Source: https://dianedrain.com/bankruptcy-articles/chapter-7-questions/
Timestamp: 2019-04-22 12:20:32+00:00

Document:
Chapter 7 Questions | Diane L. Drain- Experienced Phoenix P.A.
1.1.2 By the way – Diane offers a free consultation.
1.1.3 A Chapter 7 bankruptcy is a tool to help individuals start over.
1.1.4 Some of the information in this article is specific to cases filed in Arizona, but the majority is bankruptcy law and applies to all Chapter 7 bankruptcy.
1.1.5 Chapter 7 bankruptcy is designed to give an individual a “fresh start”.
1.1.6 Many people ask me if they “can file their own bankruptcy”.
1.1.7 The laws were complicated before they changed in 2005, now I believe that only a fool would file their own bankruptcy, no matter “how simple”.
1.1.8 Do not use those who advertise on TV – you will end up paying their advertising costs.
1.1.9 Always check out your lawyer with their state bar.
1.1.10 The Court’s filing fee are set by the court and will change with time.
1.1.12 Why are our fees less than the TV advertisers?
1.1.13 Just because you are an Arizona resident when you file for bankruptcy does not mean you are entitled to Arizona exemptions in bankruptcy.
1.1.14 No, you will be able to protect your exempt property.
1.1.15 On the main menu above is a link to a list of the properties that are exempt under Arizona law.
1.1.16 In the bankruptcy documents you list secured debts separately from unsecured debts.
1.1.18 Do not bank at Wells Fargo — they have been known to freeze your account even if you did not owe them any money.
1.1.19 Make certain you provide your attorney information about all liabilities, no matter how remote.
1.1.25 Every consumer who files Chapter 7 or 13 bankruptcy is required take a credit counseling “briefing” within 180 days PRIOR to filing their bankruptcy and file a certificate of compliance.
1.1.26 Credit Counseling and Debtor Education classes must be approved by the US Trustee’s Office.
1.2 CONFUSING — YOU BETCHA!!!!
1.2.1 The fees for the auctioneer, trustee and their attorney are paid out of the funds they collected, not by the Debtor.
1.2.2 This is a very difficult situation, especially if you paid money or transferred assets within 3 – 48 months before bankruptcy.
1.2.3 No. Bankruptcy is a civil, not a criminal proceeding.
1.3.1 Rule 9011 In other words, someone who is representing himself or herself in a bankruptcy is held to know both the bankruptcy and state laws that apply to their situation. Ignorance of the law is no excuse.
1.3.2 Failure to comply with these deadlines will most likely result in the dismissal of the bankruptcy case.
1.3.3 The automatic stay is good for only 30 days if that Debtor has filed one prior case in last 12 months. §362(c)(3)(A).
1.3.5 A dismissed case is a filed case. There is no excuse for a Debtor’s failure to understand these limitations.
1.3.6 Always read and follow the directions from the court.
1.3.8 When you receive your tax refund check, you must turn it over to the trustee.
1.3.9 Talk to your attorney about pre-bankruptcy planning.
1.3.10 To reaffirm a debt is to sign a new contract with the lender, thereby reaffirming the Debtor’s personal liability for the obligation.
1.3.11 Even once the reaffirmation agreement is signed the Debtor has 60 days to revoke it.
1.3.12 The danger for the Debtor is that they can be sued on any new contract signed after filing their bankruptcy.
1.3.13 The Court may refuse to sign the reaffirmation agreement if it appears that the Debtor cannot afford the contractual payments.
1.3.14 But, this law is always in flux so it is very important to talk with your attorney before signing any agreement.
1.3.15 A discharge is the court’s order stating that you do not have to pay your debts to the creditors that were listed in your bankruptcy documents, so long as the court did not entered a non-dischargeability order.
1.3.16 This is known as a permanent, federal injunction.
1.3.18 The granting of a discharge does not stop the Debtor’s involvement in their case.
1.3.19 Even after a discharge, generally a creditor with a valid lien on debtor’s property (such as: house, car, furniture, jewelry) may recover the property or its value.
1.3.20 Home Loans: Arizona bankruptcy do not sign reaffirmation agreements. for home loans.
1.3.21 The law changes and the following may not be accurate. Talk to your attorney.
1.3.22 But, if the Debtor discharges a utility bill do not be surprised that there is a very large deposit required whenever a new service is requested.
