Bankruptcy Archives | Dunaway Law Group, PLC

2004 Examination in Bankruptcy

Rule 2004 of the Federal Rules of Bankruptcy allows any “interested person” to depose someone who filed bankruptcy. Additionally, the bankruptcy filer must producer documents on matters related to your bankruptcy. The 2004 Exam can cover a broad range of issues, including:

Your actions, conduct or property, your debts and financial condition, any issue that relates to your bankruptcy assets or Chapter 13 plan, and any matter that affects your right to a discharge.

A 2004 Exam is not like a 341 meeting of creditors. It is more formal and involves a more detailed investigation of issues related to your bankruptcy. It is similar to a deposition, sometimes requiring the production of documents. Additionally, 2004 Exams last much longer than a 341 hearing, often lasting several hours.

Rule 2004 Exams are typically held in a law office and not the bankruptcy courthouse. If you are looking for an Arizona bankruptcy then call us at 480-389-6529 or message us HERE.

The Dunaway Law Group provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers. The Firm limits its practice to the States of Arizona and New York.

What if I Don’t Pass the Means Test?

The bankruptcy means test is a crucial component of the bankruptcy process. It is a formula used to determine whether an individual is eligible for Chapter 7 bankruptcy, which allows for the discharge of most debts. The means test was created as part of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, which aimed to prevent individuals from abusing the bankruptcy system.

the purpose of the means test

The purpose of the means test is to determine whether an individual has enough disposable income to pay back their debts. The test takes into account the individual’s income, expenses, and family size to determine their disposable income. If the individual’s disposable income is below the state median income, they are eligible for Chapter 7 bankruptcy. If it is above the median income, the individual may still be eligible for Chapter 7 bankruptcy but will need to complete additional calculations to determine their eligibility.

calculation of disposable income

Calculation of Disposable Income. The calculation of disposable income is a key component of the means test. Disposable income is the amount of income that is left over after an individual’s necessary expenses are deducted. The necessary expenses include housing, food, clothing, transportation, and other basic expenses. The means test uses standardized expense allowances for certain categories of expenses, such as housing and transportation, based on the individual’s location and family size. If an individual’s disposable income is above a certain threshold, they may not be eligible for Chapter 7 bankruptcy and may be required to file for Chapter 13 bankruptcy instead. Chapter 13 bankruptcy involves a repayment plan in which the individual pays back their debts over a period of three to five years.

Size of Your Household. The Chapter 7 bankruptcy means test compares your current monthly income against the median income for households similar in size. The means test looks at the average household income over the six months prior to filing. However, not all income is considered in the means test. Social security income, social security disability, veteran’s disability benefits, and child support payments are not considered. Conversely income from; employment, gifts, financial assistance from others, and income from a non-filing spouse are included in the calculation.

If you household income exceeds the median income for households of a similar size in your state you still may be able to qualify for a Chapter 7. This is because certain expenses are deducted from your current monthly income in order to determine your net monthly income. Now not all expenses are qualifying expenses, however, the following kinds of costs can be deducted: child support, alimony, tax withholding costs, health savings account, garnishments, certain utilities and several other types of expenses.

However, if you still do not qualify for a Chapter 7 even after deducting the qualified expenses you can still file bankruptcy. Most people who do not qualify for Chapter 7 bankruptcy because of their high income, are able to file Chapter 13 bankruptcy. Chapter 13 bankruptcy is a reorganization of your debts. The bankruptcy lasts for 3 to 5 years during which time you make payments to your creditors. At the end of the bankruptcy whatever balances are left over will be discharged.

If you are looking to file bankruptcy then contact the Dunaway Law Group at 480-702-1608 or message us HERE.

Arizona’s Anti-Deficiency: A.R.S 33-729

Arizona’s Anti-deficiency statute allows certain home owners to stop making payments on their home and walk away with no negative financial recourse.

The Arizona anti deficiency protection is set forth primarily in A.R.S. § 33-729(A) which provides in part:

“if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment.”
A.R.S. 33-729(A)

qualifying properties

To obtain anti-deficiency protection the property securing the loan must be (1) two and one-half acres or less, and (2) limited to a single one-family or a single two-family dwelling. The Arizona Supreme Court has interpreted this language to require that the dwelling actually be built and at least occasionally occupied. The property will qualify under the statute for anti-deficiency protection whether occasionally occupied by the owners or third party renters.

qualifying mortgages

Additionally, the Arizona mortgage must be “given to secure the payment of the balance of the purchase price”. This is commonly known as a “purchase money mortgage”. Therefore, the statute does not protect borrowers who have obtained “non-purchase money mortgages” such as home equity lines of credit.

