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FAQ Chapter 7 Bankruptcy

What is a bankruptcy?

Bankruptcy is a way for people or businesses who owe more money than they can pay right now, (a “debtor”), to either work out a plan to repay the money over time, under Chapter 11, 12 or 13, or for most of the bills to be wiped out (“discharged”), as in a chapter 7 case. While the debtor is either working out the plan or the trustee is gathering the available assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor.

When the bankruptcy petition is stamped “relief ordered” upon filing, you are immediately protected from your creditors. What chapter you choose to file under, what bills can be eliminated, how long payments can be stretched out, and what possessions you can keep, and the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure control other details. These are federal laws, which means they apply all over the United States. The code and Rules are found in Title 11 of the United States Code.

What do I do when creditors call?

Once you have retained my office by paying your retainer fee, you may tell all of your creditors, “I have hired the Dunaway Law Group to represent me in a bankruptcy filing. They told me to tell you to direct all further communication to their office. His phone number is 480-389-6529.” Once you tell a collection agency that you have a lawyer they may not call you any more. If they call you back after you have told them you have a lawyer, make sure to get a name and phone number of the person calling you and then contact our office.

Yes, the automatic stay prevents bill collectors from taking any action to collect debts. Once you have retained our office to file your bankruptcy then direct all creditors to our office. You can tell them, “I have hired the Dunaway Law Group to represent me in a bankruptcy filing. They told me to tell you to direct all further communication to their office. Their phone number is 480-389-6529”.

The creditors will call our office and verify that you are a client. Once they have verified that you are a client then they will stop calling you.

What happens if I file a chapter 7 bankruptcy?

A chapter 7 bankruptcy begins by filing a “petition” and schedules with the bankruptcy court. The person filing a chapter 7 is referred to as the “debtor”. The debtor is required to disclose to the court all of his or her property and debts and turn over all nonexempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor then receives a discharge of all dischargeable debts.

Who can file a bankruptcy?

Any person, partnership, corporation or business trust may file a bankruptcy. If the person or entity that owes the money, referred to as the debtor, starts the bankruptcy, it is called a voluntary bankruptcy. The people or entities that are owed money, referred to as the creditors, can also file a petition against a person or an entity who owes them money, and that is called an involuntary bankruptcy.

Voluntary cases can be filed under chapters 7, 9, 11, 12 and 13. Certain types of entities, such as banks and insurance companies, may not be eligible to file bankruptcy, however, almost all other entities can file a bankruptcy.

A business that is NOT a partnership, corporation or business trust, cannot file a separate bankruptcy on its own. Those assets and debts would be included in the personal bankruptcy of the owner(s).

What is a joint petition?

A joint petition is the filing of a single petition by an individual and the individual’s spouse. Only people who are married on the date they file may file a joint petition. Unmarried persons, corporations and partnerships must each file a separate case. If you are an individual and have a business that is not a partnership, corporation or business trust, you should list the business as a “dba” (doing business as) on your petition. However, yours will not be considered a joint petition because the business is not an independently recognized legal entity.

How long after filing will the creditors stop calling?

Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court will mail a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks.

Creditors will also stop calling if you inform them that you filed the bankruptcy petition and supply them with the “docket number” from your case. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees.

Who notifies the creditors and bill collectors?

After the bankruptcy petition is filed, the bankruptcy court mails a notice to all the creditors listed in the schedules. This usually takes a couple of weeks.

Will my employer and landlord find out about my bankruptcy?

Bankruptcy petitions are public records. However, under normal circumstances, unless your employer or landlord is a creditor, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor is must be listed as a creditor on the schedules and receive notice of the bankruptcy proceeding.

Can my employer fire me for filing bankruptcy?

No. 11 U.S.C. §525 prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.

Does the spouse of a married person also have to file bankruptcy?

No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable then it might be advisable to have only one spouse file. If the spouse have joint debt, the fact that one spouse discharged the debt may show on the other spouses credit report.

Can I keep my credit cards?

