Arizona Bankruptcy Lawyer Blog

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.

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" »

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" »

Taxes for which returns were not filed at all or...were filed, but within 2 years of filing a bankruptcy are not dischargeable.

The issue here is not always just the two year date as that becomes relatively easy to calculate.

It is more often whether or not the return is actually a "return" for purposes of this rule.

If the IRS has filed a substitute return and then the filer submits a correct return later, and more then two years before the bankruptcy filing, the two year rule may not be met as the return may not qualify as a "return".

Tax debt that is based on your income and for which a return was required to be filed within 3 years prior to the filing of your bankruptcy petition is not dischargeable in bankruptcy. See 11 U.S.C. Sect 523(a)(1)(A).

The "due date" includes extension dates. So if you filed for an extension to Oct. 15. you would not begin counting the three year period until Oct 15.

The 3 year period is also extended by a prior bankruptcy plus 6 months.

If you filed a chapter 7 bankruptcy within the last 8 years and received a discharge, you cannot file another chapter 7 bankruptcy.

It is common for chapter 7 bankruptcy filers to need another bankruptcy. So, what do they do?

If it has been less then 4 years, they use a chapter 13 bankruptcy.

11 U.S.C. Section 1328 (f)(1) lays out the rule.

A debtor cannot receive a discharge under chapter 13 if he or she received a discharge in a chapter 7, 11, or 12 bankruptcy filed within the last 4 years.

If it has been 4 years and a day, another bankruptcy can be filed.

There are circumstances where the discharge is not needed, and a chapter 13 bankruptcy may be used for other reasons. In those situations, it may be possible to file the chapter 13 bankruptcy post chapter 7 and prior to the 4 year period,

If you have filed a chapter 12 or more commonly a chapter 13 bankruptcy and received a discharge of one of those cases within the the last 6 years i.e. you cannot file a chapter 7 bankruptcy and receive a discharge.

This scenario is much less common in my experience than the debtor who has filed a chapter 7 bankruptcy previously and is seeking to file another chapter 7. In that situation the time between filing dates must be 8 years.

Read 11 U.S.C. Sect 727 (a)(9) for more.

If you filed a chapter 7 bankruptcy and received a discharge within 8 years of the filing of your present chapter 7 bankruptcy case, you are not entitled to receive a discharge in the present case.

It is 8 years not 6.

Look at 11 U.S.C. Section 727 (a)(8).

Just because you are eligible to file a chapter 7 bankruptcy doesn't mean you are entitled to a discharge of debt. The following is a list of the major parts of Bankruptcy Code Section 727(a) which describes the requirements and limits on receiving a discharge.

1. You must be an individual

2. You can't with an intent to hinder, delay or defraud a creditor or officer of the bankruptcy estate transfer, remove, destroy, mutilate or conceal, or allow someone else to do so any property that you own within one year before the bankruptcy filing date or after the date of filing.

3. You must keep good records and protect your records

4. You can't knowingly and fraudulently make a false sworn statement, make a false claim, accept money or a promise to act or fail to act, or withhold information or documents.

5. You have to be able to explain any loss of assets or deficiency of assets to meet your liabilities

6. You can't refuse to obey an order of the court, refuse to answer questions that may incriminate yourself if you have been granted immunity on the issue

7. You can't have received a discharge in another chapter 7 case filed within the last 8 years

8. You can't have received a discharge in a chapter 13 that was filed in the last 6 years unless 100 percent of the allowed unsecured claims were paid in the case or 70 percent of them were paid but the plan was proposed in good faith and was based on your best effort

9. You must take a financial management course after the filing of the case

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.

A short note on who not to choose to help you with your consumer or small business bankruptcy case.

1. The cheapest lawyer

The problems associated with this are summed up by the too often used phrase, "you get what you pay for". I won't say that this is always the case, but in an office that is based on very high volume and very low fees, many little things and some big things will give way at some point and on a consistent basis.

2. The "new" lawyer

I went fishing in Alaska once. The salmon started a run and the town showed up. It was shoulder to shoulder. There are nuances in catching the salmon, nuances learned via hard knocks and time in the water in both good and bad weather. I could tell who had been fishing many times before, after just a few minutes of observation, and it wasn't me.

Not to compare my clients to fish, but bankruptcy has become a popular choice for Americans, and the attorneys have shown up as well, shoulder to shoulder. Unfortunately for the consumer and small business person, bankruptcy has many nuances. Nuances learned via hard knocks and time in the water. You get my "drift".

3. The lawyer next door

Just because I am a lawyer, have a nice car and am your "neighbor" or best friend's neighbor, doesn't mean I should take on the defense of your criminal case. Lawyers focus on related practice areas as a result of the law and it's complexity.

