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In my Phoenix Bankruptcy practice, a commonly asked question is:  “Can I keep one credit card?”  I have been asked this question many times throughout the years.   I think the two main reasons this question comes up is: 1) We feel a certain loyalty to our banks; and 2) We fear the “What Ifs”.

But I’ve banked there for years!

Maybe you have lived in the Phoenix area for many years, and banked with the same bank for decades. You probably feel a certain loyalty to that bank and you want to maintain that relationship even after bankruptcy.   The amount of loyalty people feel for their bank is strong.  I know I feel certain loyalty to my bank because I’ve had the same account since 1993.  But, I ask people, “Did the bank help you when you called them to tell them you needed some extra time to pay, or a lower interest rate?  Did the bank offer to lower the balance after you’ve paid well over what you’ve spent?  Did they care when you told them you lost your job, and your unemployment is running out?”  Most often the answer is “No.”  Even if the answer is “yes”… the banks don’t help for as long as you’ve been a customer, do they?  They may “help” for up to three months, but how helpful is that in the long run?  The truth is, the bank feels no loyalty towards you and because you are filing for bankruptcy – you should give yourself a true fresh start by cutting all ties to your unsecured creditors (credit cards).

But, what if…

We have all learned to depend on credit cards.  We fear a life without them.  Along with the normal stress of considering bankruptcy, you are probably also overwhelmed with “what-ifs” – What if a medical emergency happens after I file for bankruptcy? What if the car breaks down?  What if the air conditioner breaks?  How will we pay for life’s emergencies without a credit card? The goal after bankruptcy should be to create a whole new mindset about money and credit.  Start a savings plan so that you have the cash if an emergency pops up.   I know, it sounds impossible because you are barely living paycheck to paycheck now.  But, have you sat down and been honest with yourselves about what your spending habits are?  Take a day, or a week, and write down everything you spend.  I think you may be surprised to find just how much you spend on fast food, coffee shops, and convenience store treats.   Take an honest look at your grocery list, do you buy what you need – or a little bit more?  Living without credit cards can be done.  Living without credit cards should be done so that you don’t ever again feel overwhelmed with interest rates, balances, and payments to creditors.  Life without credit cards would be like having true freedom.  Life without debt, imagine that.

Your Phoenix Chapter 7 Bankruptcy case is over.   You can finally breathe again.  Now, it is time to roll up your sleeves and get to work on cleaning up your credit report.  I’m not going to lie to you, it is tedious, arduous task that you must stay on top of to actually finish.  But, I know you can do it.  You’ve come this far, right!?!

You will receive your discharge order from the court.  Hold on to that document, keep it in a safe place, because you will need to supply this information to the credit agencies.  After about six months from the date of your discharge you should order a free credit report.  You can get access to free annual credit reports, access to the three credit bureaus and access to their dispute processes through this website:

https://www.annualcreditreport.com

Simple things to look for:

1. Verify personal information is correct – including current and former addresses, spouses/co-debtors, employers.
2. Dispute any credit report inquiries that you did not authorize.

A little more difficult:

Remember before you filed for bankruptcy some of your accounts had been “charged off” by the original creditor and sold to a collection agency (or two or three)?  Well, it’s time to make sure these are reported accurately.  Most importantly, every single one should be listed as “Included in Bankruptcy” or “Discharged in Bankruptcy”.

Take note of any items that are being reported incorrectly and file a dispute using the instructions on the website or by mailing them directly at:

Equifax
P.O. Box 740256
Atlanta, Georgia 30374

Experian
P.O. Box 9554
Allen, Texas 75013

TransUnion
P.O. Box 6790
Fullerton, CA 92834

If you are making payments on something and find that those payments are not being reported try the following:

1. Request a payment history from the lender/creditor.
2. File a dispute with each of the 3 credit agencies attaching a copy of the payment history.
3. The credit bureau is required to verify the accuracy within 30 days.  It should be corrected – either by the credit bureau or the lender.

Good luck on the final leg of your journey!  If you have comments or questions about this post you may contact me directly at alethia@amslawaz.com.

What Happens at the Hearing: Phoenix Bankruptcy

The second biggest hurdle and source of anxiety for many of my clients is the hearing.  (The first of course is making the decision to file for bankruptcy).   Some clients have told me they imagine the hearing will be a judge sitting high in his black robe – the courtroom silent as people stare while you walk towards the witness stand, and then a bombardment of questions and creditors protesting.  I can assure you that no matter what idea a person had before the hearing, almost every person says to me as we are leaving the hearing: “THAT was it?  I was worried for nothing!”

