that means?

There is a perception by some folks that the purpose of an attorney is to advise them on how to break the law without getting caught. This concept has, no doubt, been something that has come about as a result of some unscrupulous television show lawyers. Your attorney is there to provide you with legal advice, provide you with options, and help guide you through your legitimate course of action in any given area of law. Your attorney is not permitted to advise you to break the law. Your attorney is not permitted to assist you in breaking the law, or to conspire with you in breaking the law.

When you meet with an attorney, it’s important to tell the truth, the whole truth, and nothing but the truth. Your attorney will be able to guide you through many important aspects and plan to take actions which you are not necessarily aware of. These are legal actions which, if taken appropriately, can protect you, your family, and your assets. Your attorney may advise you take a variety of actions to protect your interests. These may include a variety of things that you, as a lay person, were unaware of. This might be something as simple as making sure you legitimately spend your bank account down below $ 300.00 before you file bankruptcy. It might mean that you need to wait a while to file your bankruptcy in order to avoid a preference issue.

The point is that your attorney cannot properly advise you to your best interest if s/he does not have all of the available, accurate, and truthful information. If you tell your attorney something that you think is bad for your upcoming case, the attorney may be able to advise you how to ameliorate the circumstances. At a minimum the attorney can advise you what harm may come to you for the bad action if you file bankruptcy. This will allow you to decide if filing a bankruptcy now is in your best interest, or if filing later is better.

There are a lot of documents that must be prepared, signed, and filed in your case. Its important to know more than just how to fill those documents out. A good attorney will know the ramifications of your answers on the documents and will consult with you about those ramifications before your bankruptcy case is filed.

When the documents are prepared, they should be as accurate and truthful as possible. Once filed with the bankruptcy court, there can be some negative aspects to making amendments. The documents are signed under penalty of perjury before they are filed with the court. You are stating that they are true and correct. In many instances an amendment is saying “oops, I forgot something”. It’s clearing saying that your statement before “that the information in the documents was true and correct” was not true and correct. Amendments are often done, but it is much simpler for your case if you get it right to start with, and do not have to file an amendment.

Bankruptcy Code Section 11 U.S.C. § 727(d) says a bankruptcy discharge may be revoked or set aside. This can happen if someone files a motion with the court and proves that the debtor obtained the discharge through fraud. Fraud might include the failure to list assets on the bankruptcy schedules, or making some sort of a material misstatement on the documents. You definitely want to avoid this possibility. As such, this can be avoided by simply telling the truth, the whole truth, and nothing but the truth.

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June 30, 2015

The Inter-relationship between Annuity Contracts and Bankruptcy Law in Arizona

Perhaps you have heard the commercials. Some insurance company offers to put your money into an annuity and give you monthly pay-outs at some point in the future. An annuity contract may be entered into in order to save for the future - for expenses like college or retirement.

The definition of annuity, according to investopedia.com, is as follows:

“An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.”

So lets say that you purchased an annuity 30 years ago and its now worth $ 150,000.00. You have lots and lots of bills, and few assets. In fact, the annuity is your major asset. Although you cannot pay your bills, and you are thinking about filing a bankruptcy, your are very afraid that you will lose the annuity in the bankruptcy. Do you need to be afraid?

In Arizona, an exemption statute referred to as A.R.S. § 33-1126(a)(7) can save your annuity contract for you in specific situations. You must have had the annuity for at least two years, and you must have named a specific certain type of person as your beneficiary under the annuity.

The statute reads as follows:

“33-1126. Money benefits or proceeds; exception

A. The following property of a debtor is exempt from execution, attachment or sale on any process issued from any court: ....

