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How long do I need to live in Arizona to file bankruptcy here?
Should I file bankruptcy before or after I file for divorce?
Will a bankruptcy halt by divorce proceedings?
What will happen if I simply stop paying my bills?
Can I sign over my expensive car to my family member before I file bankruptcy?
How long will the fact that I filed Bankruptcy appear on my credit report?
How can I rebuild my credit after bankruptcy?
Can I pick and choose which debts I file bankruptcy on?
Should I pay off my favorite credit card before I file to try and keep it?
Can I go on vacation if I am filing bankruptcy?
Will I have to go to before a judge in court if I file bankruptcy?
Will my co-workers or boss find out I filed bankruptcy?
Which is better: bankruptcy or debt consolidation?
How long does it take to file bankruptcy?
How Can I Stop Creditor Harassment (Fair Debt Collections Act)?
What are the Arizona Bankruptcy Exemptions?
What are the historical roots of bankruptcy?
What are the new bankruptcy laws?
You must live in Arizona for the greater part of the past 180 days (in other words, a period of more than three of the past six months.) If you have not lived in the state for the greater part of 180 days, then generally you may still be able to file in Arizona if you have lived here for longer than you have lived anywhere else in the 180 day period before your filing. This can be interpreted as living in Arizona for the majority of 180 days. You need to live in Arizona for two years straight, however, to use Arizona’s exemptions.
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Clients often ask us if they should file bankruptcy before or after they file for divorce. The answer depends on the situation. It is an easy solution when both spouses are in debt, because they can file together prior to the divorce to save fees and get completely out of debt even if they live apart or have filed for divorce but have not yet received the decree.
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It gets more complicated, however, if we are only representing one spouse and the other one cannot or does not wish to file. It is usually better to file prior to a family court assigning debts. This is because once a debt gets assigned per a divorce decree it may become a debt that the non-filing spouse can try and collect despite the bankruptcy filing. In some instances it is better to wait, though. It’s best to discuss the situation with an experienced bankruptcy attorney before making a decision.
Three of the biggest things that get determined in divorce proceedings are property division, child custody, and spousal and child support/ alimony. Although the automatic stay in bankruptcy will stop any property division, it will not stop the determination of child custody or the payment of child or spousal support. Therefore, if you file for bankruptcy before the property is divided up, that process will get frozen. However, since the determination of property rights includes the payment of debts, the bankruptcy will sometimes resolve those types of issues.
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The problem with stopping bill payments is that a creditor will likely file a lawsuit against you. Once they file the lawsuit, you generally have 20 to 30 days to respond. When that time has passed or if you contest the lawsuit unsuccessfully, a judgment will be entered against you. The most common ways to collect on that judgment is a wage garnishment or a bank account levy. It’s better to consult with a bankruptcy attorney to determine whether or not bankruptcy is right for you.
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No. In some cases, you may sell it to your family member for market value prior to filing if you could use the money, but you can’t sell it for less than it is worth or simply sign it over. Transferring assets outright or below market value is considered a fraudulent transfer, and the bankruptcy Trustee can make you give the value of that asset to creditors.
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It will appear on your credit report for a period of ten years if you file Chapter 7 and seven years if you file Chapter 13.
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Despite a Chapter 7 bankruptcy staying on your credit for ten years and a Chapter 13 staying on your credit for seven years, the good news is you can rebuild your credit much faster than that. Secured or long standing lines of credit work better than unsecured or revolving credit. Mortgage or car payments that you either reaffirm through the bankruptcy or get after the bankruptcy can help. Making timely student loan payments is great for rebuilding your credit, too.
You can also start off with a small secured loan or credit card from a bank or credit union. You typically put a small amount of collateral in a savings account, say $500, and get a credit line or card for that same amount. This works better to rebuild your credit than a regular credit card.
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No. Bankruptcy is an all or nothing proposition. Your discharge may be denied if you intentionally omit certain creditors from your bankruptcy.
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Probably not. Credit card companies have a “tickler system” where they check data bases for bankruptcy every so often. When they discover you have filed bankruptcy, they will do one of three things:cut you off; reduce your limit; or leave things they way they are. Chances are they will cut you off or reduce your limit drastically, so you will be wasting money that could be used toward living expenses if you pay them before filing.
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We get this question quite often: “We bought tickets and passes to Disneyland six months ago. What will the Trustee think if he sees out of town expenses on my bank statement?”
The answer is- enjoy your family vacation. As long as you don’t book an expensive trip to Europe or a cruise around the world, the Trustee isn’t likely to care. Use a common sense approach. An $80 dinner out is fine, but a $500 dinner for ten of your closest friends might garner a question or two.