I know this is your first bankruptcy and you don’t know what to expect.  Fear comes from the unknown, so this blog is to help you get a better picture of what the hearing entails.  Every person filing for bankruptcy must attend this hearing.  It is required by the Bankruptcy Code Title 11 USC §341 – which is why we often refer to it as the “341 Hearing”.   The hearing serves the purpose of putting you on the record, under oath to affirm that you have been honest in all of your written paperwork filed with the court.  (This is why I ask so many questions and get so much paperwork before we even file your case).

The hearing is not held in a typical courtroom.  The room is more like a big conference room.  There are two tables (or three) set up in an “L” or “U” shape.  The trustee (there is no judge at this hearing) sits at one table, we sit at another, and the last table (if there is one) is usually empty – but it is where creditors can sit if they appear for the hearing.  There are individual chairs in two rows in front of the tables where people wait for their cases to be called.

The trustee handles about 6 to 8 cases every half hour.  At your scheduled hearing time, we will be called into the hearing room, along with all of the other people whose cases are to be held in that half hour.  The trustee introduces himself and provides information regarding his role as the trustee.  You will be called up to the table, and I will go with you.

At that time, the trustee will have you swear or affirm to tell the truth.  The trustee will ask questions similar to these.  Most questions can be answered “Yes” or “No”.

1.       Please state your name for the record.

2.       What is your current address/phone number?

3.       Have you read the Bankruptcy Information Sheet I sent you? Did you understand it?

4.       Have you lived in Arizona for 2 years before the bankruptcy was filed?

5.       Have you previously filed for bankruptcy (if yes, when? Where? What Chapter?)

6.       Did you sign the petition, schedules, statements and related documents? Did you read the petition, schedules and related documents before you signed them?

7.       Are you personally aware of the information provided in the petition? To the best of your knowledge is that information true and correct? Are there any errors you want to bring to my attention at this time?

8.       Are all of your assets listed in the petition?

9.       Are all of your debts listed in the petition?

10.   Do you pay any domestic support obligations (child support/alimony)? If yes, what is the name and address of the person who is to receive those payments?

11.   In the 4 years before you filed this bankruptcy, did you reject (refuse to accept) any inheritance or interest in a trust?

12.   Do you understand that if someone dies within 180 days after you filed bankruptcy and a result you might receive an inheritance, life insurance or interest in a trust, then you must immediately notify the trustee?

13.   Are you a plaintiff in a lawsuit? (Do you have any claims pending that you could make for personal injury or property damage or any other reason?)

14.   If you are married and filing jointly, the trustee will ask your spouse this: Did you hear the questions I asked your spouse? If I asked you those same questions, would your answers be the same?

The trustee may have additional questions for you to clarify any information that was listed in your petition.  He concludes by asking if any creditors are present and wish to be heard in your case. It is very rare that a creditor will show up to your hearing.

It is still the unknown, but hopefully this helps develop a slightly different picture.  Important things to remember: 1) I will be there with you; 2) No decisions are made, this is just a formality to see that you were truthful when you submitted your petition for bankruptcy; 3) It doesn’t take long; 4) you aren’t alone.  You’ll find the room packed with many other people who have made the same decision as you, to free themselves from overwhelming debt.   Remember, the hearing means this part of your life is almost over.   You too, will probably say, “THAT was it?  I was worried for nothing!”

If you are considering a Chapter 7 bankruptcy you’ve probably scoped the Internet for answers.  As you’ve learned, there is a lot of information out there.  Maybe some of you have turned to your friends and family for support.  When times are tough, we all try to find information, solace, reassurance, and validation through these near and dear people.  Of course, they are supportive, and they have many ideas and suggestions.  They have done research on the Internet, too.   Maybe they have had a neighbor or co-worker file for bankruptcy or maybe even filed bankruptcy themselves.  But, unless they are licensed to practice law, and experienced in bankruptcy law, you should take the time to call an attorney for more information about bankruptcy.  Every case is unique.  This is why it is  so important to get information that is specific to you, your family, and your circumstances.  You need an attorney who will listen to all of your concerns and personalize this process for you as much as possible.