Continue reading "Filing for Bankruptcy - Experience matters when choosing an attorney" »

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 " »

Any human, who resides, is domiciled, has property or a place of business in the United States, may file a Chapter 7 bankruptcy in the U.S. Bankruptcy Court as long as:

1. he or she was not a debtor in a bankruptcy case that was dismissed within 180 days prior to the filing date for "willful failure" to abide by orders of the court or to appear before the court in proper prosecution of the case. (didn't cooperate)

2. he or she did not request and obtain a voluntary dismissal of a bankruptcy case following the filing of a request for relief from the automatic stay.

The bankruptcy filer does not have to be:

1. Insolvent - This means that they can have more assets then debts

2. A U.S. legal citizen

3. Physically residing in the U.S.

4. The actual person needing the benefit of bankruptcy

An attorney or a relative may be able to file a petition as a "next friend" to the debtor. A legally appointed guardian can file the petition for someone else as well. A bankruptcy may also be filed for an incompetent person pursuant to a very broad and valid power of attorney. A conservator may be able to file under certain circumstances.

5. Alive - (well sort of)

If a debtor files the case and then passes away, the case can typically continue. Federal rule of Bankruptcy procedure 1016 provides that the death of the debtor shall not abate a chapter 7 case.

If you are considering bankruptcy and have been reading about your options, you may have come across the term, "bankruptcy estate".

What is this... "bankruptcy estate" you asked yourself. A vineyard in Italy?

More likely...you knew that a bankruptcy estate is really just a collection of all the property and rights to property that belonged to the bankruptcy filer that can be legally administered during a bankruptcy case by the bankruptcy Court.

It is created the moment that filer actually...."files" the bankruptcy case. It is simply all of the stuff he or she owns or has the right to own or control.

Some examples:

car, home, stock, cash, community property, personal injury claim, property acquired by inheritance within 180 days of filing the bankruptcy, bare legal title to property etc.

If you can imagine it, then it probably would be part of the "bankruptcy estate". It is very important in a bankruptcy case to disclose every item that could be considered part of the estate, as a failure to properly do so could result in a denial or revocation of the overall goal of the bankruptcy filing...the discharge of debt.

A few issues arise after the estate is determined.

1. Does the Bankruptcy Trustee have a greater interest in the property then the debtor had in it on the date of filing.

2. What assets are protected from being taken by the bankruptcy trustee for distribution to creditors in a chapter 7 bankruptcy.

The second question is dealt with routinely by bankruptcy judges. Most consumers have few assets that are not protected from creditors both inside and outside of bankruptcy and those that are not protected or "exempt" are often not worth the bankruptcy estate's time to collect and distribute to creditors.

These are the types of debts that are discharged in a chapter 13 bankruptcy that are NOT dischargeable in a chapter 7 bankruptcy:

1. Debts that weren't or couldn't be discharged in a previous case.

2. Court Fees

3. Home Owners Association dues post filing

4. Debts for loans from a retirement plan

5. Debts incurred to pay a non dischargeable tax debt

6. Marital Debt that is the result of a divorce decree or settlement agreement

Many assume that all debts are paid back in a chapter 13 bankruptcy. The reality is that most chapter 13 bankruptcy filers don't pay very much of the dischargeable debt back. Most of it is wiped away at the end of the case.

The common follow up question is then...what type of debt is not dischargeable in a chapter 13 plan. Here is the list:

1. Criminal Penalties - Fines or Restitution resulting from a criminal conviction can't be discharged.

2. Certain Taxes like:

a. Recent income tax debt
b. Tax debt where the debtor attempted to evade or defeat the tax
c. Tax Returns not filed
d. Employment tax
e. Any trust fund tax
f. Fraud related to tax debt

3. Domestic Support Obligations

a. child support
b. spousal maintenance

4. Debts from the debtor's willful or malicious action

In a chapter 13, the creditor must obtain a judgement first AND the debt must be the result of personal injury or death.

5. Debts as a result of drunk driving

Drive vehicle while intoxicated and hurt someone, not dischargeable in a chapter 13.

6. Unlisted Creditors

7. Student Loans - unless hardship is proven.

8. Fraudulent Debts - Just like in a chapter 7 the creditor has to appear and challenge the
discharge

Some debts will be discharged in a chapter 7 bankruptcy case UNLESS the creditor files a complaint and obtains a court order that the debtor will remain responsible for the debt after the case is over.

