One of the most common fears of those facing bankruptcy is that they will be left homeless with no earthly possessions.  Fortunately, this is not the case.  Each state has its own set of exemption statutes that ‘exempt’ certain property — meaning that your creditors cannot take it from you.  Most are familiar with the homestead exemption, but most are not aware that Arizona has exemptions that protect things like your household goods, a car, your wedding rings, right down to a shotgun, a bicycle, and a typewriter.  Because of this, most do not lose any property while going through the bankruptcy process.  Also, Arizona’s exemptions are relatively generous when compared to other states and protect most property.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is considered a liquidating bankruptcy.  Specifically, if you own assets that are free and clear of liens, and are not protected by one of Arizona’s exemption statues, in a Chapter 7 bankruptcy case that property will likely be seized and sold with the proceeds going to your creditors.  Thus, it is very important that prior to filing bankruptcy that you consult with a bankruptcy attorney to review your property and make sure that your property is properly protected.  I have seen the sad situations that arise when people file bankruptcy without the benefit of legal counsel or who have accepted incorrect advice from friends or family.  Often those in such a situation are blind-sided by the Trustee in their case and are shocked when the Trustee seizes property that the person thought was protected.

So what is exempt?  While Arizona has numerous exemption laws, below are few of the most common:

• Homestead – you are permitted to have up to $150,000 in equity in your home (not a big problem for most in this economy).  It is important to note that you can only claim a homestead in your personal residence, not an investment property.
• Household Goods – Single people in Arizona are entitled to keep household goods such as furniture, pictures, etc. that have a liquidation value (think yard sale value) of no more than $4,000.  Married couples are entitled to double that exemption to $8,000.
• Cars - A single person in Arizona is permitted to keep a single vehicle with no more than $5,000 in equity.  Married couples are each entitled to keep vehicles with no more than $5,000 in equity in each vehicle, or alternatively can apply both exemptions to one vehicle for a total exemption of up to $10,000.  Further, an individual with a physical disability can claim up to a $10,000 exemption in one vehicle.
• Wedding Rings – A married couple is permitted to keep their wedding rings with up to $2,000 in liquidation value.  Often people feel that this is insufficient and are worried about losing their wedding rings.  I tell people that they should take their wedding ring to a pawn shop to get an estimate of what it is worth.  Most are surprised (and a little depressed) at what the true liquidation value of their wedding ring is.  Once I had a client who had purchased a wedding ring for nearly $15,000 many years before, and were surprised to learn that of the three pawn shops she went to, the most that was offered to her was $1,500.
• Cash – While most exemptions are very generous in Arizona, on the day you file for bankruptcy single filers are only permitted to have $150 while married couples are permitted $300.  Any amounts over these limits, whether they be in savings accounts, checking accounts, money market accounts, stocks, or under your mattress, will be seized by the Trustee in a Chapter 7 bankruptcy.

With some planning you can often legally protect many non-exempt assets by converting them into exempt assets prior to filing bankruptcy.  This takes time and informed advice.  An Arizona bankruptcy attorney can advise you in your particular situation if your property will be at risk.

Chapter 13 Bankruptcy

One of the benefits to a Chapter 13 bankruptcy is that you will remain in possession of all of your assets, whether they are exempt or not.  You will, however, be required to pay back a small portion of all of your unsecured debts (i.e., credit cards) over a 3 to 5 year period.  How much you must pay each month is largely dependent upon how much disposable income you have.  Disposable income is essentially calculated by subtracting your monthly expenses from monthly income.  The result is a good estimate of what your monthly plan payment will be.

However, this number will be inflated if you have non-exempt property.  The more non-exempt property you have in a Chapter 13 bankruptcy case the higher your monthly payment will be.  For example, if you own a boat free and clear of any liens that has a value of $15,000, you will be required to pay the value of the boat ($15,000) to your creditors over the 3 to 5 year period.  On a 5 year plan that would be an additional $250 per month!  You would be able to keep the boat, but as you can see from that example it can have a large impact on what you must repay your creditors.

With that in mind, it is important that you take full advantage of Arizona’s exemption laws in a Chapter 13 bankruptcy case to minimize the amount that you will be required to repay creditors.  Some property (like a boat) is not exempt and there will be no way to avoid the impact it will have on your monthly plan payment, but most people’s belongings are exempt and properly claiming them exempt in your bankruptcy documents will save you considerable money as you are trying to get back on your feet through the bankruptcy process.