Typically no, however, under some circumstances you may be able to keep a credit card if the creditor agrees. There are many factors that must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.

Will I have to go to court?

About 30 to 40 days after filing the bankruptcy petition, you will have to attend a “341 Hearing” at the bankruptcy courthouse. This hearing is called the Meeting of Creditors. the trustee is not a judge. Trustees are appointed to oversee bankruptcy cases. At the First Meeting of Creditors, the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters.

Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the Meeting of Creditors. After the initial meeting you normally do not need to return to court.

What should I do to prepare for filing bankruptcy?

If you intend to file bankruptcy you should stop using your credit cards. If you borrow money with the specific intent of discharging the debt in bankruptcy instead of paying it back, the debt is not dischargeable.

In addition, three specific circumstances are worth mentioning: (a) certain luxury purchases over $1225 within 60 days of the bankruptcy filing are presumed nondischargeable; (b) cash advances aggregating $1225 within 60 days of the bankruptcy filing are presumed nondischargeable; and (c) debts involving materially false financial statements are nondischargeable under certain circumstances.

Don’t transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.

Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away.

Can I file bankruptcy to delay a creditor?

No. Rule 9001 of the Rules of Bankruptcy Procedure requires you to certify that your petition is not filed “for any improper purpose, such as to harass or to cause unnecessary delay…” Bankruptcy is intended as a tool for dealing with debts that can not otherwise be paid. You should not file a bankruptcy petition for the sole reason of delaying a creditor’s actions.

Do I have to disclose all of my assets?

You must disclose all of your assets. If you knowingly and fraudulently conceal an asset from the court you have committed a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can deny you your discharge, or dismiss or convert your bankruptcy proceeding.

What kinds of bills can I wipe out in bankruptcy?

Generally, if you go through bankruptcy your goal is to wipe out your unsecured debts. Your unsecured debts are typically major credit cards, department store cards, personal loans or lines of credit from banks, medical bills, or any other money you may owe someone that is not secured.

Can I keep my house and my car?

Yes. Most people filing bankruptcy keep their homes, their cars, and all of the property. However, this assumes you continue making your payments!

Can I get rid of taxes in bankruptcy?

You may have heard that you cannot wipe out taxes in bankruptcy. THAT IS NOT ALWAYS TRUE! Under certain conditions you may be able to wipe out taxes in bankruptcy.

Can I get rid of student loans in bankruptcy?

You may have heard that student loans cannot be wiped out in bankruptcy. THAT IS NOT ALWAYS TRUE! Under certain conditions you may be able to wipe out student loans in bankruptcy, although it is very difficult to do so.

How long does BANKRUPTCY TAKE and who will be notified?

Typically, you can expect your case to take about three to four months from the day you file your papers (known as the bankruptcy petition) until the day the court actually wipes out your debts. Notices will only be sent to those you have listed on your bankruptcy petition.

What if I have used my credit cards just before bankruptcy?

If you intentionally run up your credit cards in hopes of wiping them out in bankruptcy, you have committed fraud. If you reasonably purchased necessities or needed to support yourself, that is not fraud.

What affect will bankruptcy have on my credit?

Bankruptcy may appear on a credit report for up to 10 years. But that doesn’t mean you can’t get credit for 10 years.

Can I rebuild my credit after bankruptcy?

Yes. You may have heard about people who have filed bankruptcy two or three times. Maybe they are the best proof that people can actually get credit after bankruptcy. If they weren’t able to get credit after their first bankruptcy, they would not have had to file bankruptcy again.

Basic Procedure

Upon filing, you will be required to file a sworn list of creditors, a schedule of assets and liabilities, a list of exempt property, a schedule of current income and expenditures, a statement of your financial affairs and a statement of intent regarding consumer debts secured by property of the estate. You will also be required to surrender to the trustee all property of the estate. 11 U.S.C. §521. The order of relief is granted when you file. What this means, among other things, is that an automatic stay is triggered, prohibiting creditors from pursuing you or your property outside of the bankruptcy proceeding.