The debts that are not dischargable if the creditor successfully challenges discharge are typically:

1. Debts that arise as a result of a fraudulent action. This includes:

a. Debts that are the result of an intentionally fraudulent act in which the creditor relied on the deceit in it's extension of credit. Examples:

- Debtor obtained the loan and promised to pay back when had no intention to do so (this is common i.e. borrowing money against a line of credit or credit card when the debtor knows they are insolvent and unable to pay and/or is going to file for bankruptcy)
- Debtor borrowed an item and used it as collateral for a loan
- Debtor wrote a check for an item, stopped payment on the check and kept the item
- Debtor wrote a check when funds in the account were insufficient then promised the seller
the check was good

b. Recent credit card charges that were used to buy luxury items.

- The law presumes...that a debt is fraudulent if it was more than 550.00 from any particular creditor for a luxury good or service within 90 days prior to filing the bankruptcy

c. Debts incurred based on a false written document about financial condition. Requirements:

- The statement must be in writing obviously.
- It must have been "material" i.e. a very important factor in the creditors decision to extend
credit. (overstatement of income is a common material false statement)
- The false statement must relate to financial condition
- There must have been an intent to deceive the creditor
- The creditor must have reasonably relied on the statement

Continue reading "Debts not discharged in a chapter 7 bankruptcy if the creditor objects" »

In a chapter 7 bankruptcy the debtor is able to "discharge" or cancel the obligation to pay certain debts. These debts typically include:

credit card
medical bill
personal loan
deficiency balances car repossessed
deficiency balances other personal property repossessed
deficiency balances on home foreclosure
certain tax debt
student loans for which the debtor can prove a "hardship"

The real question is, what debt is going to survive the debtor's attempt to discharge in the chapter 7 bankruptcy?

Continue reading "Arizona Chapter 7 Bankruptcy - Which Debts are "discharged"?" »

If someone "co-signs" a contract in order to help a friend or family member get a loan, that co-signer is legally liable to pay the debt and his or her credit report will reflect that.

What if the borrower files for bankruptcy? A few important points:

1. The cosigner is considered a codebtor both inside and outside of bankruptcy.

2. The creditor can legally pursue the codebtor for payment even if a chapter 7 bankruptcy is filed. There is no automatic stay protection for the codebtor in a chapter 7 bankruptcy.

3. The creditor can only pursue a codebtor if the borrower files a chapter 13 bankruptcy case in certain circumstances, as follows:

a. The case is over and the debt wasn't paid in full during the plan.
b. The codebtor is the one who received the consideration for loan i.e. actually owns the car.
c. The loan isn't being paid back during the plan.
d. The creditor can convince the Judge that it's interests will be "irreparably harmed" by continuation of the codebtor stay.
e. If the debt arose in the ordinary course of business and is not a consumer debt.

If you are considering bankruptcy and have a codebtor, you should speak to your attorney about the effect the bankruptcy filing will have both on the codebtor's credit and requirement to pay the debt.

Amounts paid on certain debts secured by assets can be reduced in a chapter 13 bankruptcy. The most common are:

1. Car loans entered into more than 910 days prior to the filing of a chapter 13 bankruptcy.

2. Second mortgages on homes where the home value is less then the debt owed on the first mortgage.

A reduction or "cram down" as it is commonly known is not available to reduce the following loans in a chapter 13:

1. First Mortgages

2. If the creditor has a "purchase money security interest" in the property (money lent to buy the property in question:

a. loans for motor vehicles that were purchased for personal use within about 2.5 years of the filing date.

b. loans for any other property purchased within 1 year of the filing date.

For these items, the full amount of the debt has to be paid to the creditor through the plan in order to keep the property.

If a car was purchased more than 910 days prior to the date a chapter 13 bankruptcy case is filed and the car is worth less then what the bank is owed, the debtor should be able to change the amount it pays the creditor on the car in the chapter 13 case as follows:

1. Instead of paying the full loan amount, the debtor can pay the bank the value of the car over the length of the chapter 13 plan.

2. Instead of paying the original interest rate, the debtor can pay the bank the "prime plus rate" or the national prime rate plus a specific rate adjustment for risk of non payment. (hovers at around 4.5 to 5.0% now) See Till v. SCS Credit Corp 541 U.S. 465, 124 S. Ct. 1951, 158 L.Ed.2d 787 (2004). (Can the debtor cram down the interest rate on a car purchased within 910 days? topic for another entry)

3. The unsecured portion of the debt is treated as any other unsecured debt and shares in the funds set aside for unsecured creditors, an amount that may be very small.

The ability to file a chapter 13 bankruptcy and thereby change the treatment on a car loan, can be a major benefit to a debtor who has a steady income and an upside down vehicle.

According to Attorney Craig Andresen at bankruptcylawnetwork.com a Pennsylvania District court has ruled that a private employer MAY refuse to hire a job applicant solely because the applicant filed for bankruptcy in the past. See Rea v. Federated Investors, 2010 WL 370334 (W.D.Penn. Jan. 29, 2010)

The Court's language..."while section 525(b) does indeed prevent employers from discriminating against current employees based upon a bankruptcy filing, the unique wording of this section allows bankruptcy discrimination in the hiring process."