7. An annuity contract where for a continuous unexpired period of two years that contract has been owned by a debtor and has named as beneficiary the debtor, the debtor's surviving spouse, child, parent, brother or sister, or any other dependent family member, except that, subject to the statute of limitations, the amount of any premium, payment or deposit with respect to that contract is recoverable or avoidable by a creditor pursuant to title 44, chapter 8, article 1 is not exempt. The exemption provided by this paragraph does not apply to a claim for a payment of a debt of the annuitant or beneficiary that is secured by a pledge or assignment of the contract or its proceeds. For the purposes of this paragraph, "dependent" means a family member who is dependent on the debtor for not less than half support.”

Essentially, if you have had the contract for two years, were not insolvent when you bought the contracts, and have one of the enumerated persons listed as the beneficiary, the annuity contract will be exempt. The special provisions of Arizona Title 44, chapter 8, article 1 relate to transfers made while insolvent or intentionally to defeat creditors. If the transfer was made at such a time, then the safest thing to do is to wait four years after purchasing the annuity before filing a bankruptcy.

The good news is, with proper planning and appropriate legal advise, you do not have to lose your annuity when filing for bankruptcy relief. However, it is important that you meet personally with a bankruptcy attorney, like the attorneys at Campbell & Coombs, to discuss your personal situation and take appropriate action to insure that you are protected to the fullest extent of the law.

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June 23, 2015

HOW LONG MUST ONE WAIT TO QUALIFY FOR A MORTGAGE AFTER BANKRUPTCY

The primary purpose for filing a bankruptcy is to obtain a “fresh start”. That is, to be in a position to move forward without the weight of old unsecured debt dragging down ones ability to move forward.

Often, the question is asked, How long do I have to wait to qualify for a new mortgage after filing bankruptcy? The general rule of thumb is as follows:


FOR CHAPTER 7


1) 4 years from the date of discharge or the dismissal date for a conventional
loan.

2) 2 years from the date of discharge for an FHA/HUD loan; and

3) 2 years from the date of discharge for a VA loan.


FOR CHAPTER 13


1) 2 years from the discharge date or 4 years from the dismissal date for a convention loan.

2) 1 year of the payout must elapse and payment performance must be satisfactory. Buyer must receive permission from the court to enter into mortgage loan for FHA/HUD loan.

3) Same as #2 above for a VA loan.


It should be noted that these are not hard and fast rules because the credit history, income and other factors may come into play. It is recommended that you regularly monitor your credit reports and consult with a professional with any questions or concerns.

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June 12, 2015

WELLS FARGO SANCTIONED FOR VIOLATING DISCHARGE INJUNCTION

When a debtor petitions for bankruptcy protection, the Court automatically issues a protective order sometimes referred to as an “automatic stay.” The automatic stay prohibits creditors from continuing collection activities such as calling debtors, mailing debtors or proceeding with lawsuits against debtors. In fact, creditors are required to stop all forms of contact with debtors after a bankruptcy petition has been filed.

At the conclusion of a bankruptcy proceeding and after a debtor has received a discharge of his or her debts, the Court orders a discharge injunction. This means that creditors that were listed and noticed in the bankruptcy proceeding are forever barred from collecting the discharged debt. If a creditor violates the discharge injunction, the bankruptcy court has jurisdiction to hear the matter and issue sanctions against the offending creditor if warranted.

Wells Fargo Bank N.A. was ordered to pay $69,500 to a debtor for repeated violations of the discharge injunction in April, 2015. Sometime after the debtor received a discharge in his Chapter 7 bankruptcy, Wells Fargo began calling the debtor regarding a debt that was included in the debtor’s bankruptcy. Wells Fargo made 139 attempts to collect the discharged debt. The debtor’s attorney contacted Wells Fargo regarding the debtor’s bankruptcy and discharge and followed up with a letter outlining Wells Fargo’s collection efforts over a period of two years. Wells Fargo acknowledged the attorney’s letter through a letter sent directly to the debtor stating that “as you were the only person who signed the Note, Wells Fargo holds you financially responsible for repayment of the loan.”