Sure, there are certain procedures, deadlines and parties that remain constant in any case, but the specifics of your case are different from your neighbor’s case.   You may have different types of property, or different types of debt.  You may make more money (or less money) than your neighbor, you may have more dependents, or have pending law suits or garnishments.   You may want to save your house, and your neighbors chose to walk-away from theirs.  It is  important to remember when you hear other people’s bankruptcy stories; it probably won’t be the exact same process for you.  Which is why you need someone who will treat your case as unique as it truly is, instead of just rushing you through the process like a factory line.  Everything depends on your specific circumstances.  The only way to find out what options are best for you is to set up an appointment with an attorney.  Call to schedule your appointment today 480-917-0340.

You’ve read the millions of blogs, researched the hundreds of websites with information about bankruptcy and you still find yourself confused about all of the different “players” in bankruptcy.  Here’s a list of the important people you should know for your Phoenix bankruptcy:

1.      Debtor – that’s YOU!

2.      Creditor – a bank, lender, or any person or company you owe money to, whether you are current on that payment or not; whether you are related to that person or not; whether you are a good friend or ex-friend of that person.  Any person or place you owe money to is a creditor.

3.      Chapter 7 (or Chapter 13) Trustee – oversees your case.  He reviews your petition and case for any assets that can be liquidated to be paid out to creditors.  It’s important to provide all information requested by the trustee in order for your case to run smoothly.

4.      United States Trustee – this trustee “serves as the watch dog” over the entire bankruptcy process.  This is the department that assigns the chapter 7 and chapter 13 trustees.  The UST reviews each case for “abuse”.

5.      Attorneys – as with any legal process, there are attorneys for every party.  If you hire an attorney, you only need to know who your attorney is, and she will do all of the communicating with the other attorneys involved.  Your attorney is a “Debtor’s Attorney”.  A lender hires a “Creditor’s Attorney”, and so on.

6.      Judge – the judge in your case is indicated by three letters at the end of your case number.  Usually, you will not need to see a judge in a bankruptcy case.    The judge lets the other parties handle the case.  If there is a dispute, the judge becomes involved.  Common reasons for this could be a hearing to determine if a reaffirmation agreement should be approved; if a creditor believes a debt should not be discharged because of fraud, or if a trustee believes a certain exemption should not be taken.

When you file for chapter 7 bankruptcy in Arizona, you need to be able to adjust to how you’ve done your banking before.  It is very common for a lender to cut-off online access to bank accounts and generally make it a little more inconvenient for you.

To describe this more… let’s say you have a car loan.  Once you file for bankruptcy, even if you’ve decided to keep the car and continue to pay the loan, the bank cuts off your online access.  They claim this is done because of the Automatic Stay.  They claim that by posting your balance and allowing you online access, someone could consider that “an attempt to collect a debt” – which they are prohibited from doing during bankruptcy.  Fortunately, you’ll be prepared, you’ll know it’s coming, and you’ll be ready to make small adjustments.  Thanks to technology, you don’t have to be totally inconvenienced.

Here are some ideas of dealing with life after filing bankruptcy but before your case is discharged.

1. Use the online bill pay function through your current bank.  You should have closed any bank account that you may owe money to, and reopened a new account with a new bank.  This new bank should have online access to bill pay.
2. You may mail your payments to their mailing address.  Contact the lender and ask for the Bankruptcy Department.  Ask them for the correct mailing address (because this may have changed now that you are in bankruptcy).
3. Make your payments on time.  Often, the grace period you may be accustomed to is taken away.  Payments are due on their due date.
4. You should be able to call for payoff information and balances by contacting the Lender’s Bankruptcy Department.

It’s a temporary adjustment that should go back to normal after your case is discharged.  If you have questions or need assistance with the Lender please contact me.

I recently had a young family come to see me at my Chandler, Arizona office because they wanted to know more about filing  bankruptcy in Arizona.  They were current on their bills, yet struggling to get by each month.  They tried, like many of you, to contact their creditors and get lower payments or some sort of relief.  They were hopeful, because they had been with “X” Bank for so many years.  Certainly “X” Bank would want to help, because this young family had been such loyal customers, who had always paid on time.  Unfortunately, to their surprise, the Bank didn’t help.  Neither did any of their other creditors.  Then they asked me the question I hear often, “What if I stop paying my credit card bills and then we don’t qualify for Bankruptcy?  What do we do then?”  It’s a common question I am asked.

 
What happens if I don’t qualify for bankruptcy?

Generally speaking, there is usually some sort of relief through bankruptcy for everyone.  Bankruptcy is created to protect people just like you from debts that have become too overwhelming.   When filing bankruptcy the question isn’t whether or not you qualify, the real questions are 1) which chapter should you file; and 2) when should your case be filed? The answers to these questions depend on your specific circumstances.  Your income and type of debts will help determine which chapter is best for you.

