Survey Looks at Student Loan “Debt Bomb” and Bankruptcy
Over the past ten years, Arizona bankruptcy lawyers have experienced a strong increase in the connection between clients’ mortgage-related problems and their interest in bankruptcy. As Chapter 7 or Chapter 13 bankruptcy applicants, debtors can immediately stop foreclosure and creditor harassment, while regaining their financial footing.
A recent survey indicates that debt relief attorneys nationwide are now noticing a major increase in the number of potential clients who are troubled by student loan debt. A report published by the National Association of Consumer Bankruptcy Attorneys (NACBA) found that 80 percent of the 860 lawyers surveyed say that student loan issues have increased “significantly” or “somewhat” over the past four years.
The authors of “Student Loan ‘Debt Bomb’: America’s Next Mortgage-Style Economic Crisis,” provide a variety of relevant factors to help explain this growing problem:
- The average college graduate in 2010 had accumulated over $25,000 in debt
- School debt burdens have recently increased by almost 50 percent among students who are in their 30s and 40s
- 95 percent of bankruptcy lawyers say that few educational borrowers have a chance of meeting the “undue hardship” standard for obtaining a discharge of college debt
- Two-thirds of bankruptcy attorneys report that collection efforts by student loan providers have become more aggressive in the past 18 months
While student debt is generally not subject to a bankruptcy discharge, seeking legal advice about student loans from a debt relief lawyer is still a sound idea. The Chapter 13 bankruptcy process can spell relief that allows a borrower to get caught up on their student loan payments while gaining significant relief from other obligations.
Schedule a free consultation to discuss your situation at one of our law offices in Phoenix, Scottsdale, Tempe, Avondale or Prescott. Call 480-269-9707 today.
Bankruptcy and Community Property in Arizona
Many of our clients are married couples who incurred large amount of joint debts together over the course of their marriage. However, not all of them end up filing bankruptcy jointly. Indeed, you are allowed to file a bankruptcy petition individually, without involving your spouse. The advantages of doing so may include:
1) An individual filing may help to avoid a credit score impact on your non-filing spouse.
2) Arizona is one of the nine states adopting community property laws. Therefore, once you are successfully granted a discharge in bankruptcy, it will not just apply to your individual debts, but also the community debts incurred by both of you during the course of marriage.
3) Further, in Arizona, the bankruptcy estate would include not only your separate property, but also the community property (properties owned by both you and your non-filing spouse). Hence, once you file the bankruptcy petition, the Bankruptcy Automatic Stay Protection under 11 U.S.C. 362 would apply to stop debt collectors from collecting debts against the community property, even though your spouse has not done anything under the Bankruptcy Code.
4) The non-filing spouse’s separate properties should not be treated as part of the estate so, absent any other considerations such as a fraudulent transfer, the Bankruptcy Trustee cannot reach those properties for bankruptcy distribution purposes.
Note: For readers of this article, who are now living in or used to live in other U.S. states which adopt common law property laws (i.e. equitable distribution property laws), be aware that the laws will vary and so you should consult an attorney in your area.
Call for a Free Consultation
If you are located in Phoenix or the surrounding area, Contact the Wright Law Offices online or call 480-269-9707 to set up a free consultation. This article is not meant to be a substitute for legal advice from an attorney as every person’s situation is unique. It is important that you hire an attorney to help you avoid the many pitfalls that can occur in a bankruptcy.
HOA Assessments and Bankruptcy
Many newer homes in the Phoenix, Arizona area are located in a neighborhood that is governed by a Homeowner’s or Community Association. They are commonly referred to as HOAs. You know the ones who send you nasty letters that your grass is a half-inch too long and that you will be fined if you don’t have it manicured very soon.
So you’ve filed bankruptcy and think that your obligation to your HOA has ended. Not so fast! The Bankruptcy Code, at 11 U.S.C. § 523(a)16, indicates that any assessments that come due after the order for relief are not dischargeable under most discharge sections of the Bankruptcy Code. The order for relief happens immediately upon the filing of an involuntary Bankruptcy case.