The clerk of the court will mail notice of the bankruptcy to your creditors.

An objection to your receiving a general discharge of all your debts must be filed by the Trustee or a creditor within 60 days following the first date set for the creditors meeting. If no objections are filed, and if no motion to dismiss is pending, the court will ordinarily grant a discharge upon expiration of the 60 day period. Bankruptcy Rules 4004 and 1017; 11 U.S.C. §727.

A creditor may object to the dischargeability of a particular debt at any time if the debt: (1) is for a tax or customs duty; (2) is not listed in the schedules so that a creditor could file a proof of claim; (3) is related to alimony or child support; (4) is a government fine or penalty; or (5) is a government insured student loan.  Any student loans guaranteed or insured by the government or a non-profit institution will not be dischargeable. This means that you will continue to be liable for the payment even if you file bankruptcy.

A creditor may object to the dischargeability of a particular debt only within 60 days of the first date set for the meeting of creditors, if the debt: (1) is a consumer debt incurred close to filing; is a result of fraud; or (3) is a result of a willful and malicious injury to a person or property of another. Bankruptcy Rule 4007; 11 U.S.C. § 523.

NON-DISCHARGEABLE DebtS

A debtor’s goal in any chapter 7 bankruptcy is to have as many debts discharged as possible. The general rule is that all debts created before the bankruptcy filing are discharged. Discharge destroys any personal liability you may have on a claim or debt.

There are ten categories of debt excluded from discharge under §523. These fall into two areas: debts that are not dischargeable due to the wrongful conduct of the debtor and debts that are not dischargeable due to public policy.

The debts not dischargeable due to the debtor’s misconduct include those created by intentional torts, fraud, larceny, embezzlement, fiduciary violations, and drunken driving. The debts not dischargeable due to public policy include alimony and child support, taxes and customs duties, governmental fines, penalties and forfeitures, educational loans, unscheduled debts and certain debts surviving a prior bankruptcy case. A claim must fall within one of these exceptions to be found non-dischargeable.

To prevail on a fraud exception, the creditor would need to show that there was a false, material representation of fact made by the debtor that the debtor knew was false at the time he made it, made with the intention of deceiving the creditor. Some courts have held that when a credit card is used, the debtor impliedly represents that the debtor has the ability and intention to pay for the goods and services charged. Those courts have therefore found that some credit card debt is non-dischargeable under the fraud exception.

This is not the only potential problem that can arise with credit card or similar debt. Section 523 also provides that there is a presumption that certain consumer debt created right before filing a chapter 7 is non-dischargeable.  The presumption of non-dischargeability will apply if the debt is consumer debt for so-called “luxury goods or services” incurred within 40 days before the filing, owing to a single creditor aggregating more than $500.00. Further, the presumption of non-dischargeability will apply if there are cash advances made by a creditor for more than $1,000 that are extensions of consumer credit under an open end credit plan within 20 days of filing bankruptcy.

Any credit based upon false financial statements is subject to exception from discharge. Statements made in the financial statements have to be materially false with the intent to deceive the creditor to fall within this exception. Note that a credit application should not qualify as a “financial statement” if it does not require a disclosure of debts.

It is crucial for the debtor to include all creditors in his schedules filed with the Court. If a debtor knows of the creditor and does not schedule him, the creditor is denied participation in any distribution; to protect the creditor from this type of problem, the code provides that unscheduled claims may be non-dischargeable.

Debts created by willful and malicious injury will also be excepted from discharge. These types of claims arise from intentional actions by the debtor, done with malice that causes damage.  It is important to note that ordinary negligence claims are dischargeable. A plaintiff with a personal injury claim would need to allege significantly more than simple negligence to have his or her claim deemed non-dischargeable in the Bankruptcy Court.

Cash on Hand – What does that meaN?

Cash on hand is anything in a bank account, safety deposit box, your wallet, under the mattress, etc. Money that is “pending” in your bank account is considered to still be in the account! So just because you have written checks from your account, unless they have cleared your account it is still considered to be in your account and “cash on hand”!