The debtor moved to reopen his bankruptcy case to file a motion asking the bankruptcy court to hold Wells Fargo in contempt of the discharge order. Upon argument from each side, the Court rejected Wells Fargo’s unpersuasive arguments and attempts to justify its contemptuous behavior. The Court found Wells Fargo’s actions to be “wanton and oppressive” in awarding attorney’s fees to the debtor, and that Wells Fargo exhibited “a clear disregard for the bankruptcy process and the sanctity of Debtor’s discharge” in awarding punitive damages that amounted to $69,500.

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June 2, 2015

DOES IRS REALLY HAVE A PROGRAM THAT LETS YOU PAY OFF YOUR TAX DEBT FOR PENNIES ON THE DOLLAR?

If you are in trouble with the IRS it is very scary, and now you hear many advertisements on the radio and television from companies that claim they can resolve the problems for pennies on the dollar. Of course, sometimes, that is possible, but in the vast majority of cases, the IRS demands its pound of flesh.

We see many people in our office who owe back taxes to the IRS. If you ignore the IRS, they will levy your wages or bank accounts, leaving you with no money. There are several options available to you to deal with this situation.

1. Installment agreement - You can enter into an installment agreement with IRS to pay off the tax. Interest will still accrue so this may take a very long time, but at least you know that there will be no levies as long as you are current on your payments. This is the least attractive option. Our office can help you in obtaining an installment agreement. However, this is not the promised “Pennies on the Dollar” you heard about in the ads.

2. Offer in Compromise - This is what all the ads you see on television or hear on the radio are referring to when they talk about the “New IRS Programs” or “The Fresh Start Initiative”. The Offer and Compromise (“OIC”) is not a new program and has been around since the 1990's. An OIC allows you to pay a smaller lump sum in full satisfaction of the tax debt. It is all formula driven: you must pay to the IRS as much as they would get if they sold basically all of your property and you pay them your monthly disposable income multiplied by 12 (*depending on how long it takes you to pay). Disposable income means your monthly gross income less certain stingy expenses the IRS allows you. The key here is to manipulate the formula so IRS has no choice except to accept the OIC, something the IRS seems to try and avoid. When doing an OIC it is important that you choose a reputable local attorney or accountant who has OIC experience. Most of the companies advertising on the radio or internet are out of state and I have never had a client give me a positive comment about them. They tend to take a large retainer from you after making big promises without ever reviewing your case, and then are unable to deliver. When you meet face to face with a local attorney, he can tell you what your chances for success are right then. Sometimes the numbers just do not work for an OIC.

The important thing to remember here is that just because you owe the IRS, you are not helpless and at their mercy. All of the above options can help you with your IRS debt. There are also bankruptcy options that can be used to deal with tax debt. Just make sure you choose a local qualified attorney that offers a free consultation (just like we do here at Campbell & Coombs) to go over your case and analyze all your options. And remember, we are an ARIZONA law firm representing ARIZONA clients.

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May 26, 2015

BANKRUPTCY AND REBUILDING CREDIT

Your bankruptcy is over and now you want to start rebuilding your credit. What to do.

One of the implications of getting a discharge in bankruptcy is that all of your unsecured debt is gone. Therefore, your debt to income ratio is dramatically reduced. In the eyes of a potential lender, you may actually be a better risk than you were before the bankruptcy.

After filing a chapter 7 bankruptcy and getting a discharge, potential creditors know three things about you.

1) You cannot discharge any new debt for 8 years.

2) New creditors would have this 8 years to collect on their debt. And

3) New creditors would not have to compete against any of the debt included in the bankruptcy.

Couple these factors with the fact that the recidivism rate for bankruptcy is fairly low and you become a desired customer for most potential creditors. The first thing to remember is to continue to make timely payments on the debt that may have flowed through the bankruptcy such as car payments, house payments, student loans and living expenses.