However, at least two courts have determined if you are surrendering your house to the mortgage company AND you receive a discharge under section 1328(a) of the bankruptcy code your obligation to your HOA may be discharged in a Chapter 13 Bankruptcy. In Re Colon, Bankr. Court, D. Utah (2011); In Re Kelly, Bankr. Court N. D. Cal (2010). Section 1328(a) requires a debtor to make all payments under the Chapter 13 Plan.
In Phoenix, Arizona, if you intend to keep your home and you have filed bankruptcy, you must pay your HOA dues that come due after you file your bankruptcy. This is true regardless of the Chapter you file under.
Even if you are surrendering your home to the mortgage company, you must pay the HOA dues that come due after you file bankruptcy until your mortgage company forecloses on your home AND you move out. The only exception may be in the event that you elect to surrender your home AND you receive a discharge under 11 U.S.C § 1328(a).
If you are unsure about where you stand, consult an attorney who is knowledgeable. Whether you live in Avondale, Litchfield, Buckeye, Peoria, Glendale, Phoenix or any other city in Arizona, Wright Law Offices PLC can help you through your bankruptcy.
Chapter 7 Bankruptcy in Phoenix
As a Phoenix Attorney who specializes in bankruptcy law, my biggest suggestion to anyone wanting to file a Chapter 7 bankruptcy is simple: fully cooperate with your attorney and fully disclose your financial information to your attorney.
As mentioned in previous articles, a Chapter 7 bankruptcy is usually the quickest and cheapest remedy for most individual debtors to get their financial house in order. Howver, to reach that goal, a coooperative relationship between the debtor and his or her attorney is not only recommended, but a necessity.
Bankruptcy attorneys understand that many people have financial skeletons in their closet, especially those who take risks in starting a business or have various personal financial issues. For example, some debtors may assume that they don’t have to disclose every piece of property that they own to their bankruptcy attorney or the bankruptcy trustee. Unfortunately, that is a very bad assumption and if you are caught, you risk not only the dismissal of your case, but also criminal penalties and big fines. Therefore, be sure to reveal any and all potential skeletons to your bankruptcy attorney at the initial consultation.
In summary, the only way to proceed with a Chapter 7 bankruptcy is to tell your attorney everything. Don’t take matters into your own hands. Rather, give you attorney a chance to do his job and resolve your issues for you. To do otherwise is to risk dismissal of your bankruptcy and also potential civil and criminal penalties. If you would like to schedule a free consultation with a knowledgeable attorney at Wright Law Offices, contact us online or call 480-269-9707.
Supreme Court Looks at Allowable Expenses for Bankruptcy Means Test
Bankruptcy in Arizona, as in all states, is subject to a complex set of federal statutes as well as specific state laws that govern bankruptcy exemptions and other issues. Many people who are interested in bankruptcy as a debt relief option are aware that significant changes to the U.S. Bankruptcy Code took effect when Congress passed and President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005.
One important part of these changes was the introduction of a “means test” to determine eligibility for Chapter 7 bankruptcy and compute the amount of disposable income aChapter 13 debtor has available for reimbursement of creditors. Earlier this year, the U.S. Supreme Court interpreted the section of the bankruptcy code that defines the expenses that a debtor can deduct when carrying out a Chapter 13 or Chapter 7 means test.
The bankruptcy code defines an individual or couple’s monthly expenses using national and local standards for basic necessities, as well as Internal Revenue Service (IRS) expense tables for federal income tax purposes in the debtor’s area of legal residence. In addition to housing, food and transportation costs, specifically defined expenses include “reasonably necessary health insurance, disability insurance, and health savings account expenses” for the debtor and his or her spouse and dependents. Monthly expenses of the bankruptcy applicant do not include any payments for debts.
Judicial Resolution of Complex Bankruptcy Disputes
The recent Supreme Court case, Ransom v. F.I.A. Card Services, involved a Chapter 13 petitioner who had named FIA as an unsecured creditor. In compiling information for his bankruptcy petition, he listed among his assets a car that he owned outright with no car loan or lease payments. To determine his allowable expenses, he specified a car-ownership deduction at the allowed maximum as well as a separate deduction for the costs of car operation and maintenance.