Important Note for New Residents of Arizona

If you are new to the state, it is important to know that you must have lived in Arizona for at least two years before you can avail yourself of Arizona’s exemption statutes.  While you can file bankruptcy in Arizona after you have lived here for a little over three months, until you have lived here for two years you will be required to use the exemption statutes from the state you recently moved from.  Often this is not a big deal, but there are states that have less favorable exemption statutes that protect much less property than Arizona’s laws do.  Before filing a bankruptcy it is important to review your home state’s exemption laws to evaluate what property you have that may be at risk.

If you would like to learn more about how Arizona’s exemption laws will impact your Chapter 7 or Chapter 13 bankruptcy case, and to learn more about the bankruptcy process and how it can help you, contact attorney John Skiba for a free consultation at (480) 464-1111.

For many Valley businesses, being served with even one major lawsuit can cripple business operations.  Even a successful defense can be expensive, and losing could end the business.

One business recently in the news, Luna Innovations, filed for bankruptcy protection under Chapter 11 precisely because it appeared it might lose a lawsuit (losing is described as a “potential negative outcome”).  Within six months, the company was able to settle the claim and secure approval of a reorganization plan.

Filing a Chapter 11 bankruptcy triggers the “automatic stay,” halting pending litigation.  While the creditor still has an opportunity to prove its claim, the Bankruptcy Court has control over the timing and controls where the claim will be decided.  In addition, a successful Chapter 11 case prevents a single creditor from securing immediate payment of a crippling judgment at the expense of operating expenses, other creditors, and the survival of the business.

Attorney Kelly G. Black offers a free Chapter 11 bankruptcy consultation in which to discuss the specific situation of your business.  He can be reached at (480) 464-1111.

Russ Wiles of the Arizona Republic reports today that bankruptcies for those in the Phoenix Metro area are up 82% when compared to total bankruptcy filings in 2008.  Chapter 7 filings accounted for about 81% of all filings, while Chapter 13  cases accounted for the remainder.   I was able to provide information for the Republic article and you can read it here:  http://www.azcentral.com/business/articles/2010/01/11/20100111biz-Bankruptcy0112.html .

This mirrors what I am seeing in my practice –specifically that more families are opting for Chapter 7 bankruptcy.  A chapter 7 bankruptcy will help you to wipe out most if not all unsecured credit-card type debts, including medical bills and judgments.  Another big reason people are filing Chapter 7 cases is to rid themselves of second mortgages that survive either a short sale or foreclosure.  These types of debts are discharged 100% — no payback required.

Chapter 13 on the other hand is available for those who don’t qualify for a Chapter 7 bankruptcy case because they make too much money or have significant property that would be at risk of seizure in a Chapter 7 bankruptcy case.  Many are filing Chapter 13 bankruptcy cases for the sole reason of getting rid of their second mortgage.  In short, if the value of your home has depreciated to the point that it is now worth less than what you owe on your first mortgage, we can get rid of your second mortgage and allow you to stay in your home through the Chapter 13 bankruptcy process.

If you would like more information on the Chapter 7 or Chapter 13 bankruptcy process, I offer a free consultation where we can discuss your individual situation and prepare a plan to help you out of your financial difficulties.  Attorney John Skiba can be reached at (480) 464-1111.

The Phoenix Business Journal reports on the Chapter 11 filing by a local company, Mesa Air Group.  Mesa Air’s CEO states a common reason for filing a Chapter 11 bankruptcy petition: burdensome lease obligations.

Long term leases can cripple a business of any size.  Many East Valley businesses are stuck in multi-year leases at rental rates set during the boom.  Often, revenues in 2010 simply do not cover lease payments set 2006 or 2007, when revenues were high.  In other cases, the business no longer needs to lease as much space or as much equipment, as with Mesa Air’s excess aircraft leases.

In the right circumstances, a Chapter 11 case can allow a business to reject burdensome leases as part of a new business plan.

Attorney Kelly G. Black offers a free Chapter 11 bankruptcy consultation in which to discuss the specific situation of your business.  He can be reached at (480) 464-1111.