Keep an eye on your credit scores and reports. Remember that after bankruptcy, the only acceptable notation on a credit report for a discharged debt is a) zero balance or b) discharged in bankruptcy. You should get a copy of your credit reports from Equifax, Experian and Trans Union and examine them for errors, missing or inaccurate information.

Often times after filing bankruptcy, credit card applications are sent to newly discharged debtors. Again, this is done because creditors are aware of the above three factors. If yo receive such solicitations, be careful to check for the interest rate and fees required. If you do not get credit card solicitations, you may want to apply for department store cards or even a secured credit card as these are usually fairly easy to obtain.

Once a person has established a regular pattern of making payments on time, then the issuer will normally increase the credit limits. Once that happens, then qualifying for unsecured credit usually becomes much easier.

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May 18, 2015

How Much Does a Bankruptcy Judge Make? Or, More Politely, What is the Salary of a Bankruptcy Judge?

This is a question we do not get very often, but it is something people like to know. In days gone past federal employees were not paid very well in comparison to other people in the nation’s economy. This has changed over the years. Take a look at this chart courtesy of The Federal Judicial Center:

Judicial Salaries
U.S. Bankruptcy Judges
Date Effective Annual Salary

November 6, 1978 $50,000
October 1, 1979 $53,500
January 1, 1982 $58,500
December 18, 1982 $63,600
January 1, 1984 $66,100
January 1, 1985 $68,400
January 1, 1987 $70,500
March 1, 1987 $72,500

Effective October 1, 1988 and thereafter, bankruptcy judges receive a salary of 92 percent of the salary of federal district judges. The salary does NOT vary based on locality. As such, a US Bankruptcy Judge with his court in Iowa has a much lower cost of living than does a US Bankruptcy Judge with her court in Los Angeles, California, or New York, New York. As a result, the lower cost of living makes that judge’s salary comparatively more valuable than in the more costly localities.

Judicial Salaries

District Court Judges U.S. Bankruptcy Judges
Date Effective Annual Salary Annual Salary
(92% of District Judges)

October 1, 1988 $ 89,500 $ 82,340
February 1, 1990 $ 96,600 $ 88,872
January 1, 1991 $125,100 $ 115,092
January 1, 1992 $129,500 $ 119,140
January 1, 1993 $133,600 $ 122,912
January 1, 1998 $136,700 $ 125,764
January 1, 2000 $141,300 $ 129,996
January 1, 2001 $145,100 $ 133,492
January 1, 2002 $150,000 $ 138,000
January 1, 2003 $154,700 $ 142,324
January 1, 2004 $158,100 $ 145,452
January 1, 2005 $162,100 $ 149,132
January 1, 2006 $165,200 $ 151,984
January 1, 2008 $169,300 $ 155,756
January 1, 2009 $174,000 $ 160,080
January 1, 2014 $199,100 $ 183,172


So, the answer to our question is currently $ 183,172. If you pay taxes, some small portion of what you pay goes to pay the salary of our nation’s U.S. Bankruptcy Judges.

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May 8, 2015

CHAPTER 7 DEBTOR ALLOWED TO DISCHARGE STUDENT LOANS

In February 2015, a healthy and able bodied debtor was able to discharge
approximately $119,000.00 in student loans in Nebraska. The Court looked at the totality
of the circumstances in the case and specifically at the fact that the only repayment option
offered by the lenders was the suggestion that the debtor “find more money”. Typically,
discharging student loans in bankruptcy is next to impossible and normally requires the
debtor to be in extremely poor health with no prospect to earn an income. The lenders
were particularly outrageous in this case stating in its defense that the debtor could simply
relocate and find a better paying job. The Court quickly dismissed the lenders argument
and found that the debtor made a “good faith effort to maximize her income.

images.jpg


President Barack Obama recently signed a “student aid bill of rights” to make it
easier for people with student loans to pay back their debt. This so-called bill of rights
will require that businesses that service student loans provide clear information about how
much a borrower owes, what options exist for repayment and if a borrower falls behind,
provide help to get back in good standing with reasonable fees on a reasonable timeline.
The lending industry has resisted loosening bankruptcy standards for student loans, but
advocates have argued students burdened by heavy debt should be able to more easily use
that as a way to discharge their obligations in bankruptcy.