FIA objected to the inclusion of the car ownership deduction, which would have reduced his disposable income over the duration of the 60-month bankruptcy repayment plan by $28,000. The U.S. Bankruptcy Court for the District of Nevada agreed, and its judgment was affirmed by the Bankruptcy Appellate Panel and the U.S. Circuit Court of Appeals for the Ninth Circuit.
The Supreme Court agreed to review the case, and focused its analysis on section 707(b) of the Bankruptcy Code, which provides that a debtor is not allowed to claim all monthly expenses, but only “applicable” expenses. The Court defined applicable to mean “appropriate, relevant, suitable or fit,” and in the bankruptcy context the Court concluded that this meant that a debtor must have actual costs related to the category of deduction.
A nearly unanimous Supreme Court held that the category of car-ownership deductions “encompasses the costs of a car loan or lease and nothing more,” and concluded that the petitioner could not claim the deduction because he had no lease or financing payments. The lone dissenter, Justice Antonin Scalia, took the side of the bankruptcy petitioner, a position that had also been followed by three other U.S. Courts of Appeal. Justice Scalia noted that the majority’s interpretation of applicable “produces a situation in which a debtor who owes only a single remaining payment on his car gets the full allowance.”
Arizona Bankruptcy Attorneys Help Clients Get a Handle on Financial Complexities
The common characteristic of all meaningful long-term debt relief strategies is that they require a thorough look at the hard numbers behind a couple or individual’s financial situation. A debt relief lawyer can help a client understand the pros and cons of every option, including the significance of deductibility of expenses for Chapter 7 and Chapter 13 means tests.
The Supreme Court’s recent decision regarding vehicle-ownership expenses could have significant implications for a client who considers pursuing a Chapter 7 or Chapter 13 bankruptcy. A Phoenix bankruptcy lawyer can explain precisely why this may be so under a client’s unique circumstances. For those who fail to qualify for Chapter 7 liquidation, a clear understanding of the latest legal developments can provide a clearer assessment of the advantages of a Chapter 13 reorganization, including the effect on mortgage foreclosureand a host of other debt-related issues.
Chapter 13 Bankruptcy in Phoenix
The Phoenix real estate situation continues to look bleak, at least as far as valuations go. According to an article posted on Phoenix real estate website www.phoenixpowersearch.com, foreclosures in the Phoenix area continue at a rate of 3,000 to 4,500 units per month (click here for the full article http://www.phoenixpowersearch.com/2011/05/how-is-the-phoenix-real-estate-market/ ). While the article does mention some potential areas of improvement to the Phoenix market such as a decline in the Active Notices of Default for residential properties, this is of no help to Phoenix homeowners who have already had their home values slashed by fifty percent or more over the last four years. If you are one of these Phoenix homeowners, then a Chapter 13 bankruptcy may be a great way to improve your overall situation. For example, the majority of Phoenix residents owe more than what their house is worth. If this is the case for you and you have a second mortgage or home equity line of credit, you may qualify for what is called a Chapter 13 lien strip. A Chapter 13 lien strip would re-categorize your secured loan into an unsecured loan that can be discharged at the end of the Chapter 13 bankruptcy. This is just one of the ways that a Chapter 13 bankruptcy can ease the overall burden of your debts.
I am often shocked when I speak with potential clients at my Phoenix office and they do not realize the options and flexibility that a Chapter 13 bankruptcy can give them. A Chapter 13 bankruptcy case is a way to make one monthly payment for three or five years and then be back on track with your life and debt free. Also, during the pendency of the bankruptcy plan, your unsecured debts will go to zero percent and the credit card companies have to stop adding in fees and other costs immediately upon the filing of the case.
Unfortunately, many people are afraid of bankruptcy and afraid to even explore their options. At the very least, you owe it to yourself to speak with an attorney in the Phoenix area to find out more and discover if it might be a route worth taking. Phoenix residents should know that Chapter 13 bankruptcy can be an especially useful tool to solve their issues as a result of the real estate crisis that continues to plague Phoenix.
I am an Arizona attorney and my articles only deal with Arizona and Federal Bankruptcy law. All legal services offered to Arizona Residents Only. This article should not be construed as legal advice, if you need to file a bankruptcy, contact an attorney in your state.