1.4.1 Do not take on any new credit for at least one year after bankruptcy.
1.4.2 First make sure the debt was listed in your bankruptcy. If it was not you may still have the time to add it.
1.4.3 A discharge in bankruptcy is a valid legal defense against any debt that has been properly discharged, but it is a defense that you must raise.
1.4.4 Normally 8 years from the filing of the last chapter 7 or 11.
Shopping for legal services needs to be very done carefully. You should take time to consider the reputation, experience and commitment of any lawyer. Hiring the wrong lawyer for your situation is like hiring a bad surgeon for your surgery. Ask for references and check out the attorney’s reputation and experience. I realize that money is tight, but your future could depend on this choice. You can lose your tax refunds and other important assets if you do not understand the risks.
By the way – Diane offers a free consultation.
A chapter 7 bankruptcy is a proceeding under the federal law where a person is released (discharged) from paying his or her debts by filing bankruptcy, the person keeps those assets that are exempt, they continue to pay on secured items they want to keep (house, car) and turn over all of their non-exempt assets over to the trustee-in-bankruptcy. Some types of debts, however, are not affected by bankruptcy. See 11. USC Section 523.
A permanent resident of Arizona can file bankruptcy in the Arizona bankruptcy court. But, you must have lived in Arizona for at least half of the last 180 days (or 91 days) in order to file in Arizona.
WHAT IS THE ROLE OF AN ATTORNEY IN A CHAPTER 7 CONSUMER BANKRUPTCY CASE?
Many people ask me if they “can file their own bankruptcy”.
The laws were complicated before they changed in 2005, now I believe that only a fool would file their own bankruptcy, no matter “how simple”.
In fact, after the law changed many lawyers stopped doing any bankruptcy law because it had become so complex. Never listen to the advise of someone who filed their own bankruptcy. They had a “fool for a client” and probably committed at least one federal crime, but did not get caught. The current laws are being aggressively enforced and the Attorney General’s Office is actively pursuing bankruptcy fraud.
Do not use those who advertise on TV – you will end up paying their advertising costs.
Also, do not use “legal document preparers”. These are folks who want to be attorneys, but decided not to go to school. Instead, they pretend to know the law, or, worse yet, are disbarred attorneys or other scum who prey off the innocent who do not know better.
Always check out your lawyer with their state bar.
Ask for references from the lawyer. Most people find good lawyers by asking friends or relatives for referrals.
• First and foremost – educate the debtor about the importance of the bankruptcy process. That is absolutely necessary that the debtor fully disclosure all assets and debts (no exceptions). This education takes several hours and most must be done by an attorney, not an assistant to that attorney.
• Help the debtor analyze the amount and character of the debts owed in order to determine whether bankruptcy is the best remedy for the debtor’s financial problems.
• Assist the debtor in preparing their estate for bankruptcy, so that a minimum amount of property will later have to be turned over to the Trustee. Pre-bankruptcy planning.
• Review with the Debtor their history of payments and transfers to determine possible exposure to Debtor and others.
• Assist the debtor in assempling the information and data necessary to prepare the bankruptcy schedules and statements for filing.
• Prepare the proper petitions, schedules, and statements for filing with the bankruptcy court.
• Determine whether the education classes are necessary. If so, file the required certificates with the court.
• File the bankruptcy petitions, schedules, and statements with the court and obtaining the necessary injunctions and restraining orders.
• Attend the Meeting of Creditors with the debtor.
• Prepare and file amended schedules as required by the court.
• Address issues related to redemption, surrender or reaffirmation.
HOW MUCH DOES IT COST TO FILE A CONSUMER CHAPTER 7?
The Court’s filing fee are set by the court and will change with time.
The fee is the same whether you are filing bankruptcy individually or jointly with your spouse. In addition to the court filing fee there are also two classes each individual must take. The cost for the two classes depends on the provider. We will provide you with a contact for a relatively low cost first class. Our office will assist you in making arrangement for both classes. More information on these classes.
The 2005 Bankruptcy Reform Act requires a great deal more work for everyone – including the attorney for the Debtor. As a result many attorneys left the bankruptcy practice completely. Those who stayed found they had to increase their fees in order to pay for the additional work required. It is impossible to quote a fees without first reviewing your situation we will not be able to quote a specific fee for the attorney’s time. The more complicated your situation the higher the fees. The good news is that our initial meeting and review of your situation is FREE.