You can read Mr. Andresen's article here.

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.

Hiring a bankruptcy attorney is a big deal. An incorrect bit of advice can have serious consequences. In my opinion, fees and good sales technique shouldn't be determining factors in making the choice. This is my short list of what should be:

1. How many cases has the attorney personally been responsible for?

2. How many chapter 13 cases has the attorney aided to confirmation?

3. Does the attorney file claims against creditors in consumer cases?

4. Does the attorney litigate, i.e. file motions, appear in Court for hearings etc?

5. How long has the attorney been practicing and practicing consumer bankruptcy law?

6. Does the attorney personally meet with you more than once, personally prepare documents and discuss your options personally after the analysis is complete, or turn most work over to paralegals?

7. Does the attorney or staff "sell" bankruptcy to you or educate you about your options and the pros and cons of each?

8. Is the attorney directly accessible, or do you have to move through "guardians" to reach him or her?

9. Bar Complaints?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, commonly known as BAPCPA, imposed a "means test" on those filing bankruptcy. This means test primarily determines whether the chapter 7 filing is "presumptively abusive".

In order to determine whether a presumption of abuse exists, the debtor's current monthly disposable income (as determined by the means test itself) is multiplied by 60. If that amount is is equal to or greater than the lesser of $10,000 or 25 percent of the debtor's non priority unsecured debt, the presumption of abuse exists.

Presumptively Abusive doesn't mean that the filer is a bad person...it just means that if the filer were allowed to stay in the chapter 7 bankruptcy and gain a discharge of debt, the law wouldn't be followed.

If the filing fails the means test, the filer will have to convert to or file in the first place a chapter 13 bankruptcy, and pay a specific amount based on a form of the same test to unsecured creditors over what is typically a 5 year period UNLESS the filer is able to successfully rebut the presumption of abuse.

This means test only applies to individuals not businesses, and only if the debt is primarily consumer debt, or debt incurred by the individual for personal, family or household reasons. If the debt is primarily non consumer i.e. for the purpose of earning a profit or involuntary like tax debt, the means test shouldn't apply.

Congress inserted a provision in the bankruptcy code preventing the loss of a job because of a bankruptcy filing. The reasoning appears to be based on a belief that the intended fresh start provided by bankruptcy, wouldn't be complete without job security.

The current version of the code section can be found at 11 U.S.C. sec. 525(b) and partially reads as follows:

"No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt."

The weak spot for employees, especially in "at will" employment states like Az. is that the employer can fire for other reasons including those related to a person's financial history.

If an employee were to sue an employer for a violation of this code section post bankruptcy, he or she would have to prove that the bankruptcy was the sole reason for the firing.

If you think you need to file for bankruptcy, but are concerned about this issue, not only do you need to keep good employment records but you also need to have an experienced attorney help you weigh out all the pros of filing vs all the negative potential consequences including job loss. The choice to file will ultimately be your own.

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?" »

It is a crime to hide information about assets from the bankruptcy court. Bankruptcy Fraud is the common term. Read about it at 18 USC 152(3)

The first few lines of this section of U.S. Code read:

A person who—
(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;
(2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;
(3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;

the last line reads:

"shall be fined under this title, imprisoned not more than 5 years, or both".

Just a few weeks ago a woman in Idaho was indicted on fraud charges related to a bankruptcy case she had filed in 2005. See Former Mullan Woman Charged with Bankruptcy Fraud

She seems to have attempted to hide a house. I would imagine that a house is hard to hide, although I've never tried.

She obviously hadn't sought some basic legal counsel prior to her decision or simply didn't want to believe the counsel she received.

In my experience, the former is common but the latter problem is as well. Often, a potential bankruptcy filer will whisper "just between you and me", and then proceed to tell me about an item that may have been signed over to an old friend.

Continue reading "Full Disclosure in Bankruptcy is Mandatory" »

A bankruptcy case can be planned and filed by the debtor without the aid of counsel. It happens quite often.

In very simple cases, (some would argue that there isn't such a thing), the debtor sans counsel may escape unscathed, but may do so without really understanding the perils they encountered. Bankruptcy law is full of traps that the average filer and even many attorneys aren't aware of. It isn't just a simple matter of "filling out forms".

Some of the more common and serious problems I see when contacted by a debtor who has filed his or her own case are the following:

Continue reading "4 Common Mistakes When Filing Bankruptcy On Your Own" »

The Bankruptcy Code is made up of eight different sections or "chapters". Almost all bankruptcies are filed under sections commonly known as chapter 7, chapter 11 and chapter 13. Of these three, the chapter 7 bankruptcy is most popular.