To learn more about Chapter 13 bankruptcy, contact us online or call 480-269-9707 for a free consultation.
Fogotten Creditor in Bankruptcy
WHAT HAPPENS IF I FORGET TO LIST A CREDITOR IN MY CHAPTER 7 BANKRUPTCY IN ARIZONA
It seems to happen all the time. A debtor files a Chapter 7 petition and within several months receives her §727 discharge.Shortly thereafter, the bankruptcy clerk’s office closes the case pursuant to §350(a) and Federal Rule of Bankruptcy Procedure 5009 (Fed. R. Bankr. P.).
Within months, the debtor is contacted by a long forgotten landlord, credit card issuer, or relative whose debt was not listed on the schedule of creditors and who is now demanding payment. The nervous debtor contacts the bankruptcy attorney and explains that their failure to list the debt was a mistake, the result of forgetfulness or inadvertence.
If you happen to have filed your bankruptcy in Arizona, which is part of the 9th Circuit, it may not matter as long as your omission of the creditor was not intentional. If your case was what is commonly referred to as a no asset Chapter 7 case the 9th Circuit Court of Appeals has ruled that a creditor who was inadvertently left off of the creditors’ list is still a discharged debt. In re: Beezley, 994 F.2d at 1435-36. At least one Arizona Court of Appeals agrees with the Beezley Court. Webber v. Grindle Audio Productions, Inc. 60 P.3d 224 (Ariz. Ct. App. 2002).
Both the 9th Circuit and the Arizona Court of Appeals reasoned that in a no asset Chapter 7, there are no assets to distribute to any creditor, listed or not. Because the case is a no asset Chapter 7 a date is not set for submitting proofs of claims. No asset cases do not require filing proofs of claims. Fed. R. Bankr.P. 2002(e).
What happens then when grandma decides to sue you for that loan she gave you years ago that you failed to list in your bankruptcy? She will more than likely bring suit in a State Court. What can the State Court do? The 9th Circuit Court of Appeals has determined that they do not have the jurisdiction to determine whether your debt to grandma is dischargeable or not. In re: Lon McGhan, 288 F.3d 1172 (9th Cir. 2002) citing Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir.2000) (en banc). It appears that grandma will have to go to the Bankruptcy Court to determine if her claim is discharged or not. Based on the discussion above, the Bankruptcy Court should determine that the debt has been discharged and any action in the State Court is void.
Please bear in mind that this article only applies in Arizona and the 9th Circuit. And, as always, please consult with a qualified attorney who is familiar with the decisions in your jurisdiction.
If you are located in Phoenix, Scottsdale, or Tempe, contact the Contact the Wright Law Offices online or call 480-269-9707 to set up a free consultation. This article is not meant to be a substitute for legal advice from an attorney.
Phoenix Coyotes Bankruptcy
American companies frequently use the bankruptcy process to reorganize and help a business survive through difficult economic times. For similar reasons, Chapter 7 bankruptcy and Chapter 13 bankruptcy make sound financial sense for individuals and married couples who have fallen behind due to mounting debts caused by medical expenses, job loss and other difficulties.
One of the most notorious recent corporate bankruptcies in Arizona involves the local National Hockey League franchise, the Phoenix Coyotes. Since moving from Winnipeg in 1996, the club has not had a great deal of success, never making it past the conference quarterfinals and failing to make the playoffs as often as not. That led to financial troubles and previous owner Jerry Moyes’s decision to put the team in bankruptcy. NHL records indicate that the Coyotes lost $36.6 million this season.
One example of the major complexities that can arise in this type of business bankruptcy is the ongoing agreement that the team has with the City of Glendale, which built the Jobing.com Arena to host the Coyotes. Due to that obligation, the bankruptcy court prevented Moyes from selling to a Canadian buyer who would have relocated the team. The NHL finally emerged as owner, essentially by default, and is trying to bring in a new owner who may be able to make the business succeed in Arizona.
Consumer Bankruptcy Can Provide Effective Debt Relief
The closest analogy to this process is the liquidation of assets for a consumer who qualifies for Chapter 7 bankruptcy. Certain property – by no means all assets – must be liquidated to satisfy the claims of creditors to complete a discharge of debts owed by an individual or married couple. Arizona bankruptcy law details exemptions from the liquidation process, including retirement accounts, $150,000 in homestead equity, $5,000 in value in motor vehicles (double this value for a couple), and household items such as furniture.