In a story by the Associated Press yesterday, it was announced that in 2009 there were approximately 1.4 million bankruptcies filed across the nation.  Arizona saw the fastest increase with a jump of 77 percent in filings when compared to 2008.

Over the last two years I have seen not only a significant jump in the number of people filing, but a significant change in the type of financial situation that is leading a person into bankruptcy.  Two years ago almost all filings were associated with a foreclosure or fear of losing a home.  Now, most have experienced a reduction in pay or have lost their job completely and simply cannot make ends meet.  The situation is often made worse in that people have done everything to avoid bankruptcy — including maxing out their credit cards.

If you are in a similar situation where you have maxed out credit cards in trying to keep your home or just cover basic living expenses and are no longer able to keep up on the payments; or if you have lost a job or seen a significant pay decrease, filing a Chapter 7 bankruptcy case can bring you the relief you are seeking.  Chapter 7 bankruptcy will discharge or eliminate most if not all credit card-type debts while permitting you to keep most if not all of your assets, including your home.

As part of my video series on bankruptcy I have prepared a short video on the basics of Chapter 7 bankruptcy.  You can access it here http://www.youtube.com/watch?v=ZHubPnIu5rs .

I offer a free consultation where we can discuss your current financial situation and discuss how a bankruptcy filing can help you and your family during this stressful time.  You can reach me at (480) 464-1111.

I have prepared a series of short videos on the bankruptcy process, including discussions on the various chapters (7, 11, 13).  These videos are all currently posted on You Tube.  You can access these videos by clicking on this link http://www.youtube.com/user/JohnSkibaAttorney .  These videos will give you a good start in gaining knowledge about Chapter 7 bankruptcy, Chapter 11 bankruptcy, or Chapter 13 bankruptcy and if it is a good option for you.  I welcome any comments you may have on the videos and if there are areas you would like more information on.

Attorney John Skiba offers a free bankruptcy consultation where your specific situation can be discussed.  He can be reached at (480) 464-1111.

Recent numbers show that Arizona ranks third nationwide in both mortgage delinquencies as well as credit card delinquencies.  In meeting with bankruptcy clients on a daily basis, I have begun to see more and more people who have either lost their job or have had a reduction in pay that is making it very difficult to make ends meet.  Most resort to credit card use to cover basic expenses like groceries and gas.  In today’s Arizona Republic, reporter Russ Wiles reports on a prediction from credit bureau TransUnion that Arizona will be the only state in the country that will likely continue to see delinquencies rise on credit cards and home loans.

For those facing overwhelming credit card debt, a chapter 7 bankruptcy can provide instant relief.  Especially if you are behind on credit card payments, you are experiencing the aggressive nature of the credit card companies and the collection agencies they employ.  Immediately upon filing your chapter 7 bankruptcy case the bankruptcy court will issue an Order that stops all collections efforts against you and your property –including stopping the phone calls.

Further, in a chapter 7 bankruptcy, all of your credit card debt can be eliminated with no payback required.  Many assume that if they file a chapter 7 bankruptcy that they will be required to give up their home or their cars.  Actually, most people do not lose any property in their bankruptcy case.  If you are dealing with the stress and burden of credit card debt, contact Arizona Bankruptcy attorney John Skiba for a free consultation.  We can put together a game plan to help you completely eliminate your credit card debt with no repayment required.

A fairly common issue that arises in bankruptcy cases is what happens to those debts that were divided in a divorce proceeding.  The answer to that question largely depends on two things–what type of debt it is, and what chapter of bankruptcy you are filing. 

First, you must determine if the debt that is owed is what the Bankruptcy Code terms a “Domestic Support Obligation” (”DSO”).  The Code defines a DSO as a debt owed to a former spouse or child of the person filing for bankruptcy in the nature of “alimony, maintenance, or support.”  See 11 U.S.C. § 101(14A).  If the debt owed is child support or spousal support (alimony), then it will not be discharged in either a Chapter 7 bankruptcy nor in a Chapter 13 bankruptcy.  It is sound public policy that debts like child support and alimony would not be discharged in bankruptcy.  However, often there are debts provided for in a divorce decree, that while not actually child support or alimony, are considered or deemed alimony by the very terms of the divorce decree.  Often family law attorneys will purposefully draft the divorce decree with this very issue in mind and will try and frame as much of the debt as “support” or “alimony” as possible so that it will be non-dischargeable in bankruptcy.

