Articles Posted in Bankruptcy Basic Questions

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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.

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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.

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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.

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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.

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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

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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.
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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:
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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.

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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.

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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.