I am told by other clients that my fees are a lot less than those charged by other firms (especially the TV and billboard advertising firms. Those charge more than double in fees and who use strong-armed tactics to bully people to retain their services.
Why are our fees less than the TV advertisers?
I can do this only if my clients gather information in an orderly fashion by filling out as much of the requested information as pertains to their situation. If a client provides me with only part of the requested information, then my fees will have to increase for that client because I am forced to do more of the client’s work. So the client who fails to provide the names, dates, addresses, and/or amounts on the questionnaire will be charged more for the additional attorney time than the client who does their portion of the work without my intervention. That does not mean you should not ask questions. Thoroughness and accuracy are of utmost importance in a properly filed bankruptcy. Inaccurate paperwork can cause you to lose your bankruptcy protection, cost you more in attorney fees defending fraud claims and you may face jail time for bankruptcy fraud. My job it to help you avoid all those problems. So, thoughtful and organized questions are encouraged.
WHAT IS EXEMPT PROPERTY (THINGS YOU CAN KEEP)?
An important concept in both Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Chapter 7 Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the exemption laws of the applicable state. Each state has its own exemptions for bankruptcy purposes. For a link to Arizona exemptions go to the primary menu, Bankruptcy, Arizona Exemptions. There is a download PDF of the exemptions. Only Arizona residents are able to use Arizona exemptions (YouTube video).
WHAT EXEMPTIONS DO I USE WHEN FILING A BANKRUPTCY?
Just because you are an Arizona resident when you file for bankruptcy does not mean you are entitled to Arizona exemptions in bankruptcy.
Therefore, before you file bankruptcy you and your bankruptcy attorney must determine which state laws will determine your exempt assets. The state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately prior to filing your bankruptcy. If you have not been a resident of Arizona for the two-year period before filing your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you lived for 180 (6 months) days immediately before the two year period, or the state in which you lived for the longer portion of that 180-day period. Confused yet? I recommend making a diagram of where you lived and when.
For example: a person filing bankruptcy in Arizona today may use the Arizona property exemptions if he or she lived in Arizona for more than two years. But, if that person did not live in Arizona for two full years, then that person will need to look to the exemptions of the state where he or she lived in that last two years. It is possible that the exemptions of the prior state are limited to residents only. Therefore, the person filing for bankruptcy will need to use federal exemptions. In many cases, the state where the person moved from will provide better bankruptcy exemptions than Arizona law.
Consider John. John sells his residence in Georgia for $100,000 and moves to Arizona in January. In March of that year John purchases an Arizona homestead for $100,000; he gets an Arizona drivers license and registers to vote in Arizona. Then, 14 months after moving to Arizona, John loses his job and files bankruptcy. Under the bankruptcy law, Georgia’s relatively limited exemption laws would apply to John’s bankruptcy, and John may not have the benefit of Arizona $150,000 homestead protection (but laws change and so may this result).
WILL I LOSE EVERYTHING I OWN IF I FILE BANKRUPTCY?
No, you will be able to protect your exempt property.
Under the laws of the state where you live, and under the federal laws, certain properties are declared to be exempt, and out of the reach of your general creditors. That list of exemptions is unique to the state where you file bankruptcy and how long you lived in that state. If you have property not on the exemption list then you will have to turn it over to the Trustee. Warning – all your property, including exempt property, can be sold to pay back child support or alimony/maintenance.
On the main menu above is a link to a list of the properties that are exempt under Arizona law.
Be aware that the 2005 Bankruptcy Reform Act dramatically changed law governing exemptions. Now you are required to live in Arizona for the last 2 years in order to use Arizona exemptions. Otherwise, you will have to use the state that you lived in for the six months prior to the last 2 years prior to filing a bankruptcy.
WHAT ARE ALL THE STEPS IN A STANDARD CONSUMER CHAPTER 7 BANKRUPTCY?
In the bankruptcy documents you list secured debts separately from unsecured debts.
Unsecured debts include personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items. Vehicle leases, medical bills, and personal loans are also unsecured debts. Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loans, loans from finance companies (usually secured by household items), furniture, computers or electronics. If you purchased goods at a store using a store credit card, such as a card from Home Depot, Best Buy, etc., the store probably has a security interest in certain items purchased, which makes the store a secured creditor.