The second type of debt one often sees in a divorce decree are those debts that are neither child support or alimony, but are debts that were incurred during the marriage.  A good example are credit cards that were used during the marriage.  The divorce decree will include a “property settlement agreement” that will provide for how these debts are going to be divided between the husband and wife.  Debts owed based upon a property settlement agreement are likewise non-dischargeable in a Chapter 7 bankruptcy, similar to child support and alimony.  However, property settlement debt is dischargeable in a Chapter 13 case.

In sum, in a Chapter 7 bankruptcy, neither child support, alimony (”DSO”), nor debts stemming from a property settlement agreement are dischargeable.  In a Chapter 13 bankruptcy, child support and alimony are non-dischargeable, however debt from a property settlement agreement is dischargeable.

If you have questions reqarding bankruptcy or how bankruptcy will effect your divorce, Arizona bankruptcy attorney John Skiba offers a free bankruptcy consultation.  Call Mr. Skiba at (480) 464-1111.

If you are going through financial difficulties and have fallen behind on payments to creditors, you likely experience the unrelenting telephone calls of creditors seeking payment.   A previous client once told me that she received over 40 telephone calls from debt collectors in a single day! It is to be expected that a creditor wants to contact you to discuss the missed or late payment, however, it is important to know that collectors are governed by the Fair Debt Collection Practices Act (FDCPA) which prohibits certain types of contact and conduct on the part of a collector.

For instance, did you know that collectors are prohibited from threatening lawsuits, garnishments, liens or arrest for not paying a bill?  Likewise, they cannot call your family, friends, neighbors, or your employer to collect a debt.  Bill collectors are in violation of the FDCPA if they leave abusive phone messages, if they insult, swear, yell, lie, threaten, call you early in the morning or late at night, or otherwise harass you.  If you have experienced these behaviors by a debt collector you may be entitled to compensation.  The FDCPA not only provides for statutory damages up to $1,000 and actual damages, it requires the offending debt collector to pay any attorney’s fees and court costs you incur.  If we agree to represent you in your FDCPA case, you won’t pay any attorney’s fees unless we recover on your behalf.

In evaluating your case it is important that you (1) save copies of all letters and notices from collection agencies; (2) save all phone messages and voice mails (very important); (3) make note of your conversations with bill collectors; and (4) contact a consumer rights attorney to help you recover damages.  To help you keep good records of the contacts you receive, we have prepared a collection communications log for your to write down information on contacts from debt collectors.  Click here for a copy of the collections communication log.

The FDCPA is a powerful tool in holding collections agencies accountable under the law.  Likewise, if you are in a position where a bankruptcy filing is necessary, a benefit to a bankruptcy filing is that the court will issue an order that will require creditors to stop calling you.  The court’s order, known as the Automatic Stay, bars any collections efforts against you.  Specifically, creditors will not be able to foreclose or repossess property, sue you, or even call you on the phone.  If debt collectors have in any way violated the FDCPA, either before or after your bankruptcy case if filed, you may still be entitled to damages for their unlawful conduct.

Arizona Bankruptcy Attorney John Skiba offers a free consultation to discuss FDCPA violation as well as to discuss Chapter 7 and Chapter 13 bankruptcy options.

Much of the fear or uneasiness associated with bankruptcy stems from not knowing or understanding what to expect and what the actual process will be.  With that in mind I thought I would go step by step through the bankruptcy process in your typical Chapter 7 and Chapter 13 bankruptcy cases.

The Process of Pre-Filing

Much of the work in your bankruptcy is completed prior to your case actually being filed with the bankruptcy court.  Initially, it is vital that you meet with an attorney to discuss the various Chapters available under the Bankruptcy Code and to further discuss the best way to protect assets throughout the bankruptcy process.  While there are people who file bankruptcy without an attorney, it is not recommended.  The Bankruptcy Code is very large and quite technical, making it very easy for those unacquainted with it to make a misstep that could prove very costly in the long run and even possibly get your case dismissed.

