August 15, 2013

Student Loan Interest Rate Reduction

A bipartisan bill, expected to be signed by President Barack Obama, would lower the rate on federally subsidized Stafford loans from 6.8 percent to 3.9 percent. It comes a month after lawmakers failed to reach a deal to keep the interest rates from rising from 3.4 percent to 6.8 percent. This is good news for everyone with student loans. Total student loan debt in this country is now higher than total credit card debt. It is fast becoming the number one debt problem in America.

I am the State Chairperson for the National Association Consumer Bankruptcy Attorneys (NACBA). Our lobbying arm worked very hard to get this interest rate reduction. We are continuing to lobby for changes to the bankruptcy law regarding the discharge of student loans. Current bankruptcy law only allow the discharge of student loans if the debtor can prove a hardship. The rules for hardship are so strict that it is virtually impossible to obtain a hardship discharge unless you are totally disabled and have been making payments on the loans.

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Before 2005, we could discharge private (as opposed to government guaranteed) student loans. That is no longer the case. NACBA is lobbying very hard to remove this private student loan restriction because these loans have the highest interest rates and private student loans are not eligible for most of the programs that government student loans have that allow for lower payments or forbearance. Once we have accomplished this, we will be lobbying for a return to the student loan discharge law as it existed before 1995, which did allow for a bankruptcy discharge for student loans that were over 7 years old.

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August 9, 2013

Select Arizona Exemptions — Guns, Motorcycles and Professionally Prescribed Prostheses

When it comes to guns, motorcycles and prescribed health aides, folks get downright indignant if someone tries to take them away.

It seems people think the second amendment to the U.S. Constitution has something to do with guns. This amendment has been around for a long time. It was enacted by congress on December 15, 1791. It reads as follows: “A well regulated Militia, being necessary to the security of a free state, the
right of the people to keep and bear arms, shall not be infringed.”

Although the words are simple, the meaning has been debated by many people in the last several decades. Gun enthusiasts are pretty clear on the meaning, however, “stay away from my firearms”.

Motorcycles have been part of the American culture for a long time too. Bicycle racing was at its height in the United States in the 1890s and shortly after that, motor driven cycles were invented. The Harley-Davidson Motor Company made its appearance in the manufacture of motorcycles in 1903. By 1913 there were thirty-seven different makes of motorcycles being manufactured in the United States, including Indian, Thor, Black Hawk, Breed, and Corson Special. Motorcycle slogans such as “Live Fast, Die Young” and “Live to Ride, Ride to Live” express how many motorcyclists feel about the experience of owning a motorcycle.

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And of course, you are wondering, why are we interested in Prescribed Health Aides and what do they have to do with guns and motorcycles? Well, read on and you’ll learn something. Folks with wheelchairs, crutches, cains, and scooters can get just as indignant as bikers if you try and take their crutches away.

What is a Prescribed Health Aide or a Professionally Prescribed Prostheses in the bankruptcy context, anyway? There is virtually no case law on this. Research of the issues indicates that they are designed to allow an injured person to approximate normal body function or to compensate for the effect that the injury had on normal body functions
So, if you want to file bankruptcy, its normally a “Voluntary” thing. This means that, due to your circumstances, you are choosing to file for bankruptcy. You do not have to do so. As a result, how bankruptcy affects your rights in relation to motorcycles, guns, and prescribed health aides is not an infringement of your constitutional or god given rights.

In Arizona, effective September 15, 2013, if you file a bankruptcy, you can exempt certain interests in motorcycles, guns, or professionally prescribed prostheses in new amounts. The relevant Arizona Revised Statutes, or portions thereof, are as follows:

“33-1125. Personal items
The following property of a debtor used primarily for personal, family or household purposes shall be exempt from process:
... 7. One typewriter, one bicycle, one sewing machine, a family bible, a lot in any burial ground, one shotgun or one rifle or one pistol, not in excess of an aggregate fair market value of one thousand dollars.
8. One motor vehicle not in excess of a fair market value of six thousand dollars. If the debtor or debtor's dependent is physically disabled, the equity in the motor vehicle shall not exceed twelve thousand dollars

9. Professionally prescribed prostheses for the debtor or a dependent of the debtor, including a wheelchair. “

So, there are certain facts you have to face, in relation to guns, motorcycles, and medically prescribed prosthesis, should you choose to file bankruptcy.