Even though filing bankruptcy is usually an option for everyone, certain debts are non-dischargeable in bankruptcy.  These include student loans, most taxes, child support, alimony, criminal fines/restitution, and debts incurred through fraud.   Part of the pre-bankruptcy process is to assess your financial situation and the types of debts you have to make sure bankruptcy is truly beneficial to you.

Now, while most everyone “qualifies” for bankruptcy in Arizona, it is true that a case could be dismissed – leaving you without a discharge of your debts.  This could happen if, for example: you fail to provide documentation to the trustee when requested; fail to appear at your hearing (Meeting of Creditors); you fail to make your Chapter 13 payments on time; or failing to file tax returns on time.   Another possibility is that a particular creditor can object and say that his debt should not be discharged.  However, this is rare.  This could happen if the creditor claims that a debt was incurred through fraud.  The creditor would have to file a lawsuit in bankruptcy court (called an Adversary Proceeding) and prove that it was, in fact and in law, fraud.

During the free consultation we talk about your true financial picture.  I want to know everything - the good, the bad, and the ugly – to make certain your case runs smoothly and so you know what to expect.

My friend, Bill Balena, in Northern Ohio has recently written a blog called the “Credit Card Bailout Lie.” This got me thinking.  How many people have wondered if such a bailout truly exists?  It doesn’t.  Perhaps the misconception began with the Credit Card Reform Act of 2009.

The new Act was to place certain added protections to people like you and me from credit card companies.  Basically, the law requires the lender to be more HONEST and FORTHCOMING to you, the consumer.   But here are some examples:

• 45 days advance notice. Do you remember when credit card companies would change interest rates, without much notice to you (if any notice at all!)  Now, they must disclose changes, such as interest rate increases or other significant changes, with 45 days advance notice and give you the option to cancel without requiring the balance to be paid immediately (you can continue to make payments as agreed in your original credit card agreement).
• Payments must now be applied to the highest interest rate first. Remember when you’d open your new credit card with that great low interest offer.  You’d start at 0%, and then it would change to 4.99%, then to 9.99%, going as high as 29.99% (maybe higher).  Depending on when you used your card, a different (higher) interest rate could be in effect.   Any payments you made went to the lowest interest balance first, leaving the balances with the highest interest rate to continue to grow exponentially.  That is now changed.  A creditor has to apply payments to the highest interest balance FIRST.  That’s good news because it will help you pay off your credit card balance faster.
• 21 Days. Credit card bills would come inconsistently, and began leaving you less and less time to pay by the due date.  Then you’d pay late (on accident) your interest rate would increase (without notice) and it was a vicious cycle that started you on the path to being unable to afford things.  Now bills must be sent at least 21 days before the due date.
• Protections for 18-21 year olds.  Remember how much trouble we all got into with that first credit card when we turned 18?  Now, credit cannot be extended to people under 21, unless they have a co-signer or can prove their own independent ability to repay.
• Minimum Payment Warning. One of the most obvious changes is the requirement for credit card companies to indicate on the front of the bill how much it will cost you, and how long it will take to pay it off, if you make the minimum payment.  When it’s all written out, it’s pretty overwhelming and a harsh wake-up call to most of us.

So, when you hear an ad on the radio, someone promising to show you the secrets to the “Credit Card Bailout Program,” remember – they are lying to you.  At the very least, they are being less than forthcoming, by giving you the impression that their “debt consolidation or settlement program” is brand new under the “new law”.  Now you know the truth.  Credit Card bailout programs are like unicorns.  They sound beautiful and magical, but they don’t exist.  You have certain protections under the law without dishing out any money to debt consolidation/settlement companies promising to “save you”.   If you’re in financial trouble, talk to an attorney about all of your options.  Get the truth.

