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.

Bankruptcy and Underwater Cars

Bankruptcy can absolutely help if you owe more on your car than it is worth.

Chapter 7 Bankruptcy – 722 Redemption:

Filing for Chapter 7 bankruptcy can allow you to reduce the amount you owe on your vehicle. Through a “722 redemption” you can seek a court order that allows you to pay your car loan company a lump sum payment equal to the market value of your vehicle. Most people going through bankruptcy don’t have a lump sum amount to pay off their vehicle, however, there are several companies that do 722 redemptions and who will finance the lump sum payment. They will pay off your original loan and then you will make monthly payments to them.

How does the § 722 Redemption work?

Under 11 U.S.C. § 722 of the Bankruptcy Code you may redeem tangible personal property from a lien through paying the secured creditor a lump sum in a Chapter 7 Bankruptcy. In order to be eligible for a 722 redemption the property must be:

1) Tangible personal property intended primarily for personal, family or household use;

2) The secured claim must be paid a lump sum; and

3) The lump sum payment must be based on the current retail value.

If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a § 722 redemption loan. We closely work with several banks that can assist you in applying for one of these special loans. Typically, the interest rate is higher than normal due to the risk involved for the lender. Once you have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle. If the motion is granted by the court then the secured creditor will be paid a lump sum amount based on the current retail value of the vehicle. The secured creditor will then release the lien held on the vehicle.

Chapter 13 Bankruptcy and Car Cramdown:

If the amount of your car loan is greater than the value of your car, you might be able to reduce the amount of your loan and the interest rate in a Chapter 13 bankruptcy through a cramdown. Cramdown is a funny word that basically means you can reduce the amount you owe to equal the current value of the car. Whatever is left becomes unsecured debt, and is treated like your other unsecured debts.

Cramdowns are available in Chapter 13 bankruptcy only — you cannot cram down a car loan in Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you propose a repayment plan to pay back your creditors over a three to five year period. In your plan, your attorney has the ability to propose that your car lender receive only the current value of your car instead of the current balance owed.

The unpaid portion of your loan is then treated as an unsecured debt. Other types of unsecured debt include credit cards and medical bills. Since most Chapter 13 plans pay little or nothing to these creditors, this means that your car lender will likely receive nothing or pennies on the dollar on the remaining balance of your loan. Upon completion of your bankruptcy, any unpaid balance on the car loan will be completely discharged and you will own the vehicle free and clear.

When you cram down a car loan in Chapter 13 bankruptcy, the law also allows you to lower your interest rate on the loan! In Arizona the interest rate will be determined by the current prime rate plus a little extra. Almost always this new interest rate is lower than your original car loan rate.

Additionally, the bankruptcy code places important restrictions on when you are allowed to cram down your car loan. In order to cram down a car loan, you must have purchased your vehicle at least 910 days (about 2 ½ years) prior to filing your bankruptcy.

If you are underwater on one or more of your vehicles and would like to speak with an experienced 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. The law changes quickly and varies from jurisdiction to jurisdiction. As such, readers should not act upon this information without seeking advice from professional advisers. Additionally, this Firm limits its practice to the states of Arizona and New York.

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.

Debt Collection

There is a multi-billion dollar debt-buying industry in this country. Debt collectors purchase literally hundreds of thousands of old debts for pennies on the dollar of what the original creditors have written off. These debt buyers/collectors receive minimal information on each account, and then begin attempting to collect.

Their business model is to cast a wide net without properly verifying whether the consumer owes the money, or even that they are suing the right consumer, and see what money is recovered. This litigation strategy is effective because very few consumers obtain legal representation, and the overwhelming majority of consumer defendants default in the collection action. Quite often, debt buyers do not have sufficient evidence to prove its case, but rely on junk evidence improperly admitted.

Many Arizonans do not answer the debt buyer’s complaint (lawsuit) and guess what? The debt collectors win by default, this is called a “Default Judgment”! This is what they are hoping happens—that you don’t seek legal representation—and that they will win without having to prove their case. In fact, many debt collectors will not even pursue a case once they know a defendant has obtained legal representation.

Reason #1: Because You May Not Owe This Debt

Debt buyers rely on credit reports to locate consumers, but the credit reports themselves are filled with errors, including “mismerged” information that mixes the credit reports of two or more people with similar names and other identifying information that results in the collector suing the wrong person. Also, debt collectors 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 include, suits against authorized user not liable on the account and against family members of a deceased debtor. Additionally, the statute of limitations may make it possible for you to avoid a judgment.

Reason #2: Protect Your Assets and Income

A judgment against you can have serious financial consequences. Once a judgment is entered against you, your assets and income may be at risk. Your wages could be garnished. Once a debt collector obtains a Writ of Garnishment they can begin taking 10% of your gross paycheck–directly from your paycheck.

Additionally, bank accounts, may be frozen for days or even weeks, and may eventually be seized unless exemptions are properly pursued. Defeating this collection action eliminates those threats. Even if a default judgment has already been entered, contact us immediately because we may succeed in setting aside the default judgment or in minimizing the impact of these creditor remedies.

Reason #3: You May Have your own Claims

Often we discover that our clients have separate affirmative actions under the Fair Debt Collections Practice Act (FDCPA), Fair Credit Reporting Act (FCRA), and other federal and Arizona statutes, resulting in significant actual and statutory damages and attorney fees. Investigating the facts relating to your specific situation will often uncover various creditor violations.

Reason #4: Debt Collector May Have to Pay Your Attorney’s Fees

Often Arizona 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 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 #5: Prevailing in the Collection Action Can Improve Your Credit Rating

If your case is dismissed, you can take action to ensure that credit reports indicate that the current balance of that debt is now reported as zero. If the Arizona judge also rules that you never owed the money (for example, because the collector sued the wrong person), then you can seek to delete information showing that you had been in default in the past. Additionally, you may have a cause of action under the Fair Credit Reporting Act (FCRA) if that information is not properly corrected.

Furthermore, in addition to fighting debt collectors, the Dunaway Law Group, assists Arizonans in seeking debt relief through bankruptcy. So if your debts have grown to an unmanageable level let’s see what we can do to help.

Time is not on your side, if you do nothing, a judgment will be entered against you. Arizona Consumers fare much better in court when they obtain legal representation. Know your rights, know your options, and have someone in your corner to fight for you. Contact the Dunaway Law Group at 480-702-1608 or by messaging us HERE, we may be able to help.

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. Additionally, this Firm limits its practice to the states of Arizona and New York.