After filing a Chapter 7 bankruptcy, you will have to choose to either reaffirm or redeem secured debts or surrender the secured items to the creditor. You are entitled to keep any secured property as long as you continue to pay the loan for that property in a timely manner. If, however, you elect to surrender secured property, the secured creditor may not sue you for and try to collect any money from you. Some mortgage companies recently have required borrowers to sign cross-collateralizated agreements. This means that the borrower agreed to allow their bank or savings union to seize their bank accounts in order to pay delinquent payments for the vehicle. If you are unsure whether you signed this type of documents, you should review the papers you signed when you purchased your vehicle and/or when you opened your account. You may want to move your money to a new bank before defaulting on a vehicle loan.
Do not bank at Wells Fargo — they have been known to freeze your account even if you did not owe them any money.
WHAT ARE CONTINGENT or DISPUTED CLAIMS/LIABILITIES?
Make certain you provide your attorney information about all liabilities, no matter how remote.
List any claim that anyone might have against you even if you are certain that claim will never arise. If you are a co-debtor on a note, have personally guaranteed any debt, or are liable on any mortgage, the debt should be listed and explained in the bankruptcy. You also must list debts you dispute. This includes any past obligations to any mortgage companies for a foreclosed home or even a short sale, make sure to include any mortgage insurance company (such as a VA loan). You should also include any obligations that someone promised to pay for you, such as selling your home to someone who promised to pay you, but the sale was done without paying off the entire debt.
Your bankruptcy estate refers to your non-exempt assets that are subject to administration by the bankruptcy trustee. Exempt assets, such as your homestead and IRA, are not part of your bankruptcy estate.
An executory contract is a legal term referring to an agreement between parties and an obligation due by at least one of the parties (such as a car lease or a residential lease). The most common example is a lease agreement for a car or a residence.
An example of an executory contract is a vehicle lease. If the debtor does not want to keep the leased vehicle then he can surrender the vehicle to the leasing company and has no further liability. If the debtor wants to keep the vehicle then will need to assume the lease and keep the payments current. The debtor and creditor must sign the lease assumption, but it is not necessary for the judge to approve the lease assumption. If the debtor cannot make the lease payments the leasing company can repossess the car, but cannot sue the debtor for any deficiency.
WHAT IS THE ‘MEAN’S TEST’?
ARE ANY CLASSES REQUIRED BEFORE FILING A BANKRUPTCY?
Every consumer who files Chapter 7 or 13 bankruptcy is required take a credit counseling “briefing” within 180 days PRIOR to filing their bankruptcy and file a certificate of compliance.
There is a provision for emergency situations, but they still must prove that they tried to obtain the class within the last 5 days of filing, but they must take the class and file a certificate of compliance within 30 days after filing their bankruptcy Petition. Never assume the court will permit this late filing – most likely your bankruptcy will be dismissed and you will have to start all over (plus there are other consequences).
There is also a budget class that must be taken within 45 day s after filing your bankruptcy. Failure to do so will result in additional fees and costs in order to get your discharge in your bankruptcy. There will be fees charged for those classes, unless you cannot afford to pay such fees. Diane and Jay will explain the process.
Warning about all the companies providing the certificates – their information regarding bankruptcy is often not accurate. You must talk to a bankruptcy attorney in your State. We will provide you with information about both of these classes.
After filing your bankruptcy you must take a class called Personal Financial Management. DO NOT TAKE THIS CLASS BEFORE FILING YOUR BANKRUPTCY.
Credit Counseling and Debtor Education classes must be approved by the US Trustee’s Office.
Moral – Use an Experienced Bankruptcy Attorney Who Cares About You.
WHAT HAPPENS IF I HAVE THINGS THAT ARE IMPORTANT TO ME?
If you have items that are not on the exemptions list Download List Of Arizona Exemptions	(3101 downloads) bankruptcy Trustee will immediately begin to collect the remaining property and prepare for auction (each trustee has a different process so you need to talk to your attorney). You are obligated to protect those assets until the Trustee can make arrangements to pick them up.
After the auction of the items, your creditors will be notified by the Trustee to file a proof of claim; usually within six months after the Meeting of Creditors. The Trustee will examine the proof of claims and object to those the Trustee deems to be improper. All claims not objected to by the Trustee, you, or another creditor will be approved by the court and the creditors will receive a pro-rata share of whatever the Trustee has collected.