A. You can keep ONE shotgun or ONE rifle or ONE pistol, not valued over $ 1,000.00. (This doubles if you are married).

B. You can keep ONE motor vehicle (this includes a motor-cycle) with a fair market value of $ 6,000.00. (This doubles if married.) The statute indicates that you may have a motor vehicle with equity of $ 12,000.00 if the debtor or debtor’s dependent is physically disability.

C. You can keep professionally prescribed prostheses for the debtor or a dependent of the debtor, including a wheelchair.


Its important to note that you may have issues successfully claiming a motor-cycle exempt under the physical disability aspect of the statute, unless you can show how the particular motorcycle meets the statutory requirement. Since the statute does not really say much about it, you may want to consider how a reasonable person might view your claim of exemption.

The gun exemption is going to $ 1,000.00 per gun, that’s a $ 2,000.00 gun if married (stacking exemptions) or two one-thousand guns if married.

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Professionally prescribed prostheses are wide open. There are no upward dollar limits on these items. There is virtually no case law on what the definition of “professionally prescribed prostheses” is. Its apparent, however, that you need a professional to prescribe the item for you, presumably for a medical reason - mental or physical. So now we leave you with some questions for your consideration. Take a look at the pictures accompanying this post. If a debtor could obtain a prescription for these items, could they be successfully claimed as exempt, and therefore retained, when doing a bankruptcy? Remember, there is no dollar limit on professionally prescribed prostheses.

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June 28, 2013

ARIZONA LEGISLATURE AMENDS EXEMPTIONS FOR BANKRUPTCY

For the first time since 2001, Arizona has increased the exemptions that a Debtor may claim when he files a bankruptcy. When debtors file a Chapter 7 bankruptcy, they receive a discharge of their debts (with some limited exceptions). In exchange for this discharge, a trustee is appointed who takes and sells some of the debtor’s property to be used to pay his creditors. However, pursuant to the Arizona exemptions, there are some items the trustee cannot take. The debtor gets to keep these items to help with her fresh start. Beginning September 15, 2013, the new exemption law allows exemptions in more items of property and for increased values. Some of the highlight are as follows: [NOTE: Regarding a debtor’s home-This was unchanged. A debtor can still exempt equity of $150,000].

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1. All wearing apparel not in excess of a fair market value of five hundred dollars ($500).

2. All musical instruments provided for the debtor's individual or family use not in excess of an aggregate fair market value of four hundred dollars ($400).

3. Domestic pets, horses, milk cows and poultry not in excess of an aggregate fair market value of eight hundred dollars ($800).

4. All engagement and wedding rings not in excess of an aggregate fair market value of two thousand dollars ($2,000).

5. The library of a debtor, including books, manuals, published materials and personal documents not in excess of an aggregate fair market value of two hundred fifty dollars ($250).

6. One watch not in excess of a fair market value of one hundred fifty dollars ($150).

7. One typewriter, one computer, one bicycle, one sewing machine, a family bible, a lot in any burial ground, one shotgun or one rifle or one pistol, not in excess of an aggregate fair market value of one thousand dollars ($1,000).

8. Equity in one motor vehicle not in excess of a fair market value of six thousand dollars ($6,000). If the debtor or debtor's dependent is physically disabled, the equity in the motor vehicle shall not exceed twelve thousand dollars ($12,000).

9. Professionally prescribed prostheses for the debtor or a dependent of the debtor, including a wheelchair.

10. A total of three hundred dollars ($300) held in a single account in any one financial institution.

Perhaps the most important change concerns self employed business debtors who can now exempt the tools, equipment, instruments and books, including telephone numbers, client or customer contact information, or marketing tools, such as websites, domain names or any other intangible work product, in the possession of a debtor or the spouse of a debtor primarily used in, and necessary to carry on or develop, the commercial activity, trade, business or profession of the debtor or the debtor's spouse, not in excess of an aggregate fair market value of five thousand dollars ($5,000). For the purpose of this paragraph, “tools” do not include a motor vehicle primarily used by a debtor for personal, family or household purposes such as transportation to and from the debtor's place of employment.