In a chapter 7 bankruptcy, non exempt assets are "liquidated" or distributed to creditors based on the order of creditor importance (at least according to congress). A court appointed trustee is appointed to manage the liquidation of this non exempt property and to distribute it to creditors. If no one objects to the discharge of certain debts then the filer is discharged from his or her obligation to pay it.

The main reason that a chapter 7 bankruptcy is popular, is that it is typically quick. A well thought out bankruptcy that is also a "no asset case", i.e. there are no non exempt assets which are worth enough for the trustee to liquidate, is theoretically a 3-4 month process from filing to discharge.

It is important for a person with serious debt problems to understand that the choice to file for bankruptcy and the choice of bankruptcy chapter are personal. The choice to avoid bankruptcy and try to deal with debt directly is as well.

Except in the simplest of matters, that personal decision should only be made with the guidance of an experienced bankruptcy attorney.

The question is when should these decisions be made, after a short meeting with the attorney or after a more thorough analysis is complete?

I think that many debtors are under the impression that a simple one hour consultation with an attorney (or often non attorney) is enough to allow them to make these decisions.

In fact, many calls to my office start with something like, "I spoke to an attorney (friend, paralegal etc.) and I am ready to file a chapter 7 bankruptcy". My initial thought is usually, "how are you so sure"?

At most, a short consultation can provide the debtor with the sense that bankruptcy may end up being the only option in the long run. It may also provide some detailed information about how bankruptcy works and what problems may be encountered by the debtor.

However, the planning involved to prepare and file a well done bankruptcy case, the final decision as to which chapter makes the most sense, and the verification that there is not some better non bankruptcy alternative, cannot be made without a thorough review of hundreds of facts, timing issues, and potential changes.

This analysis is often made more complicated by the inability of the debtor to provide complete information at the initial consultation and during the analysis process, changes in the debtor's situation, and changes in the law.

I suggest that my clients, even in "simpler situations" hold off on their decision making until a complete review of all their information is complete and a second "analysis" meeting is final.
This way the "stones" are all turned over, before decision making is done.

I find that this creates less surprise and a well planned case.

You should wait as well for your attorney to finalize his or her analysis before setting your heart on a solution. Even if you are "sure" that you are a chapter 7 candidate.

I don't sell bankruptcy as a commodity. Why?

1. There are other options that may better fit the client's situation.
2. The client may have personal reasons for choosing to deal with the debt before relying on bankruptcy.
3. Bankruptcy is not always the best option from a financial standpoint. There are situations where the client will lose more financially in bankruptcy than outside it.

Having said that, I must admit that most of those I meet with, come to the conclusion, after review of their own numbers and how the law works, that bankruptcy makes the most financial sense.

A recent cnn.com article describes a woman with serious credit card debt who has chosen to live on a budget and pay the debt off. No matter her circumstance (she may have more non exempt asset value then debt or simply doesn't qualify well for a bankruptcy from an income and budget standpoint) you have to give her some respect for trying.

If you have serious credit card debt, I am not suggesting that you simply disregard bankruptcy as an option.

I do suggest that you sit down with a sharp pencil and clean paper to look closely at your actual income and budget. If it appears that paying the debt back will be difficult, find an experienced bankruptcy attorney who will personally help you understand your options. Preferably, someone who doesn't sell bankruptcy, but is looking out for your best interests.

The Ninth Circuit Court of Appeals, has decided the issue of whether a reaffirmation agreement is necessary in bankruptcy in relation to personal property.

Prior to the 2005 changes to the bankruptcy code that resulted in what is now known as "bapcpa", a debtor could "retain and pay" or "ride through" on it's car loan as long as he stayed current on the car payment.

The creditor with the security interest in the car was left without any legal obligation to sue on, should the car be surrendered or repossessed and a deficiency balance existed.

No reaffirmation agreement was typically necessary. (read more about what a reaffirmation agreement is here)

Not signing a reaffirmation agreement was good for the debtor because he obtained the best of both worlds as a result. i.e. Keep the car and make the payment, but not be liable on any deficiency balance should he not be able to afford the car down the road and after surrender.

Many attorneys felt as a result, that advising a client to sign a reaffirmation agreement with the creditor on the car loan inside of the bankruptcy case was malpractice. Especially if the car was upside down, i.e. it was worth much less then what was owed on it.

If the reaffirmation was signed unnecessarily and the debtor lost the car down the road he would then owe what sometimes amounted to a large deficiency balance nullifying some of the "fresh start" benefit gained in the bankruptcy case.

Continue reading "Ride Thru, Reaffirmation Agreements and the Ninth Circuit Court of Appeals" »

In light of a recent and important case from the Ninth Circuit Court regarding "reaffirmation" agreements, it may be a good time to talk about what a reaffirmation agreement is.