The fees for the auctioneer, trustee and their attorney are paid out of the funds they collected, not by the Debtor.
Pre-Bankruptcy Planning – good or bad faith?
IS THERE A WAY TO MINIMIZE NON-EXEMPT PROPERTY THAT HAS TO BE TURNED OVER TO THE BANKRUPTCY TRUSTEE?
This is a very difficult situation, especially if you paid money or transferred assets within 3 – 48 months before bankruptcy.
Discuss this with your bankruptcy attorney before you pay money or transfer any assets since not all such transactions are permitted under the Bankruptcy law, but may be permitted under your state law. The 2005 Bankruptcy Reform Act added several very complicated hoops to jump through when planning for a bankruptcy.
Paying down mortgages within the last 10 years (more than you normally pay), buying or transferring assets in the last 2 years or more, paying friends or relatives money in the past 12 months may all be doorways for the Trustee and your creditors to attach your assets.
The moral – never plan for your bankruptcy without seeking assistance from an experienced bankruptcy lawyer. By “experienced” I mean someone who practices only bankruptcy law for at least 10 years, is in good standing with the State Bar, and has a great reputation in the Bankruptcy Court.
WILL MY EMPLOYER BE TOLD I FILED BANKRUPTCY?
The bankruptcy Trustee will request that you provide copies of several documents (tax returns, bank statements, etc). One of these items will be copies of some of your pay stubs before filing. If you refuse to provide this information then the Trustee may send a form to your employer seeking information about your wages. Therefore, your employer will usually not be contacted so long as you comply with the Trustee’s request.
This is very hard to give specific credit ratings. Most likely the filing of a bankruptcy generally means that your credit rating will go down to under 550. Given your situation, it may not take long after your discharge to substantially raise that rating. Several financial institutions openly solicit business from recent debtors, apparently because they know that the debtor cannot file another chapter 7 for at least eight years (six under the pre-10/2005 law). If there are compelling reasons for filing bankruptcy that were not within your control, such as an injury or illness, the creditor may take that into consideration in rating your credit after bankruptcy.
IF I FILED BANKRUPTCY DO I LOSE ANY OF MY RIGHTS, SUCH AS THE RIGHT TO VOTE?
No. Bankruptcy is a civil, not a criminal proceeding.
You do not forfeit any of your civil or constitutional rights by filing a bankruptcy. Also, neither a utility, a governmental unit, nor your employer may discriminate against you because you have filed bankruptcy. But, if you discharge a utility bill then you may find that you are charged a very large “deposit” when you apply for new utility service.
WHAT IF I AM HERE ILLEGALLY; CAN I FILE BANKRUPTCY?
Articles on immigration and bankruptcy.
WHAT ARE THE DEBTOR’S DUTIES?
The Debtor may not submit any documents to the Bankruptcy Court until the Debtor is certain that the information is (1) well grounded in fact; and (2) warranted by existing law or a good faith argument for the modification of the existing law.
Rule 9011 In other words, someone who is representing himself or herself in a bankruptcy is held to know both the bankruptcy and state laws that apply to their situation. Ignorance of the law is no excuse.
The Debtor’s attorney must make the same avow regarding the information provided by the Debtor. Sanctions can be awarded under §707(b)(4).
complete the required credit briefing class (before filing the bankruptcy §109(h)) and budget class (after filing the bankruptcy §§111, 727(a)(11)).
7 days before the creditor’s meeting deliver to the Trustee a copy of the last tax return filed or a transcript, provide the Trustee with proof of identity and other documents (bank statements, wage statements, tax returns, car titles, etc).
Click here for the timeline. (§521(i)(1).
All creditors must receive notice of the bankruptcy (§521(a)(1)(A).
Failure to provide notice to the correct address may mean the creditor can continue legal actions outside the bankruptcy court, until they receive notice at the correct address.
Failure to comply with these deadlines will most likely result in the dismissal of the bankruptcy case.
Some of these requirements listed above may not apply if the Debtor is a company, or debts are not primarily consumer debts and has nonexempt property above $150,000. §101(3).
The bankruptcy stay is the bankruptcy tool that stops creditors from contacting you in any way after you file bankruptcy. This could be a problem because the lender secured by your home or car may stop sending monthly statements. It is your responsibility to make sure you pay these debts on time, otherwise the lender may ask the court for permission to take your home or vehicle.