*** NOVEMBER 2019 UPDATE ***
The Arizona Court of Appeals ruled that a loan used to expand and upgrade a home is not entitled to anti-deficiency protection because it is not a home construction loan. Arizona’s anti-deficiency statutes may protect the homeowner from a deficiency judgment if the loan’s proceeds were used for a certain purpose. A “construction loan” qualifies for protection, but a “home-improvement loan” does not qualify. the anti-deficiency statutory provisions do not define “home construction loan”. Under its common sense meaning, “home construction loan” means a loan used to build a new residence from scratch, not a loan used to pay to transform an existing home over time with significant improvements, additions, and upgrades. Helvetica Servicing, Inc. v. Pasquan, 1 CA-CV 7-0699.

arizona debtor protection

If the property meets Arizona’s anti-deficiency statute, the lender may not obtain a deficiency judgment against the debtor. If a qualifying property is sold by the lender “no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses”. A.R.S. §§ 33-814(G). Therefore, certain Arizonian’s are able to walk away from their homes and face no financial recourse from their lender.

If you have questions about how the Arizona anti-deficiency law protects you then contact the Dunaway Law Group at 480-702-1608 or message us HERE.

Defending Credit Card Lawsuits

Reasons to Defend a Consumer Collection Complaint

The distressed debt buying industry is a multi-billion dollar industry in which debt collectors purchase literally millions of old debts for pennies on the dollar that the original creditors have written off. The debt buyers receive minimal information on each account, and certainly do not receive the contract or copies of any communications in which the consumer might have disputed the amount owed. In addition, after having unsuccessfully attempted to collect the accounts, these debt buyers regularly resell repackaged portfolios of uncollectable debts to other debt buyers whose connection to the original creditor—and to original documentation and proof—is even more distant.

Statute of Limitations

Because debt buyers purchase very old debt, the statute of limitations is an important consumer defense. Debt buyers who cannot produce the written contract often bring the case on an account stated or other claim not based upon a written contract. In many states, such causes of action have a shorter limitations period than a claim based upon a written contract. Credit card collection cases, even when brought on a contract theory, may have to be brought within a shorter limitations period applying to non-written contracts. Moreover, the action may have to be brought within a shorter limitations period found in the law of some other state than the forum state.

Because the debts are old, the consumer often will have moved after the credit account was closed, and the debt buyer must first try to locate the consumer’s present residence. Debt buyers may try to serve the consumer at the wrong address or even sue the wrong consumer. Debt buyers rely on credit reports to locate the consumer, but the credit reports themselves are filled with errors, including incorrectly merged information that mixes the credit reports of two or more people with similar names and other identifying information, and that results in the collector then suing the wrong person.

Quite often, the debt buyer does not have sufficient evidence to prove its case, relies on business records that are not properly introduced into evidence, or tries to prove its case based on clearly defective affidavits. Debt buyers frequently cannot even prove that they own the debt they are collecting and they may not have access to better evidence or may not want to expend the resources acquiring that evidence, so they try to win cases by default without an ability to prove that money is owed.

Creditors also may commit billing errors which may be the reason the creditor stopped collection efforts—the consumer did not owe all or part of the money claimed. When these debts are sold, the debt buyer does not receive or retain this information concerning consumer defenses. The consumer can then defend the collection action based upon the original dispute the consumer had with the creditor.

Too often debt buyers will bring actions against spouses and other parties knowing these defendants do not owe the debt, but hoping to either pressure them into payment or obtain a default judgment against them. Examples includes suits against authorized user not liable on the account and against family members of a deceased debtor. The debt buying business model is to cast a wide net without consideration as to whether the consumer owes the money, and see what money is recovered.

Reason #1: Prevailing Can Improve Your Credit Rating

If your case is dismissed, the consumer can take action to ensure that credit reports indicate that the current balance of that debt is now reported as zero. If the judge also rules that the consumer never owed the money (for example, because the collector sued the wrong consumer), then the consumer can seek to delete information in their credit report that the debt had been in default in the past. In addition, the attorney can help the consumer dispute inaccurate information in a credit report, and the consumer has a cause of action under the Fair Credit Reporting Act (FCRA) if that information is not properly investigated and corrected.

Reason #2: Alleviate Stress

Being sued is an extremely upsetting and difficult experience. You probably have never been sued in your entire life and may be feeling distressed over the suit, even for a relatively minor debt. That distress can place strain on your intrafamily relationships, work, and health. Medical problems can be accentuated under stress. You need legal representation to explain what is happening and how to depend your interests.

Reason #3: Protection of Your Assets and Income

A judgment against you can have serious financial consequences. Your assets and income may be at risk. Bank accounts, even those containing certain exempt funds, may be frozen for days or even weeks, and may eventually be seized unless exemptions are properly pursued. Your wages can be garnished. Cars and other property can be seized. Defeating this collection action eliminates those threats. Even if a default judgment has already been entered, an attorney can assist the consumer either in setting aside the default judgment or in minimizing the impact of these creditor remedies.

Reason #4: You May Have Legal Claims Against the Debt Collector

Often we discover that the consumer has separate affirmative actions under the FDCPA, FCRA, and other federal and state statutes, resulting in significant actual and statutory damages and attorney fees, either on an individual or class-wide basis. Investigating the facts relating to the collection action will often uncover various systematic law violations.