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No. You will have a meeting with a court appointed auditor known as a Trustee. The meeting is officially known as a Meeting of Creditors but creditors rarely attend, so we refer to it as a “Trustee Meeting.” Some of the Trustee’s main duties are to make sure you qualify for bankruptcy, to determine if you have any nonexempt or unprotected assets that should go to your creditors, and to determine if you have taken part in any recent transactions that violate the rules of bankruptcy such as paying back family members in the past year or transferring assets out of your name without receiving fair market value.
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No. No one informs your company that you filed bankruptcy. It isn’t published anywhere. Unless someone actually checks with the bankruptcy court, they won’t know. Even if your company found out you filed, they cannot fire you due to strict federal laws prohibiting discrimination against someone who files bankruptcy.
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The so-called debt consolidation companies don’t consolidate debt at all. They should properly be called debt negotiation companies. The only companies that consolidate and pay all of your debts are credit counseling companies. Debt consolidation companies collect monthly payments from you (the first several of which go to them) and make lump settlement offers to your creditors. Sometimes it works, sometimes it doesn’t, and you often get sued, followed by a wage garnishment. Even if it works, you are faced with possible tax consequences, unlike when you file bankruptcy, which is considered an exception to debt forgiveness. In addition, often your credit will be more harmed by trying debt negotiation than by filing bankruptcy. Bankruptcy is generally a better solution (assuming you qualify,) but we recommend that you speak to an experienced bankruptcy lawyer before making a decision.
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The entire process takes a minimum of 3 months and could stretch as long as a year. When a client is getting their wages garnished, we try and file as soon as possible to stop the garnishment. However, at times extensive planning goes intoa bankruptcy where it is necessary to wait to file for various reasons. For instance, due to a job loss, some clients have used credit cards recently which could lead to creditor objections if a case is filed too soon. To find out how long your possible bankruptcy will take, fill out our free evaluation to talk to an experienced bankruptcy lawyer.
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The Fair Debt Collection Practices Act (FDCPA) is a United States statute that protects consumers from abusive or harassing behavior of debt collectors. The FDCPA includes 1) guidelines for how debt collectors may interact with consumers, 2) a list of prohibited conduct of debt collectors, and 3) a strategy for remedies or penalties for violations of the Act.
As a consumer, the FDCPA secures your right to fair treatment by setting guidelines for how debt collectors should interact with you. Debt collectors must:
In addition, the FDCPA prohibits the use of abusive and/or deceptive conduct by debt collectors. When attempting to collect a debt, a debt collector may not:
If you have a problem with a debt collector, you may take action to protect yourself. You may decide to file a complaint with the Federal Trade Commission, who has the authority to enforce the FDCPA. You may also choose to file a private lawsuit against the debt collector in either a state or federal court. In court, you may sue for damages that you sustained from a debt collector who violated the professional conduct set forth by the FDCPA. If it is proven in court that a debt collector is in violation, you may receive up to $1,000 in damages, plus reasonable attorney fees.
If bankruptcy turns out to be the right move for you, an automatic stay under federal law is in effect when your case is filed. At this point creditors may not contact you and will have to go through our office for any correspondence. An automatic stay is an injunction that goes into effect automatically when a debtor files for bankruptcy. The automatic stay prohibits most creditor collection activities, such as filing or continuing lawsuits, making written requests for payment, or notifying credit reporting agencies of an unpaid debt.
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When an individual files for bankruptcy, all of their possessions, in theory, become property of the estate and should therefore be surrendered. However, each state has a list of property items that can be claimed as “exempt,” meaning these items can be kept by the individual filing Chapter 7 bankruptcy (although, if applicable, these items would still be subject to any liens). A major purpose of the exemption laws is to help individuals retain their financial footing. Therefore, exemptions are made for personal effects, household items, work tools, and other daily essentials.
There is much debate about what property should be considered exempt and for how great of a value. Exemption laws vary greatly from state to state. In Arizona, some of the exemptions seem generous; for example, the homestead exemption allows for individuals to keep $150,000 of equity in a house. However, other exemptions seem rather low: only $6,000 is permitted for an automobile and $300 within a checking/savings account. Please refer to the following table, which summarizes the Arizona bankruptcy exemptions.
