Sunday, January 20, 2013

Filing Chapter 7 bankruptcy in Arizona? Know What You Are Dealing With When You File Your Bankruptcy

by Bill Ponath

I am a bankruptcy attorney in Phoenix ($995/Chapter 7) and want potential clients to know the following.When you file Bankruptcy; you are putting yourself into the hands of the Bankruptcy Court.  Most of the Rules are intended to protect you from aggressive creditors; but you also need to be careful about what can bite you back.
Until a year ago; bankruptcies were so common that everybody had much more work to do than they had time for.  The number of bankruptcy cases has slowed down last year and this year; which gives everyone more time to review the details of every case.
When you file a case, it is assigned to a Trustee appointed by the Court.  That Trustee’s job puts him or her in many positions.  Firstly; the Trustee is assigned to review your papers filed in court and make sure the information matches what is available to the Trustee by researching your government records, bank records, and the like.  Secondly; the Trustee will often protect you from aggressive creditors that are trying to get more than they deserve or are otherwise harassing you.
The third part is what you need to be prepared for.  Trustees are paid very little to manage your case.  If that was all they received; they would all go bankrupt.  Most of their income is derived from processing non-exempt assets that you may own.  For instance; if you file a case right now and haven’t received any tax refund that is owed to you; your trustee will “own” that refund because it is part of your bankruptcy estate.  If it is small enough it won’t be sufficient for the Trustee to invest his/her effort into maintaining it and dividing it up for disbursement.  But if it is large enough the Trustee will keep it and send notices to all of your creditors to file claims for their shares.  The same sort of process may apply if you own a car that has excess equity.  You are allowed only $5,000 in equity in a car in Arizona; but a husband and wife may claim both of their $5,000 exemptions in one car.  If you have enough excess equity the Trustee may demand that the car(s) be sold, you get the first $5,000, and the remainder is taken for disbursement to creditors.
The worst of this issue concerns Trustees’ rights to hire attorneys on a contingency fee basis to look through your case and see if they can find any excess or non-exempt assets.  These attorneys don’t get paid unless they find something to attach; therefore they are highly motivated to give your case a good look-over.
This is one of the reasons why it is very wise for you to look for an attorney who is very experienced in bankruptcy work and knows how to deal with the ever-changing landscape of the Courts.
Another Trustee you may have to deal with is the U.S. Trustee.  The UST examines your income to determine if you are eligible to file for Chapter 7 relief.  This is another reason you should get an attorney highly experienced in bankruptcy to represent you.  This subject matter is called the “Means Test” and it is a multi-step process that many lawyers don’t fully understand.  The first step simply adds up your Total Gross Income for the six months before the month that you file your bankruptcy.  If a single person’s income is less than $3,438 per month or a married couple’s income is less than $4,500 per month, they automatically pass.  Those numbers go up as more dependants are added to the equation.
If you fail the first step your attorney will have to go through a complicated series of calculations based on standards published by our old friends the Internal Revenue Service.  Some of these numbers are specific, others can vary based on the facts and circumstances of people’s lives.  You need an experienced attorney to understand these standards and know when they can be bent to squeeze you into a Chapter 7.  If not; you will be forced into a Chapter 13 bankruptcy that demands you to make monthly payments to your Trustee; who then disburses the money to your creditors according to a schedule of priorities issued by the Court.
The moral of the story is simple; if you need legal assistance you should hire someone who spends all or most of his/her time in the chosen field.  It will run smoother and easier and you will sleep a lot more peacefully!

Bill Ponath provides low low cost Chapter 7 and 13 personal bankruptcies. $995 Chapter 7 or $2500 Chapter 13 bankruptcies plus court filing fee. Free consultation with a compassionate attorney who will handle your case personally. Call 24/7, available to meet with you around your schedule. 602-404-0143. Conveniently located in North-Central Phoenix on Tatum.

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