Best of all, the process is much more simple. A Phoenix bankruptcy lawyer can further explain how the consumer bankruptcy process proceeds much more quickly than a large-scale business bankruptcy. But in the end, the goal is the same: to give the bankruptcy applicant a fresh start and a brighter financial future.
Advantages of Chapter 13 Bankruptcy
Many potential clients come to my Phoenix office for a consultation and think that they want to file a Chapter 7 no matter what because they want to wipe out all of their debts as soon as possible. While this may be the best option for many individuals, it is definitely not the case for all. This article discusses some of the advantages that a Chapter 13 bankruptcy can offer.
Residents of Phoenix are still losing their homes throughout this ongoing recession/depression because they simply cannot catch up on their house payments and have significant house arrearages. In a Chapter 13, those house arrearages will be made up through the Chapter 13 bankruptcy plan. A Chapter 13 bankruptcy plan is either 36 or 60 months. So, instead of having to catch up on all of your arrearages at once in order to avoid a trustee sale on your home, you can file a Chapter 13 and be able to pay off those arrearages over the course of 36 or 60 months. Therefore, for those residents of Phoenix who want to keep their homes, there is a huge advantage to filing a Chapter 13 bankruptcy instead of a Chapter 7.
In addition, many Phoenix residents are upside down on their mortgages and have more than one mortgage on their homes. Chapter 13 bankruptcy gives you the opportunity to “strip” a second or third mortgage off of your home, convert it to an unsecured debt and discharge it at the end of the bankruptcy plan.
Further, a Chapter 13 bankruptcy can allow you to cram down loans on personal property such as vehicles if they were purchase at least 2 and ½ years prior to the bankruptcy filing. If you have debts owed to the IRS, they can only be paid through the Chapter 13 plan as well and cannot collect directly from you during the 36 or 60 month plan, which allows you some breathing room if you have tax debt problems. Also, your student loan payments will be stayed during the course of the Chapter 13 bankruptcy plan.
If you live in Phoenix or the Phoenix area, give Wright Law Offices a call at 480-269-9707 and let us discuss with you further the potential financial benefits to filing a Chapter 13 bankruptcy and whether or not you qualify.
How to Stop Pesky Creditor Calls
Harassing calls from creditors can be one of the most stressful parts of being in debt and not having the ability to pay your debts. In the Phoenix area, many people are living this nightmare on a daily basis.
There are a few different ways to put a stop to the creditors that are giving you so much worry. Firstly, threats such as, “I am going to have you put in jail if you don’t pay” are illegal, a creditor cannot threaten to do what he or she cannot legally do. Typically, you cannot go to jail from simply not paying your debts. Therefore, this type of threat is illegal pursuant to the Fair Debt Collection Practices Act.
The Fair Debt Collection Practices Act is a set of federal laws that essentially provide protection to you, the debtor, from debt collectors. The full act can be found here: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
If there is a violation of this act, you may be able to sue the creditor and obtain monetary damages! You read that right, you may be entitled to actually obtain money from the company or entity that is trying to get money from you. If you suspect a creditor may be in violation of this act, you should immediately contact an attorney in your area. If you are in the Phoenix, Scottsdale or surrounding areas, give Wright Law Offices a call and we can help you make a determination as to whether or not you have a potential claim against a harassing creditor or collection company.
Another way to put an almost immediate stop to those collection calls is to file bankruptcy. Any contact of you by a creditor after a bankruptcy is filed is in violation of federal law. If a creditor dares to harass you after a bankruptcy, you can file a motion for sanctions against that creditor and also win monetary damages. Again, if you are in Phoenix, give us a call at Wright Law Offices and we will help determine if bankruptcy is a suitable option for you.
Contact Us to Learn More
Call one of our Phoenix Bankruptcy attorneys at 480-269-9707 or send us an e-mail, and we will can help get you past the pesky creditor calls and on to a fresh start. We look forward to meeting with you for a free consultation.