The filing of the petition creates an automatic stay under 11 U.S.C. §362 prohibiting all collection actions. 11 U.S.C. §§ 301, 302, 101(42) – unless the Debtor has filed a prior bankruptcy in the last 12 months.
The automatic stay is good for only 30 days if that Debtor has filed one prior case in last 12 months. §362(c)(3)(A).
If the Debtor wants to extend the automatic stay they must file a motion to extend the Stay immediately after filing the bankruptcy.
A dismissed case is a filed case. There is no excuse for a Debtor’s failure to understand these limitations.
HOW WILL THE COURT CONTACT ME and WHAT SHOULD I DO ABOUT COURT ORDERS or INSTRUCTIONS?
Always read and follow the directions from the court.
The orders or instructions will be mailed to you, unless you sign up for e-mail notification. You should contact your attorney as soon as you receive the orders to obtain advice on how to properly follow the orders. It is very important, therefore, that you always keep the court and your attorney informed of your correct address.
WHAT HAPPENS TO THE PROPERTY I TURN OVER TO THE TRUSTEE?
A public auction is held and your property is is converted into cash, which is then distributed to those of your creditors who file claims (Proof of Claim) against your bankruptcy estate. You, your family and friends have a right to bid at this auction. The expenses of administering your estate will also be paid from these funds. The Trustee assigned to your case will be responsible for paying his/her attorney or other professional.
WHAT HAPPENS IF THERE IS NO MONEY (TAX RETURNS, ETC.) or OTHER PROPERTY TO TURNOVER TO THE TRUSTEE?
If you have no money or property of a value in excess of the exemptions allowed by law, your case will be considered a “no-asset” case. Soon after the Meeting of Creditors the Trustee/court will decide whether or not your case is a no-asset case.
Normally, your discharge will be entered approximately 120 days after your case was originally filed, unless a creditor files an objection to your discharge, the Trustee request an extension of time or you ask for more time in which to reaffirm debts. Your case will probably be closed shortly after the discharge.
WHAT ABOUT MY TAX REFUNDS?
When you receive your tax refund check, you must turn it over to the trustee.
Any right that you had to a tax refund at the time of filing the bankruptcy is an asset of your bankruptcy estate and belongs to your trustee. If the amount is small it is possible that you may get back the check back. However, you should anticipate that the trustee will take a portion of the refund equal to the amount due to you on the date of filing.
Talk to your attorney about pre-bankruptcy planning.
Transferring assets before bankruptcy could be fraud.
When your bankruptcy papers are filed, they become public records. The record of your filing may be published by some credit-reporting agencies. In addition, your name will be published in one newspaper in Arizona, and possibly more. However, your name will be listed on a page with hundreds of other debtors, so your name will probably not stand out.
To reaffirm a debt is to sign a new contract with the lender, thereby reaffirming the Debtor’s personal liability for the obligation.
This is typically done with vehicles. The Debtor should always talk to their attorney before reaffirming any personal liability for a debt. There may be other options to reaffirming, such as surrender, redeem, or avoidance of the lien. If, after considering the options a debtor voluntarily decides to reaffirm and re-establish their personal liability to a creditor, and enters into a written agreement to that effect signed by the debtor and the creditor, the Debtor must then submit the agreement to be approved by the Court.
Even once the reaffirmation agreement is signed the Debtor has 60 days to revoke it.
The consequence of a debtor’s failure to take advantage of other options, other than reaffirming the debt, is that the debtor is bound by the terms of the new agreement and can be sued if there is a default.
The danger for the Debtor is that they can be sued on any new contract signed after filing their bankruptcy.
If the Debtor does not sign a new contract, then the lender cannot sue, but they can take the vehicle – MAYBE. Here is where it gets complicated. Under the old bankruptcy law the Debtor could keep their vehicle so long as they made the regular monthly payments and kept insurance current. They were not required to sign a reaffirmation agreement. That way, if later on the car became a lemon, the Debtor could surrender the car to the lender and was not subject to any deficiency action (lawsuit).
Under the 2005 Reform act: a reaffirmation agreement is binding only if it is entered into before the discharge is filed, the debtor receives the numerous disclosures required from the creditor, except credit unions (§524(k), the Debtor does not rescind the agreement and the court approves the reaffirmation agreement – that may include having a hearing (§524(c)).