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January 15, 2013

JOSEPH A. SMITH APPOINTED AS MONITOR FOR NATIONAL MORTGAGE SETTLEMENT

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

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July 17, 2012

WILL THERE FINALLY BE SOME RELIEF FOR DISTRESSED HOMEOWNERS?

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

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

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

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July 7, 2011

Just Say No To Bankruptcy Biases

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

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

In order to get past the stigma and stereotypes associated with bankruptcy it can be useful to really break down the circumstances that might lead a smart, capable, and responsible individual to look to the Bankruptcy Court for relief from debt. I will even use an extreme example by selecting Sonja Morgan, New York socialite and member of the cast of Bravo TV’s Real Housewives of New York City to make my point. sonja-morgan-getty-250.jpg
Ms. Morgan is a smart, attractive, New Yorker who by many accounts seemed to have it all and have it all together. These adjectives describing Ms. Morgan ought not to change simply because she elected to exercise her constitutionally protected right to bankruptcy protection. This is especially true when so many of the reasons that lead her to bankruptcy were very much beyond her direct control. Unfortunately the media and those in society are judging Morgan and looking down their noses at her causing her emotional distress.

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

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

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

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

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December 29, 2010

Will the Credit Card Accountability Act of 2009 slow bankruptcy filings?

President Obama signed the "Credit Card Accountability Responsibility and Disclosure" Act in May of 2009. The law was designed to further restrict credit card practices that the government and many consumer groups considered harmful. A few requirements of the law that I found to be interesting:

1. Credit card companies will not be able to charge a penalty fee that exceeds the amount associated with the violation. If the payment was $10.00, the penalty for paying it late can't be more than $10.00.

2. Penalty fees must be "reasonable and proportional to the omission or violation".

3. Late fees and fees for other violations against the terms and conditions of using the credit card can't be more than $25.00 unless the violation is a repeat, or it costs the company more than $25.00 to deal with it.

4. Credit card companies are prohibited from charging inactivity fees on gift cards and gift cards can't expire for 5 years.

5. Credit card companies must show the consequences of negative actions, including the release of periodic statements concerning the time it would take to pay off the balance and the total cost.

Some other changes:

1. All contracts and terms must now be in "clear in language"

2. The terms of the contract aren't allowed to change for the first year.

3. All promotions must be plainly disclosed.

4. Consumers must no approve transactions that would place balances over limit instead of incurring an over limit penalty.

5. Fees on low limit and bad credit cards would be restricted.

For those with serious credit card debt, the issue is whether or not this act has or will help them avoid bankruptcy.

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February 3, 2009

Nationwide Bankruptcy Filings in January 09 Jump 34%

According to an Article posted February 3, 2009 at Bloomberg.com, personal bankruptcy filings climbed by 34% in January of 2009.

The American Bankruptcy Institute expects 1.4 million consumer bankruptcies to be filed this year up from 1.06 million in 2008.

Considering the numbers, Arizona Bankruptcy filings will likely grow close to the number of filings in 2005. Those considering bankruptcy right now in Arizona are not alone.

If you are considering bankruptcy, be aware that bankruptcy is not typically a simple process. The law, when considered in relation to an individual's set of facts, can create a myriad of pitfalls and options.

It is only with the help of an experienced bankruptcy attorney that these potential issues can be spotted and fully discussed.

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February 3, 2009

Foreclosures Rise 81% in 2008 from 2007

According to a recent USA today article, home foreclosures rose nationwide by 81% from 2007 and 225% from 2006.

Total repossessions were 850,000 up from 404,000 in 2007.

Arizona's numbers were among the leaders.

The question is whether proposed government fixes, including a proposed mortgage modification in bankruptcy bill, will stem the problem short term.

It appears that the market will have to reach a level that attracts buyers and money back into the system. This means more short term foreclosure activity.

For many it may be possible to modify the loan now, or use a chapter 13 to catch up the arrears and save the home from a foreclosure filing.

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