Technically, such an agreement in bankruptcy law is made between the debtor or the person who filed the bankruptcy, and the creditor who was owed money prior to the bankruptcy filing. That agreement "waives" the discharge of the debt that would occur at the end of the case if nothing were done.

In english...debtors owe creditors money for things like cars and houses. Those creditors maintain a security interest in the home or car to protect them should the debtor not pay.
If the debtor fails to pay for the home or car, the creditor will repo or foreclose to try and recoup the loss, and then maybe, especially where cars are concerned sue the debtor for any remaining balance owed.

When a bankruptcy is filed by the debtor, that obligation to pay on the particular debt will be discharged or wiped away should the case reach a successful conclusion.

What happens if the debtor gets the discharge of the debt and the creditor with the security interest is not being paid?

The creditor will eventually take the asset that was previously acting as security anyway, but the debtor will be free from ever paying the debt back.

The problem? The debtor doesn't want to lose the asset.

He or she simply wants to pay as they were, and keep the house and the car.

Prior to 2005, most Courts allowed for the debtor to simply continue to make the house and car payment directly to the lender, and NOT sign a reaffirmation agreement in Bankruptcy. Most of the time, the lender simply accepted the payments and continued as if nothing had happened.

BUT something had, because no reaffirmation agreement was signed, the debtor got the best of both worlds. He or she kept the asset, continued making payments on it, but the obligation to pay was gone.

Continue reading "Arizona Bankruptcy - Reaffirmation Agreement, what is it?" »

The typical consumer files a bankruptcy case in order to obtain a "discharge" of overwhelming debt. An unfortunate word that is used to describe what for many is a life changing "event". Why?

When a debt is "discharged", the obligation of the debtor to pay it, no longer exists. The obligation is simply gone...poof. It is government intervention in the realm of private contract relationship at it's "finest", and with some careful planning and preparation, it works like a charm.

Having said that, this powerful discharge has it's limits.

1. It doesn't deal with every debt. Some debts cannot be "discharged" by statute, like child support, newer income tax debt, spousal maintenance etc.

2. Even though the personal liability may no longer exist as a result of the "discharge", liens recorded against the debtor's property, may survive the bankruptcy unless they are modified or removed.

3. You can't get very many of them too close together. There are time limits that prevent "serial" bankruptcy filings and thus too many discharge "events". The creditor has to have some time to collect the debt between discharge dates.

4. Not everyone needs bankruptcy for purposes of obtaining a discharge. Some need it for other reasons, like saving a home from foreclosure or restructuring the repayment of debt. These people don't care as much about the discharge as others.

For those debts like credit card, repossession related, old income tax and medical bill debt that are typically governed by it, not only are they "gone", the discharge acts as a "permanent injunction" or a court order at the close of the case, against those same creditors. It replaces the "automatic stay".

If the creditor continues, post discharge, to attempt collection, that order is being violated, and can result in "punishment" for the offending creditor. Possibly even "punishment" in the form of money to the debtor.

If you have overwhelming debt, have been losing sleep consistently over it, and see no way to pay it in a reasonable amount of time, you probably need to "aquaint" yourself with the "discharge" provisions of the U.S. Bankruptcy Code.

Chapter 7 Bankruptcy is also known as a "straight" or "liquidation" bankruptcy. In a chapter 7, if the debtor qualifies to file based on his or her "inability" to pay debt, non exempt assets will be sold and given to creditors and most remaining debt then will be "wiped" away (discharged).

Chapter 13 Bankruptcy is also known as a "wage earner plan" or personal "reorganization". In a Chapter 13 bankruptcy, the debtor with a "regular" income, is able to keep non exempt assets and pay some portion of the debt over a 3 year to 5 year period. Sometimes the debt paid is a small amount and sometimes it is larger, depending on a number of different factors including the amounts of the debtor's income and budget, types and amounts of debts, and the debtor's non exempt asset value.

Certain debts that cannot be discharged in Chapter 7, can be discharged in Chapter 13.

Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts.

Chapter 11 bankruptcy is a reorganization case as well, and is typically only used by a debtor who doesn't qualify for either a chapter 7 or chapter 13 bankruptcy or a business entity.

In Chapter 11, the debtor will typically retain possession of assets and continue to operate the business.

The debtor devises a plan of reorganization which, if accepted by creditors can bind both the debtor and the creditors to its terms. Plans commonly call for repayment out of future profits, or a sale of assets.

Every so often, I read a letter or receive a call from an attorney or creditor after the filing of a client's bankruptcy, that attempts to explain to me the need for my client to file a motion with the local court to obtain a ruling as to whether the automatic stay applies to a collection case against the debtor.