The Court may refuse to sign the reaffirmation agreement if it appears that the Debtor cannot afford the contractual payments.
So what is the problem? Some creditors are taking the position that the new Bankruptcy law requires the Debtors to sign a reaffirmation agreement, if they want to keep the car. But, §524(c) states that an obligation must be “enforceable under applicable non-bankruptcy law, whether or not discharge of such debt is waived”. If the Debtor keeps the vehicle payments current, has insurance, but refused to sign the reaffirmation agreement – there does not appear to be a default which is “enforceable under applicable non-bankruptcy law”. After all, the creditor is receiving their monthly payment.
But, this law is always in flux so it is very important to talk with your attorney before signing any agreement.
SO WHY WOULD YOU SIGN A REAFFIRMATION AGREEMENT?
Perhaps, in the situation where the creditor is offering better terms on a new contract; such as a reduction in the principal equal to the current fair market value of the vehicle and reduction of the interest rate. Nothing stops the Debtor from negotiating these new terms as part of any reaffirmation agreement, but the lender can reject the terms and the court cannot force the terms on the lender.
A debtor’s tool in bankruptcy is to “redeem” secured personal property such as furniture, computers, automobiles, or other property purchased on credit. To redeem means to purchase the property from the secured lender at its current fair market value considering its age and condition. If the property is worth less than the secured debt then this may be a good option. The problem is that most redemptions require payment in full at the time the redemption is accepted or approved by the court.
A discharge is the court’s order stating that you do not have to pay your debts to the creditors that were listed in your bankruptcy documents, so long as the court did not entered a non-dischargeability order.
The discharge is the legal process that eliminates most of your legal liability to your creditors. Creditors who have been discharged in bankruptcy can never again try to collect debts that you incurred prior to filing bankruptcy. There are certain debts that remain even after the discharge is entered. These debts include child support, alimony, student loans, most taxes, and several other obligations. A good bankruptcy attorney can guide you as to what debts are discharged and what are not. Video explaining the discharge.
Some debts that are not discharged under the current laws include student loans, child support, alimony/maintenance, government fines or penalties, most taxes and a few others.
This is known as a permanent, federal injunction.
The effect of a discharge is that debtors are released from personal liability for all dischargeable debts, and all creditors, whose debts are discharged, are prohibited from performing any act to collect such debts from the debtors. Only people received discharges, companies do not.
Creditors and the trustee have a 60 day period after the creditor’s meeting to file a complaint indicating that they believe there is good reason why their debt should not be discharged (forgiven) or a good reason why this chapter 7 case should not be continued (Bankruptcy Code §523(a)(2), (4), (6, and (15)). The Trustee can request that the court deny a chapter 7 discharge in some cases.
The granting of a discharge does not stop the Debtor’s involvement in their case.
The Debtor is not relieved from performing the duties required under the Bankruptcy law. One example of a continuing duty is the Debtor’s obligation to surrender assets or tax refunds to the Trustee after the discharge is entered. In the event the Debtor fails to perform those duties an action may be brought to revoke the discharge. This will mean that the Debtor went through all this hassle and ends up with no protection from their creditors garnishing wages, suing or seizing bank accounts.
Even after a discharge, generally a creditor with a valid lien on debtor’s property (such as: house, car, furniture, jewelry) may recover the property or its value.
However, if the debtor possesses certain property that is encumbered by a judicial lien or a non-purchase—money security interest, the Debtor will have to bring this issue to the Court for an order which will remove the effect of the lien. This action is called a Motion to Avoid a Lien.
If the debtor wants to keep assets that have secured liens (such as a house or car) the debtor can either continue making the same payments as before the bankruptcy, or pay the lender one lump-sum payment equal to the fair market value of the item (redemption).
Home Loans: Arizona bankruptcy do not sign reaffirmation agreements. for home loans.
Talk to your attorney about the issues and if they will sign the agreement so your payments will be reflected on your credit reports.
HOW WILL I RECEIVE MY BANKRUPTCY DISCHARGE?
Usually by mail, unless you have asked for electronic notification. In some states there may be a court hearing, which you must attend, where the court will explain the meaning of the discharge, or the reasons for denying your discharge, if it is not granted.
Arizona does not have this discharge hearing, unless yours is a very unique situation.
The law changes and the following may not be accurate. Talk to your attorney.