WHAT HAPPENS IF I HAVE TOO MUCH CASH ON HAND?

You give it to the bankruptcy trustee!

How to Make a Shared Well Agreement

I. VERIFY the WELL INFORMATION

The first step in creating a Shared Well Agreement is verify that the information is correct. Otherwise, making a new well share agreement with bad information is like trying to make a gourmet meal using rotten food. It can create more problems than it helps.

  1. Verify Well Ownership Information with the ADWR

Arizona Department of Water Resources (ADWR) requires that all property owners register and update the ownership information each time there is a change to ownership.

Recording of a deed with the county recorder, transferring title of the real estate does not notify ADWR that the well ownership has been transferred. Therefore, the new water well owner must take steps to register the well in their name.

Verify the APN Numbers

Counties assign APN numbers to parcels for tax purposes and each parcel has a unique number assigned to it by the county. But what happens to a parcel number with the property is split?

  • Well share agreements are often inaccurate and outdated. Land parcels have changed. For example, the lot has been divided.
  • A new homeowner has begun using the well, with permission, but the well share agreement was never modified naming the new homeowner.
  • The property was sold but never updated with the new homeowner’s information.
  • A new home will be built, and the agreement is not modified naming the new owners.

II. CUSTOMIZING THE SHARED WELL AGREEMENT

Every situation is different, every property is different.

  • What about swimming pools;
  • What about electricity meters;
  • What about water meters;
  • What about establishing a bank account to save money;
  • What if someone doesn’t pay;
  • Should a property owner without a home on her property be required to pay for maintenance even when they are not drawing water;
  • Buy-in for ‘later comers’? Drilling a new well can cost upwards of $40,000, so is it fair that someone builds a house and begins using the well without contributing to the cost of its construction.

The list could go on and on.

UPDATING OWNERSHIP WITH THE SHARED WELL AGREEMENT

A well share agreement protects people. Each person is obligating themselves to abide by the agreement. For instance, they are committing to pay for all repairs, maintenance, upkeep, and electricity. When an agreement is signed, that person is obligated to abide by the promises made in the agreement. However, if a new homeowner does not sign an amended agreement, then they have not obligated themselves to the terms of the agreement.

AMENDMENTS PROVIDE AN OPPORTUNITY TO CORRECT ERRORS

I’m continually amazed at the inaccuracies found in many well share agreements. I’ve seen some where the well share number was incorrect, the legal descriptions were incorrect, and so were <<insert>>.

III. AFTER THE SHARED WELL AGREEMENT IS COMPLETE

RECORD THE AGREEMENT WITH THE COUNTY

Once the Shared Well Agreement is completed and signed by all parties it must be recorded with the county recorder.

REGISTERING YOUR WELL WITH THE ADWR

In Arizona, private well owners are left strictly on their own to manage and protect their water well. There are no standards for the performance of private or shared water wells during the sale and transfer of the real estate upon which the well is constructed.

Even though the Arizona Department of Water Resources (ADWR) does not get involved in Shared Well Agreements it is still a best practice to record the agreements with them. They will put it in the permanent file for the well and so it can always be referenced. However, well share agreements are completely unregulated and not required by Arizona law.

Contact water law attorney Clint Dunaway at 480-702-1608 or by email at Clint@DunawayLG.com. * The information provided is informational only, does not constitute legal advice, and will not create an attorney-client or attorney-prospective client relationship. Additionally, the Dunaway Law Group, PLC limits its practice to the states of Arizona and Utah.

Deposition

What is a deposition?

Deposition is the oral testimony of a witness taken under oath before trial at which time most of the objections available at trial do not apply; the basic rule being that the questions asked need only address themselves to information that is relevant to the case or to discovering relevant facts.  Anything said at the deposition can be used as evidence at trial.  