Doing so is unnecessary. (although providing notice to the local court and other parties may be in order to ensure they are aware of the filing).

The filing of the bankruptcy petition alone invokes the bankruptcy code's automatic stay and it applies to collection activity in and out of court. (See 11 U.S.C. Section 362 of the bankruptcy code).

The "stay" provision takes effect the moment the case is filed and the debtor and his or her property is under the protection of the bankruptcy court itself with a few minor exceptions.

If you are in a bankruptcy case, and a creditor is continuing it's collection activity with knowledge that you have filed, it has probably violated federal law.

Talk to your bankruptcy attorney or a bankruptcy attorney experienced with automatic stay litigation in bankruptcy, if you are having this problem.

A bankruptcy filing becomes a public record. This means that anyone can see what you have disclosed to the court.

Most of my clients seem to understand this when speaking to me initially.

What they don't always understand, is that everything about your present financial life and many things about your past financial life, must be disclosed to the Court under the penalty of perjury.

You cannot exclude certain assets or debts from this disclosure requirement.

If you owe your cousin 2500.00 for the work he did on your home, and he considers himself to be a creditor of yours, you must disclose to the court that he is a creditor and propose to treat him the same as other creditors in a similar position.

If you re paid your cousin the money within a certain period of time prior to filing, you must disclose it.

If you owe child support or are owed child support you must disclose it.

The trade off for the loss of privacy is the "Fresh Start" or the removal of the obligation to pay on most debts.

The decision to make that trade, rests with the debtor.

If you file for bankruptcy, all collection activity by creditors must stop with a few exceptions. The part of the law governs this is called the "automatic stay".

So if a creditor is trying to collect from your or sue you based on a credit card, medical, breach of contract or other debt, they must stop all activity against you once you file.

They can't file a lawsuit, continue in a lawsuit, record a lien, report the debt to the credit reporting agency or seize property without permission from the court.

What happens if the creditor does continue with collection activity after notice of the bankruptcy has been received? They have likely violated the automatic stay rule and can be sued by the debtor. They may also have to pay damages and attorney fees.

I always suggest that if a creditor who is barred from collection by virtue of the bankruptcy filing continues to contact one of my clients, that the client or our office provide the creditor one more "notice" of the bankruptcy prior to suing. This notice usually goes out by phone and/or via a certified letter.

Most creditors "get the picture" and discontinue the contact.

Unfortunately, some continue. A lawsuit is then appropriate and often even necessary.

There are exceptions to the list of creditors who are completely barred from collection activity which will be discussed in further posts.

If you are in a bankruptcy and a creditor continues to contact you even after you are sure they know about the bankruptcy, you will want to speak to your attorney about whether a lawsuit is a good idea.

If you have credit card, medical bill debt, or other unsecured personal loans that are so large you can't pay them off in a reasonable amount of time, you will likely end up using one of the following options to deal with it.

1. Borrow your way out

In the recent past, most with serious unsecured debts would turn to their home in the form of a home equity line or second mortgage. This was a quick fix that usually provided a lower monthly payment to service the same amount of debt. The obvious problem now? Loans are more difficult to come by.

The other problem? The new lender will require that the home be pledged as security for the loan. Once that happens, the debt is here to stay. The borrower will eventually pay in full or lose the home. These loans are almost always of the higher rate and higher cost variety as well.

2. Non Bankruptcy Payment Plan - Consumer Credit Counseling

Many credit providers will work out a payment plan with you either directly or through a "credit counselor". These counselors or agencies gather your income and budget information, help you get organized, and propose a new payment arrangement to each creditor. The proposal typically consists of a reduction in the interest rate and a lower monthly payment. Problems do exist, especially where the debt is so high that no "payment plan" will ever catch you up.

For those with serious debt, the debt usually never goes away, the credit report continues to reflect late payments, and at some point a collector gets involved again.

If you are going to engage a credit counselor, make sure that 1. They are reputable 2. They are not doing something for you that you couldn't do yourself and 3. That the proposed plan is "doable" and will pay off the debt in full in a reasonable amount of time.

3. "Negotiate" your debt

Many unsecured credit card lenders will reduce the principal balance and accept a sum smaller then they are owed to "settle" the account. "A bird in the hand" as they say.

Once you have fallen behind on the debt, the creditor or collector has a "formula" that tells them how much they will accept to settle the account at any given time. If you are a bankruptcy candidate or if they believe that for some other reason they may end up getting less than they would like, they may adjust the amount downward.

The willingness on the part of these credit card companies has led to the growth of a horde of so called "professional" debt negotiators. You hear the ads on TV, Radio and if you listen to enough cable news, you start to hear them in your head.