If your discharge in bankruptcy is granted, in most circumstances all of your debts will be discharged except the following list, which is intended to be only an outline of most debts that are not discharged.
Taxes due within the last three years or taxes not assessed because of fraud.
If the bankruptcy court so rules, debts for obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive.
Debts not listed on your bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim.
If the bankruptcy court so rules, debts for fraud, embezzlement or larceny.
Debts for domestic support obligations (alimony, maintenance or support).
If the bankruptcy court so rules, debts for intentional injury.
Debts for certain fines and penalties payable to governmental units.
Debts for student loans that were insured by a governmental agency, unless not discharging the debt would impose an severe undue hardship. This undue hardship must be properly plead to the Court and the judge will decide based on your unique situation.
Debts that were or could have been listed in a prior bankruptcy case in which you either waived your discharge or your discharge was denied.
Debts that are owed to a single creditor (of an amount specified in the Code) for the purchase of “luxury goods” incurred by you in the 90 days before you filed the petition for bankruptcy. The 90 day period may be long, depending on your history of paying, what the money was used for and your “intent” at the time of incurring the debt.
account incurred by you an the 70 days before the bankruptcy was filed, regardless of the number of creditors involved.
DUI personal injury judgments against you resulting from car accidents in which you were a drunk driver.
Post-petition Homeowner association fees. Note – pre-petition HOA assessments are normally still attached to your home.
Monies owed to a pension, profit-sharing, stock bonus or such other plan.
CAN MY UTILITY COMPANY REFUSE SERVICE IF THEIR DEBT IS INCLUDED IN THE BANKRUPTCY?
If, immediately after filing the bankruptcy, the Debtor provides their utility company with a deposit or other security to insure the payment of future services, the utility may not stop service, refuse to serve, or discriminate against the Debtor for discharging their bill.
But, if the Debtor discharges a utility bill do not be surprised that there is a very large deposit required whenever a new service is requested.
ARE MY OUT-OF-STATE DEBTS DISCHARGED IN BANKRUPTCY?
Yes. Bankruptcy is a federal proceeding and the bankruptcy court has the jurisdiction and power to discharge debts contracted anywhere in the Country.
Contact your attorney immediately about a change of address or phone number for a year after you receive you discharge. Also, make sure the Court and the Trustee are informed of your new address.
CAN I CONTINUE TO PAY SOME OF MY DEBTS AFTER FILING BANKRUPTCY?
Yes, you can pay as many of your debts as you want or need to pay after you file bankruptcy. Certainly, if you want to keep your house and car you must continue paying the lender. You are also obligated to pay the debts that for which you enter into a Reaffirmation Agreement. (See discussion above on reaffirmation agreements).
Do not take on any new credit for at least one year after bankruptcy.
I recommend that you not make any payments that are not absolutely necessary. My clients tell me they have more money than they ever thought, once they were relieved of the obligation to pay the high interest rates for their credit cards and other unsecured debts.
WHAT SHOULD I DO IF A CREDITOR, WHO WAS INCLUDED IN THE BANKRUPTCY, SUES ME AFTER DISCHARGE?
First make sure the debt was listed in your bankruptcy. If it was not you may still have the time to add it.
As to the lawsuit – do not ignore it, otherwise a default judgment will be entered against you. Respond to the law suit by filing an answer in the court where you have been sued, stating that the debt has been discharged in bankruptcy. In most instances the case will be dismissed once the judge learns the debt was listed in the bankruptcy and subsequently discharged. If the judge does not dismiss the case, then you can apply to the bankruptcy court for an injunction ordering the creditor to stop the suit against you.
A discharge in bankruptcy is a valid legal defense against any debt that has been properly discharged, but it is a defense that you must raise.
HOW OFTEN CAN I FILE A CHAPTER 7?
Normally 8 years from the filing of the last chapter 7 or 11.
Only individuals who have complied with the Bankruptcy laws can receive a chapter 7 discharge. That individual cannot receive another chapter 7 or chapter 11 discharge for 8 years after the filing of the first chapter 7 bankruptcy. 727(a)(8). If the debtor commits fraud, or fails to perform as required by law, the discharge can be revoked. Even if a chapter 7 discharge is not available the Debtor may be able to file a chapter 13.

References: §362
 §707
 §109
 §101
 §362
 §362
 §524
 §523
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