Reason #5: Debt Collector May Have to Pay the Consumer’s Attorney Fees

Often Debtors wonder how they may be able to pay for an attorney. However, there are a several ways that we may be able to recover our legal fees from the debt collector. Fees may be recovered by statute in about twenty states. Fees are also available to the consumer for prevailing on certain counterclaims, or as a result of the collector’s bringing an action without adequate facts.

Reason #6: Stopping Systematic Abuse of the Court System

Debt buyers today are using the courts to engage in wholesale litigation abuse. They sue huge numbers of consumers with no real knowledge of whether the consumer owes the debt or whether the statute of limitations has run. Debt buyers sue with little or no evidence to prove that the consumer owes the money, that the debt buyer in fact owns the debt, or even that they are suing the right consumer. This litigation strategy is effective because very few consumers obtain legal representation, and the overwhelming majority of consumer defendants default in the collection action.

When a consumer does not contest the lawsuit, the debt collector utilizes various techniques to win without having to produce admissible evidence to prove its claim. The collector may take advantage of the unrepresented consumer by working out a stipulated judgment without disclosing that the collector cannot prove the debt.

Another technique is to send the consumer a long list of requests for admission to which the consumer does not timely respond. The requests are deemed admitted, and the collector needs no other evidence to prove its case. Alternatively, collectors seek summary judgment on junk evidence—attachments that are not attached, affidavits from debt buyer employees (or even non-employees) who state conclusory facts about which the affiant has no personal knowledge, or about pretend business records created years after the fact.

If you are looking to file for bankruptcy protection, then contact the Dunaway Law Group at 480-702-1608 or message us HERE.

Automatic Stay of Bankruptcy

understanding the automatic stay

One essential concept within bankruptcy law is the automatic stay, a crucial provision that offers immediate relief and protection to debtors facing financial distress.

The automatic stay is one of the biggest benefits to someone filing for bankruptcy. Once a bankruptcy is filed, the automatic stay goes into effect, halting all collection efforts, lawsuits, foreclosures, repossessions, evictions and creditor contact. The reprieve from creditor harassment provides debtors breathing space and a chance to reorganize and begin a new financial life without being subjected to aggressive collection efforts.

effects of the automatic stay of bankruptcy

Protection from Collection Activities. The automatic stay prevents creditors from pursuing legal actions to recover their debts. This includes phone calls, letters, lawsuits, wage garnishments, and even utility disconnections.

Preservation of Assets: The stay of bankruptcy safeguards a debtor’s assets from being liquidated by creditors while the bankruptcy process is underway. For example, it will stop the repossession of vehicles and the foreclosure of homes.

The Automatic Stay of Bankruptcy can also be described as an injunction that immediately stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed. This automatic stay is the equivalent to a restraining order that prevents creditors from taking certain collection actions against a debtor.

These collection actions include: repossessing vehicles, foreclosing on homes, telephoning you, sending you collection letters, filing lawsuits against you or continuing with lawsuits that are already in progress, repossession attempts, wage or bank garnishments, recording any liens or judgments, or anything else that attempts to collect a debt or improve a creditor’s position as it relates to you and your underlying debt.

penalties for violating the automatic stay

Creditors must and do respect the automatic stay, as any violations can lead to serious consequences. The bankruptcy court takes violations seriously to maintain the integrity of the process and ensure that debtors receive the full benefits of bankruptcy protection. The following is a list of potential penalties creditors may face if they violate the automatic stay.

Damages Against Creditors. Creditors who willfully violate the automatic stay can be liable for actual damages, which may include financial losses suffered by the debtor due to the violation.

Injunctions and Orders. The bankruptcy court can issue injunctions and orders to prevent further violations, including restraining orders against harassing collection actions.

The Automatic Stay is Not Absolute

The automatic stay is not absolute and creditors are given the right to file a Motion with the bankruptcy court requesting the stay to be “lifted”. By having the stay lifted creditors are free to pursue their collection activities.

For example, an auto finance company can file a Motion to Lift the Automatic Stay if a debtor is delinquent on their car your payments. In those cases, the creditor will be granted its relief and will be permitted to recover the collateral despite the bankruptcy. So if a debtor does not continue to make the car payment after the bankruptcy has been filed then you may have your vehicle repossessed.

Also, the automatic stay will only provide temporary relief if you are not making your mortgage payments. As far as general creditors and unsecured creditors, the automatic stay will continue until the case is discharged.

municipalities and money owed

Additionally, the automatic stay does not prevent Federal, State or local authorities from pursuing criminal action. Furthermore, lawsuits involving child support or spousal support (alimony) are not stayed and cannot be discharged in bankruptcy.

If you need help from an Arizona Bankruptcy Attorney then contact the Dunaway Law Group at 480-702-1608 or message us HERE.

The Dunaway Law Group provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice and does not create a lawyer-client or attorney-prospective client relationship. Readers should not act upon this information without seeking advice from professional advisers. This Firm limits its practice to the states of Arizona and New York.