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April 6, 2015

IRS OFFER IN COMPROMISE

The IRS offer in compromise program has been around for decades. In theory, the program serves the best interests of all concerned, enabling the government to collect what it can from the taxpayer, and relieving the taxpayer a tax burden he cannot pay.

To qualify for an OIC, you must prove that you can’t pay the total balances owed before the collection statute expires, using net equity in assets plus any future income. The IRS calculates future income as the amount it can collect on a monthly basis (monthly disposable income) before the collection statute expires. While the number of OICs accepted by the IRS is small compared with the number of taxpayers who have outstanding balances, more taxpayers are qualifying for and obtaining OICs due to the 2011 IRS Fresh Start Initiative, which softened qualification criteria and allowed for lower offer amounts.

In 2004, the IRS issued a consumer alert warning of promoters' claims to settle debts for "pennies on the dollar" through the OIC program. The warning addressed companies charging high fees to consumers who may not be eligible for the program; all other payment means would have to be exhausted, including installment payments. It is highly recommended to all that are seeking guidance for tax relief to consult with a qualified attorney such as the attorneys at Campbell & Coombs, P.C.

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March 4, 2015

DOES AN IRS OFFER IN COMPROMISE REALLY WORK?

These days you hear many advertisements on the radio and television from companies that claim they can resolve your tax problems for pennies on the dollar. These ads refer to “brand new IRS programs” or something called the “Fresh Start Initiative”. What they are really referring to is a program run and administered by the Internal Revenue Service called an Offer in Compromise. The Offer and Compromise (“OIC”) is not a new program and has been around since the 1990s. It is driven by a rather unrealistic formula the IRS uses. According to the IRS, an offer in compromise will be accepted if the amount offered by the taxpayer is equal to or greater than the reasonable collection potential.

IRS records show a dismal success rate for the Offer in Compromise, just a shade under 25%. Why is this? The problem is that many of the companies touting their services as “tax specialists” are anything but, and file Offers in Compromise that have no chance of succeeding from the beginning. These companies are basically scamming you as the taxpayer by taking your money for something that has no chance of success. Here is how the scam works. IRS often files a lien against you when you owe back taxes. These companies get a list of these filings and start sending you letters. They claim that for a huge fee, they can resolve your problems. Typically, the initial fee will be upwards of $6,000 with no end in sight.

Here is all they really do. They are all out of state and there is never a face to face meeting. The never look at your entire situation to see if the Offer in Compromise could ever work. Generally speaking, a successful offer in compromise will come from a taxpayer who has liabilities in excess of his or her assets and little to no disposable monthly income after allowing for basic expenses. Regardless of whether this fits your situation, they will prepare a Form 656 for you. The form will require extensive financial data from you. You will actually do most of the work. When the company files the form, the IRS is supposed to stop all collection activity. The IRS will consider the form for about eight months during which time, your problems magically seem to disappear. After about eight months, the IRS will most likely send a rejection letter or make a counter offer for thousands of dollars more. The company then may request many thousands of dollars more to write an appeal. The entire time, you are out of the IRS collection loop, but interest is still accruing. You don't know what is happening and you are basically held hostage to the company. If the offer in compromise is accepted you will, quite likely, have to make payments that you cannot afford, and if the offer in compromise is ultimately rejected, you will be right back to square one and you will have extended the statutes governing the bankruptcy and collection of taxes. You end up right back where you started and you will have wasted all the money you paid to the company.