Most of these companies include in their "pitches" things that aren't necessarily true. Things that lead you to believe that these credit card companies must allow you to settle your debt or that they have some secret that allows them to settle your debt for less than anyone else.

The truth however is a little different as follows:

A. You can probably do on your own what most "debt negotiation professionals" are able to do for you.

In order to have a shot at convincing the lender to settle for less than the standard, I find that you need to be a good candidate for bankruptcy and the creditor must believe that to be true, and you need to have the cash in your hand when you make the settlement offer.

If these two things aren't true, you are simply relying on the "good graces" of the creditor to determine the amount of settlement. That is all a "debt negotiation professional" does i.e. rely on good graces and a slick marketing campaign.

B. If you begin to make payments monthly to the "debt settlement professional" you will likely continue to get collection calls and you may even be sued before you come up with the funds to settle all the debts.

Monthly payments to the "debt negotation professional" does not stop the clock from ticking, nor does it stop the creditors litigation timeline. There is no secret word that the "professional" uses to magically stop the collection. Many people with serious debt learn this the hard way.

C. "Debt Settlement Professionals" are very expensive and you are vastly overpaying for what you get.

In essence, you are paying the company to set up an accounting system to collect and track your money. When they are paid the estimated amount for their fee and the estimated amount needed to settle, they make some phone calls. If you are sued in the meantime, they "earned their fee" for magically keeping the debt collector from suing you until then.

I have reviewed dozens of the contracts they use, and know that most people taken in by these operators pay a "set up" fee, a monthly fee and a percentage of either the total debt or the amount saved. For a debtor with $100,000 in credit card debt who settles the debt for 50%, or $50,000, the overall fee is usually $12,000 to $20,000.

Before you consider paying these types of fees, contact your local bankruptcy attorney. Ask him or her to put together a bankruptcy case if you are a good candidate for bankruptcy. Then ask them to use it and your funds as leverage to negotiate with your creditors on an hourly basis.

You will pay far less and likely get a much better result. One governed by Arizona State Ethics Rules for Attorneys.

D. Forgiven debt is taxable

Unless you fall under the "insolvency" exception, you will have to treat the forgiven portion of the debt as income on your tax return. Bankruptcy is the other exception.

E. While you are waiting to save the money to settle your credit score is being destroyed

Most creditors don't seem to be interested in settling unless you are late on your payments. Most people who engage the "professional debt negotiator" stop making payments and never start again. The plan falls apart, they still have the debt and the 10 months of late pays on the report. Thanks.

4. File for Bankruptcy

Filing for bankruptcy is usually the most comprehensive and effective method for dealing with serious debt. Bankruptcy can do the following:

A. Stops Debt Collection by virtue of the federally mandated "automatic stay"
B. Provides a means to save a home from foreclosure
C. Provides a means to save your car from repossession
D. Provides a potential means to reduce secured debt amounts
E. Discharges or wipes away most if not all of your consumer debt

Chapter 13 bankruptcy, allows you to pay what you can "afford" over a set amount of time to your creditors.

In almost every instance the amount paid in the chapter 13 is far less then a debt settlement negotiation will require you to pay.

There are downsides. Bankruptcy carries a stigma. It has become a bit more difficult to qualify to file, the workload to file has increased, it is a matter of public record and stays on the credit report for 10 years.

My clients go through a rigorous analysis process to determine which of the options described above is the best.

The following are two lists. The first is a list of the most common reasons I encounter in representing clients with debt that force them to use a chapter 13 bankruptcy instead of chapter 7 bankruptcy. The second list are the most common reasons I see people choose to file chapter 13 bankruptcy as opposed to chapter 7.

Must File Chapter 13 Bankruptcy - Most Common Reasons
1. Filed a recent bankruptcy case. (8 years for from chapter 7 to chapter 7)
2. Fail to qualify for a chapter 7 bankruptcy - i.e. fail the means test, filing chapter 7 would otherwise be done in "bad faith"
3. Majority of debt may not be discharged in chapter 7 but may be in chapter 13

Choose Chapter 13 Bankruptcy Instead of Chapter 7 Bankruptcy - Most Common reasons
1. Need to protect "non exempt" assets
2. Simply want to control creditors via court supervised repayment plan
3. Need to Protect co-debtor(s) from collection
4. Keep the IRS at bay - obtain an overall better monthly payment than installment or oic
5. Reduce Principal on certain car loans
6. Strip away/treat as unsecured debt second mortgages on home that are "wholly" unsecured
7. Stop Foreclosure and pay arrears over time.
8. Stop repossession and pay for car through chapter 13 plan at actual value.
9. Usually less expensive to actually file case than chapter 7.
10. Want to make the effort to try and pay creditors back something if only a small percentage of debt
11. Divorce related debt problems