Arizona Bankruptcy Lawyer Blog

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

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" »

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" »

Retirements accounts are usually safe from common creditors both inside and outside of bankruptcy. If the creditor can't touch the retirement account, it would not be wise for you to do any of the following:

1. Take a loan out against the account

This is a common issue and it is typically a result of good intentions. Most people who are facing financial problems do not want to file for bankruptcy and will do almost anything to avoid it. This shouldn't be one of those things except in very limited circumstances. Speak to an experienced bankruptcy attorney before signing the loan documents.

Continue reading "Retirement Accounts and Bankruptcy - Don't do the following" »

Retirements accounts are usually safe from common creditors both inside and outside of bankruptcy. If the creditor can't touch the retirement account, it would not be wise for you to do any of the following:

1. Take a loan out against the account

This is a common issue and it is typically a result of good intentions. Most people who are facing financial problems do not want to file for bankruptcy and will do almost anything to avoid it. This shouldn't be one of those things except in very limited circumstances. Speak to an experienced bankruptcy attorney before signing the loan documents.

Continue reading "Retirement Accounts and Bankruptcy - Don't do the following" »

Car Lenders don't have to wait a certain number of months to repossess your vehicle if you are behind. They don't have to wait at all. Making a partial payment won't legally ensure the repossession doesn't happen either and neither will the fact that you are struggling financially.

Having said that, most car lenders will attempt to work with you if you are late on payments. They typically don't just take the car the first day you are late.

If you are late and do not see an easy way to catch the car up, here are some options:

Continue reading "Auto Repossession - Avoiding It" »

Most retirement accounts are protected from seizure by creditors. Therefore, if you have serious debt, a retirement account, and feel like bankruptcy may be in your future, you shouldn't do the following:

1. Don’t Cash It Out
The fact that you are having to pull money from the account is a sign that you should be talking to a bankruptcy attorney. Once you take the money out of it’s protected "cocoon", it may not be safe from creditors and the bankruptcy trustee.

2. Don’t Borrow Against It
Borrowing against the retirement account can create a number of problems. The first is similar to the “cash out” problem mentioned above. The cash in your hand is not protected. You have also created a new “debt”, that must be paid or you may suffer tax consequences.

3. Don’t Use The Account As Collateral For a Loan
Doing so could jeopardize the full effect of the retirement account protection.

If you feel like you need the funds from your retirement account to survive, and you have serious debt issues, spend the time to speak to an experienced bankruptcy attorney first. You may be glad you did.

The University of Arizona's Eller College of Management sponsored an ethics symposium on August 20 for about 75 executives and others. The main point of the symposium was to discuss whether it is moral/ethical for a consumer living in an upside down home to simply walk away from it or "strategically default". Then, after walking away to take advantage of the various laws protecting the consumer from deficiency balances and taxes.

See the Inside Tucson Business article here.

As stated in the article, most consumers do not walk away from upside down homes, even when it is makes financial sense to do so. I get the sense from the article (I didn't attend, don't like the UoA...go devils!) that the experts are a bit surprised by this.

The surprise is I believe, based on the following line of thought:

1. The consumer has limited options because he is fenced in by his own ethical sense of obligation to pay his debt

2. The banks are only fenced in by their drive for profits and fear of losses.

3. The burdens of this whole thing fall unfairly on the consumer as a result...something about the loss of bargaining power.

4. For this reason, and because the lender knew the buyer would or could default, it can't be unethical for the consumer to simply walk.

Got it? Ethics don't or shouldn't exist in this scenario. The bank doesn't use it, neither should the consumer.

The fact that most consumers do not always adopt this line of reasoning and simply walk away doesn't surprise me though.

Continue reading "Home Underwater? Ethical Considerations " »

If you have serious debt and feel that bankruptcy may be in your future, be aware of the following:

1. You should avoid borrowing money or withdrawing money from your IRA, 401k or ERISA qualified retirement plans to pay the debt. These funds should be safe in a bankruptcy case.

2. Don't borrow money on your home's equity to pay your bills.

3. If you owe friends, family, or business associates money, don't pay them back within one year before you file (unless less than 600.00). This is considered a "preference" and the money can be recovered form those close to you for distribution to all of your creditors in the bankruptcy case.

4. Don't put property into someone else's name or give an asset away. This type of transfer could be considered fraudulent and cause you to lose the discharge and the asset.

5. If you typically get a large tax refund, think about increasing net income monthly in order to get a smaller refund. It will be property of the bankruptcy estate. If the refund is the result of earned income tax credit, you may be able to request that it be paid in your paycheck.

6. Don't reduce the withholding so much that you end up with a large tax bill either.

7. Continue to make payment on cars and real estate you need to keep.

8. Lastly, get good advice from an experienced bankruptcy attorney sooner rather then later. The longer you wait to get advice, the narrower your choices will be.

Most chapter 7 bankruptcy cases filed in the U.S. are considered "no asset" cases. "No asset", is a term lawyers and others involved in the bankruptcy process call chapter 7 cases in which there are no assets available for the chapter 7 trustee to sell and share with creditors either because they are legally "exempt" or just not worth the time.

So a basic question: What does the law protect?

A good place to start is to read a basic list of Arizona bankruptcy exemptions. The U.S. Bankruptcy Court updates a list every so often and has done so as recently as May 2010. Read it here.

Some interesting points about this list:

1. Most major assets Arizona consumers own are exempt in a chapter 7 bankruptcy case.

- Homes - possibly 150000 in equity is exempt (equity =value minus the bank loan)
- Cars - 5000 in equity per person
- Most retirement plan/accounts

Continue reading "Arizona Bankruptcy Exemptions - What are they?" »

Auto finance companies can repossess your car if your are late, they don't have to wait a certain period of time to do so. Partial payments won't typically slow the repossession process down and pleading your case to the lender doesn't guarantee that they will wait forever.

If you are unable to catch up the car payments and the car is repossessed, the "repo man" can't "breach the peace" however. Generally, this means that he can't:

1. forcibly remove you from the car
2. force you to stop
3. break into property in order to get the car
4. pretend to be a law enforcement officer
5. threaten you or assault you

If any of the above occur, it is probably wise for you to step away and call the police.

If you want to save the car you may have one of the following options:

Continue reading "Car Repossession - Options" »