I just had a question from a woman from Phoenix, Arizona who filed a chapter 7 bankruptcy with another attorney in the area.  She has already received her discharge .  She’s scared now that she’s going to lose her house because the lender is telling her she HAD to sign a reaffirmation agreement for her first and second mortgages.  (I’ll be posting a blog soon about reaffirmation agreements and mortgages).  With all of the paperwork she had in preparing and filing for bankruptcy, she can’t remember if she signed a reaffirmation agreement or not.    Understandably, she emailed her former attorney in a panic asking for clarification. The attorney’s response was, “A discharge has been entered in your case. That is all the legal representation I have been retained to perform.  If you and your lender wish to enter into a Reaffirmation Agreement at this time, and you require my assistance, you will need to retain me to perform that service…”
What is wrong with this picture?  Sure, her former attorney probably did just what he was hired to do and he probably did a decent job.  But, don’t you want to be able to contact your attorney, even after your case has been closed?  That’s something that would make the difference between a good attorney and a truly compassionate attorney.   If I had received that email from a former client, I would have taken the time to explain what a reaffirmation agreement is and put her mind at ease, even if my representation of her had “officially” ended (and even if I had explained it before).  This is a perfect example of why it is so important to take the time to choose the right attorney.  (By the way, if you stay current on your mortgage(s) in a chapter 7 bankruptcy you CAN keep your house – a reaffirmation on a mortgage is not necessary, and not recommended – look for a future post on this topic).

You need (AND DESERVE!) to have someone there to walk you through the process, and sometimes that includes questions post-discharge.   I hope you will call me with any questions – before, during, and after bankruptcy.  I always keep in mind that even though I have filed hundreds of bankruptcy cases, this is your FIRST time.

In my Chandler, Arizona office, I’ve sat with many people with questions about Chapter 13 bankruptcy.  A Chapter 13 bankruptcy is sometimes referred to as a “reorganization plan”.  With that type of name, it begs the question, “What’s the difference between a Chapter 13 bankruptcy and a debt consolidation company?”

The most important difference between the two is THE AUTOMATIC STAY.  Once your bankruptcy case is filed, the Automatic Stay is, well… AUTOMATIC.  It is protection from creditors, prohibiting any creditor from suing you, obtaining a judgment, garnishing wages, foreclosing on your house, repossessing your car or other personal property and protects you from their overwhelming phone calls. THIS is why you see, “STOP FORECLOSURE, STOP WAGE GARNISHMENT, STOP CREDITOR PHONE CALLS”, when you read about bankruptcy.  The Automatic Stay is such an important and basic right of a debtor (YOU) and is not available outside of bankruptcy.  Debt companies do not tell you this and so, here’s how I’ve seen those type of debt companies work:

John is drowning in debt, but he wants to pay it back.  He thinks that doing so will be better for his credit report and conscience.  So he calls one of those phone numbers he hears on a radio commercial (you know the ones: “Don’t file for bankruptcy, call us! We have secrets creditors don’t want you to know”).  Well, it sounds so promising; John thinks he’ll give it a try.  He talks to a super nice representative at the debt company – we’ll call it “Company” for now.  John is supposed to pay monthly fees to “Company” which will be automatically withdrawn from his checking account.  “Company” has promised that once enough money is collected from John, “Company” will begin making settlement offers and his debt will be paid off in a couple of years.  This sounds great to John, and he signs the papers, gives his checking account number and his money starts flowing to “Company”.  Creditors are supposed to be notified, but there is nothing obligating the creditors to agree to be part of “Company’s” plan.  Eventually, (usually after thousands of dollars have been paid into John’s consolidation plan – yes, after a year or two) a creditor decides they’ve waited long enough, and they sue John. The creditor gets a judgment and starts wage garnishment proceedings.  John calls “Company” to cancel his service, stop automatic withdrawals from his checking account, and get a refund of any money that wasn’t used to settle with creditors.  This is difficult.  Now, John can’t find that original super nice representative.  Instead, he talks to people who are often rude and unsympathetic to what is happening to him.  They often make it very difficult to cancel, sometimes even failing to stop their automatic withdrawals.  Worst of all, the clever folks at “Company”, drafted their contract to require “Company’s” fees be paid first – meaning most (if not all) of the money paid by John over the months or years, is non-refundable.  That’s when John calls me and files for bankruptcy.

Bankruptcy, on the other hand, is a legal process, set in place for people just like John (and you).  It’s a legal right to discharge debt that has become too overwhelming.  When you file for chapter 13 bankruptcy:

• You will have an attorney, bound by ethical rules to be YOUR advocate, and keep YOUR best interests in mind at all times.
• Your attorney is also required, by bankruptcy law and state ethical rules, to set forth a written contract specifying what the attorney will do for you and how much it will cost.
• You will have TRUE legal protection from all of your creditors through the “Automatic Stay.”
• If any creditor crosses the line, you have your advocate working for you to stop those creditors, and you have the law on your side.
• You will have someone working to protect your assets and ensure an affordable and realistic payment.
• At the end of your Chapter 13 Plan, any unpaid unsecured debt, is discharged.

Contact me to get started.