Homestead: Equity in a house, townhouse, condominium, or mobile home, where the debtor resides
$150,000
Bank Account: Money held in one account at any one financial institution
$300
Automobile: One motor vehicle
$6,000
Household items:
$12,000 Total
Pets and Animals: Domestic pets, horses, milk cows, and poultry
$500
Wearing Apparel: Clothing belonging to debtor and family
$500
Jewelry: Including engagement and wedding rings
$4,000
Library: All books, manuals, published materials, and personal documents
$250
Musical Instruments
$250
Other Personal Property: One typewriter, one bicycle, one sewing machine, a family Bible, a lot in any burial ground, one shotgun or rifle or pistol
$500
Tools of Trade: The tools, equipment, instruments, and books needed for commercial activity, trade, business, or profession
$2,500
Farming Implements: Farm machinery, utensils, implements of husbandry, feed, seed, grain, and animals (only if the primary income is derived from farming)
$2,500
In addition to the above exemptions, the state of Arizona also allows an individual to keep 100% of the following:
The exemption lists given above may not be exhaustive. Please refer to the web site of Arizona Legislative Computer Service of the Arizona State Legislature,ALIS Online, to verify the current status of any exemption.
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The first known bankruptcy law was passed in England in 1542 to give creditors remedies (other than imprisonment) against debtors who did not pay their bills. Under this law, debtors were considered quasi-criminals.
In 1570, England passed its second bankruptcy law:
In 1705, Parliament made sweeping changes:
Early independent America had no bankruptcy laws. Neither the Articles of Confederation nor the U.S. Constitution contained specific provisions for bankruptcy — although the Constitution gave Congress the power to establish uniform bankruptcy laws.
In 1800, by one vote, Congress passed the first American bankruptcy law. It was very similar to the 1705 British law, although a fraudulent bankrupt could not be sentenced to death. It was repealed three years later.
Congress tried again in 1841, after the abolishment of debtors’ prisons. The new act allowed for both merchant and non-merchant debtors. Debtors could claim basic exemptions, although there were limits on what debts could be discharged. Debtors as well as creditors could file cases. The creation of debtor filings — voluntary bankruptcies — was a watershed event. Thousands of debtors received discharges and creditors received very little. The act was repealed after two years.
Congress tried yet again in 1867. This law allowed for both merchant and non-merchant debtors, and allowed voluntary and involuntary cases. Debtors had to take an oath of allegiance to the United States (this was just after the Civil War). This law lasted 11 years and was repealed because too many debtors were using it and creditors were getting little in return.
Modern American bankruptcy has its permanent beginning with the Bankruptcy Act of 1898. This law allowed both voluntary and involuntary cases, permitted debtors to claim exemptions and removed most barriers for discharging virtually all debts. One commentator of the time suggested Congress went too far in favoring debtors. He reminded them that bankruptcy was primarily a “commercial regulation,” not a general debtor “jubilee” as provided in the Bible.
During the 1920s, the act was amended to add grounds for denial of discharge and debts excepted from the discharge. In 1938, Congress overhauled American bankruptcy law. Although most changes affected business bankruptcies, this law also created Chapter XIII, the wage earners’ repayment plan.
The next major change came with the enactment of the Bankruptcy Act of 1978, the law that exists today. It was amended in 1984 to add several new categories of non-dischargeable debts. The law has been tinkered with since then, but Congress has not changed the essential nature of bankruptcy in America for 100 years. However, ongoing efforts by the Congress will likely change that in the near future.
In October, 2005, the BAPCPA was passed in an effort by congress to reduce the number of bankruptcy filings.
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New bankruptcy laws took effect across the country, including here in Arizona. Although a lot of hoopla was made about what these changes would mean, the effect was actually somewhat marginal. In the end, filing for Chapter 7 or Chapter 13 bankruptcy is still an option for most people. The main difference now is that there are a few more requirements during the process of filing for bankruptcy.
First, under the new bankruptcy laws, you are now required to complete two consumer credit counseling sessions before you can file for bankruptcy. Overall, these classes in credit counseling and debtor education provide valuable information as to whether bankruptcy is your best option or whether an informal payment plan may suit your needs better. Typically, these courses can be performed over the phone or via the internet. If you do decide to file for bankruptcy, then you must first obtain a certificate of completion from these courses. At Meyer Law, we can give you direction in completing this first step.
In addition, under the new bankruptcy laws, there is now a greater focus on the median income in your area and your family size to determine if you qualify for bankruptcy. Specifically, if your monthly income is below that of the Arizona median income for a family of your size, then you will qualify for Chapter 7 bankruptcy. If your monthly income is higher than the Arizona median, then we can help you conduct a means test to determine if you qualify for Chapter 7 bankruptcy or if Chapter 13 may be a better option for you.
Finally, the new bankruptcy laws stipulate that you may only file for Chapter 7 bankruptcy once within an eight-year period. Therefore, to file for Chapter 7 bankruptcy now, you may not have already filed in the last eight years.
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At Meyer Law, we are well-versed in all the new bankruptcy laws and how they will directly affect you and your financial situation.