At Jackson White, after you call in we will set up a free consultation with you to discuss your particular financial situation and to help you determine what chapter under the Bankruptcy Code you should file under (or if you should even file bankruptcy).  Once the decision has been made to move forward, you will be given a questionnaire to fill out that covers all of your debts, income, assets, and financial history.  It is vital to the process that you disclose all assets and all debts accurately in the early stages of bankruptcy.  You will also be asked to get documents together such as tax returns, bank statements, and pay stubs.

After this information has been provided, it will be used to prepare the bankruptcy petition and schedules.  The bankruptcy petition is a document that contains information such as your name, address, and any prior bankruptcies.  The schedules contain information on your assets, debts, income, and monthly expenses.  Once complete, you and your attorney will review the documents for any errors.

Prior to filing your bankruptcy case, the Bankruptcy Code mandates that you take a credit counseling class.  At Jackson White we work with credit counseling providers to help you in getting this requirement taken care of and can even be done online or over the telephone.  This is an important step as your case cannot be filed until the credit counseling course has been completed.

Now that the bankruptcy documents and credit counseling course have been completed, your case is ready to be filed.  In bankruptcy court in the District of Arizona all case filings are done electronically over the Internet.

The Post-Filing Process

Upon filing your case, you will receive a case number from the court and pursuant to the Bankruptcy Code the “automatic stay” is in effect.  The automatic stay bars any collection efforts against your or any of your property.  This is a powerful tool and will stop foreclosures, repossession, even telephone calls.

U.S. Trustee

Your case will be assigned a trustee who represents the United States Trustee’s Office, a division of the Department of Justice.  The trustee’s purpose is to review your case and make sure that you are in compliance with relevant sections of the Bankruptcy Code.  In a Chapter 7 bankruptcy case, the trustee will review your assets and if warranted, can seize non-exempt assets for liquidation.  In Chapter 13 cases, you will make your monthly plan payment directly to the trustee.

Shortly after you file you will receive a letter from your assigned trustee that contains a questionnaire and makes requests for items such as bank statements, copies of titles to vehicles, and tax returns.  It is important to gather all requested documents and return them to the trustee in the requested time.  Failure to do so will delay your case and even possibly result in your case being dismissed.

Chapter 13 Plan

If you have filed a Chapter 13 case, you will have a Chapter 13 plan payment that must be paid monthly.  The first plan payment is due 30 days from the date your case was filed.

Meeting of Creditors

Approximately 30 days after your case is filed you will be required to go to the Bankruptcy Court to attend the Meeting of Creditors.  The Bankruptcy Code provides that creditors and the trustee are to have an opportunity to ask questions.  It is rare that a creditor will actually make an appearance at the Meeting of Creditors.  However, the trustee will place you under oath and ask questions about your bankruptcy filing and the documents you provide in response to the trustee’s letter.  Most of these questions are centered on the truthfulness of your documents and information as well as any transfer of assets.   I attend this meeting with all clients and am there to answer any questions a client may have.  This meeting it typically 5-10 minutes long.  While the Meeting of Creditors is an important day and something that must be taken seriously, it is nothing to lose sleep over.

Discharge

The goal of the bankruptcy case is to obtain a discharge.  Upon discharge, you are no longer liable for the debts that are provided for in your bankruptcy schedules.  Prior to receiving your discharge you must complete a second credit counseling class.  This second course is actually a Financial Management course.  Again, at Jackson White we will provide you with a course that can be completed online.

In Chapter 7 bankruptcy cases, you should receive your discharge approximately 90 days after your Meeting of the Creditors.  In Chapter 13 cases, you will not receive your discharge until after you successfully make all payments provided for in your Chapter 13 Plan.  This occurs after the plan is complete.  Most plans are in the 36 month to 60 month range.

Closing of Case

The fact that you have received your discharge does not mean that your case is now closed with the bankruptcy court.  However, once your discharge has been issued, in most cases the bankruptcy court will close your case out within 30 to 60 days.

While not every case is the same, understanding the basic process of filing bankruptcy can reduce a great amount of stress and give you greater insight into how your case is being handled by the court.

Arizona Bankruptcy Attorney John Skiba offers free consultations on all bankruptcy matters.  If you would like to meet with Mr. Skiba call (480) 464-1111.