A deposition is a question-and-answer session. Attorneys for the other side will ask you questions, and you will answer the questions. When you answer, you will be testifying under oath, just as if you were testifying in court.  A court reporter will make a record of what is being said, which will later be transcribed into booklet format. When you are answering questions, you should relax and speak openly and frankly. The following pointers may be of some help:

The opposing party has a right to find out what information you have about the dispute so they can be prepared for trial, if the case does not settle.

What Happens at a Deposition?

The first thing that happens is the court reporter will ask you to swear or affirm to tell the truth. Then the other attorney will usually ask you to follow his or her rules. Ninety percent of the time, these rules are a) don’t talk over his questions because the court reporter can’t get down two people talking at once, b) if you don’t understand the question please ask for clarification, and c) if you need a break ask for one. Then the questions and answers begin. Once the deposition starts, you cannot talk to your attorney about your testimony. Your attorney is only there to protect you from improper questions. If your attorney objects, stop talking. Let the attorney get the objection out and then he will tell you whether to answer or not. Most of the time, objections are “for the record” only, because there is no judge present. So, a lot of times, attorneys object to questions and then tell their clients to go ahead and answer. Do not be surprised if that happens.

A deposition is a question-and-answer session. It is not a conversation. The pattern of the deposition should be:

You need to make sure that after you hear the question, you pause and think your answer through. After you are sure that the answer in your head is the best, most accurate answer, then you say it. Taking a pause and thinking through what you are going to say has two benefits:

Second, it lets you take control of the deposition.. But you still maintain 49% control over the way the deposition goes by controlling the pace.

TIPS FOR ANSWERING THE QUESTIONS

1.  Tell the Truth– It is your sworn duty. At your deposition, as in all other matters, honesty is the best policy. You must testify accurately about what you know.

2. Understand the Question– You cannot possibly give an accurate answer unless you understand the question. If you do not understand the question, say so. The lawyer will either repeat the question or rephrase it. Listen carefully to make sure that you understand. Some questions may have more than one meaning or may assume that you have testified to a fact when you have not done so. Listen to the entire question before answering.

Do not be afraid to say, “I don’t understand” or “I’m not 100% sure what you’re asking”. People do not like to admit they do not understand the question. If you are not 100% sure what something means, ask.

QUESTION . . .    PAUSE . . .   ANSWER . . .

QUESTION . . .   PAUSE . . .   ANSWER . . .

3.  Answer the Question that is Being Asked– If the question can be answered with a “yes” or “no”, do so and then stop. By attempting to go beyond the pale of the questions, it may well appear that you are attempting to persuade the questioner rather than answer the question.  Leave the persuasion to your lawyer.

Your answer should be a sentence long. It should not be a paragraph, a chapter or a book. If your answer is longer than a sentence, you are giving too much information.

You may feel that your answer is incomplete, and you will want to further explain so that the lawyer gets what you are saying. Fight the urge. You never want to volunteer something that was not asked for in a deposition. If you get the feeling that you should give more information to fully explain something, just remember that we can talk about it after the deposition is done and write a letter to the other attorney if we really have further explaining to do.

4. “I Don’t Remember”– Do not be afraid to say, “I don’t remember”. If you do not remember something, just say so. Do not guess!  If you don’t know, say you don’t know. Your testimony should consist of your personal observations and knowledge, not your guesses. If you do remember an event but do not remember all the details with absolute certainty, you should qualify your answer by saying, “To the best of my memory” or in some other way.

5. ‘Yes” or “No” Questions– Just the attorney asks you a “Yes” or “No” question does not mean that you have to give a “Yes” or “No” answer. One of the reasons for taking your deposition is to lock you into an answer. Instead of saying “Yes”, try saying “As far as I can recall”. Instead of “No”, you could say “I don’t recall that happening”. That way, you are not really locked into that answer. If you remember the information later, you can change your answer to make it true.

6.  Breaks– A deposition is taxing. On top of the anxiety that everyone naturally has, you are going to basically ask your brain to run a mini marathon. Therefore, the night before the deposition, have a decent dinner then get a good night’s sleep.