For those Offers that do work, it is usually because the taxpayer has used a local Arizona attorney who you can meet with face to face and who analyzes your chances of success before taking your money and blindly filing the Offer. If the Offer in Compromise is not the way to go, your attorney will look at other options (installment agreements, waiting out the statute of limitations, liquidation bankruptcy, reorganization bankruptcy, etc.), and help you choose the best way for you to go. That is how the attorneys at Campbell & Coombs operate: what is best for you the client rather than just taking your money for something that is going to fail. We have an exemplary success rate for Offers in Compromise because we only file an Offer when we see a good chance of success. And remember, we are an ARIZONA law firm representing ARIZONA clients.

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January 26, 2015

Discharge vs. Case Closure

Discharge is often the last thing a bankruptcy client sees or thinks about their case, but it is not the end of the bankruptcy case. This is often a confusing aspect for clients. We’ll explain here and try to simplify the two and explain what the distinctions are.

11 United States Code § 101 is often helpful in defining terms in the bankruptcy context. This section is the “Definitions” section of the Bankruptcy Code. Regretfully, the terms “discharge” and “closure” are not set forth in the definitions section. So what do they mean in the day to day lives of those who choose to file for bankruptcy relief?

On the United States Courts' website the answer to the question “What is a discharge in bankruptcy? is answered this way:

“A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.”

Its important to note that the discharge relates to debts. The discharge does not relate to the “discharge” or “termination of authority” of a bankruptcy trustee. In this manner, people who have gone through a bankruptcy are often surprised when they have received their “discharge” order, but then receive a demand letter from their bankruptcy trustee. We sometimes have requests from clients to sell assets after discharge, but before case closure. This is inappropriate without court approval.

The bankruptcy is considered by credit reporting agencies, by lenders, and by the court to be active or “open” until the case is closed by the court. In the case of a discharge order, a copy is sent by the Bankruptcy Noticing Center to all creditors and parties in interest. In the case of a case closure, there is simply an annotation made to the court docket that the case is closed. A case closure divests the trustee from authority or responsibility for the case and typically operates as an abandonment of any scheduled, disclosed property that the bankruptcy trustee has not administered. If you want to know if your case has been closed or not, you’ll have to have your attorney look at the court docket.

When dealing with a bankruptcy and a bankruptcy trustee, it is important for the debtor to understand that a “discharge” does not give the debtor a right to ignore the trustee. All requests of a trustee must be addressed until case closure. The debtor will not hear from the case trustee after case closure unless a fraud is discovered.

Bankruptcies are typically reported on your credit report for up to ten years. The credit report will typically show when the bankruptcy was filed, what debts are discharged, and when the case is discharged. Credit reports typically do not show the case closure date.





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December 17, 2014

BEWARE OF TELEMARKETING SCHEMES

Thousands of consumers have been deceived through telemarketing schemes designed to sell phony mortgage assistance and debt relief programs to already cash-strapped citizens. In 2012, the FTC filed complaints against several telemarketing companies alleging that they pitched programs that would supposedly help consumers in financial distress pay, reduce or restructure their mortgage and other debts. Among other things, the reported schemes violated the FTC Act, the Commission’s Telemarketing Sales Rule and the Mortgage Assistance Relief Services Rule (MARS Rule) which prohibits mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

According to the FTC, the FTC’s complaints alleged that in addition to misrepresenting the likelihood that consumers would obtain a mortgage modification, the defendants falsely represented that consumers who did not receive a modification would receive full refunds, falsely represented that they were affiliated with the U.S. government, and falsely claimed to provide legal representation to consumers. Also, in violation of the MARS Rule, the telemarketers allegedly told consumers to stop communicating with their lenders, and failed to make Rule-mandated disclosures intended to ensure that consumers understand transactions with mortgage-assistance relief service providers and their rights under the Rule.

If you are experiencing financial difficulty, you may be tempted to use a debt relief company to help take care of your bills. Often times, settling with your creditors is a good alternative to filing bankruptcy. However, before you hire a company to help with your debts, you should first understand the differences in services that debt relief companies claim to offer, as well as the potential risks involved.

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