Reaffirmation Agreements

A reaffirmation agreement is a contract made between a debtor and a creditor during a bankruptcy proceeding. In this agreement, the debtor agrees to continue repaying a specific debt even after the bankruptcy case is concluded. The debt remains valid and unaffected by the bankruptcy discharge, allowing the debtor to keep certain collateral, such as a car, that is tied to the debt.


As long as debtor abides by the terms of the reaffirmation agreement it is a sure way to keep your property. The creditor will mail the debtor monthly statements and report payments to the credit bureaus which will increase your credit score.


A reaffirmed debt remains your personal legal obligation to pay. The reaffirmed debt is not discharged in your bankruptcy case. That means that if you default on your reaffirmed debt after your bankruptcy case is over, the creditor may be able to take your property or your wages.

So, if you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien. The creditor can also take legal action to recover a judgment against you. The reaffirmation leaves a debtor personally liable, and can no longer just “walk away” from the debt.

UNDUE HARDSHIP to the debtor(s)?

In Arizona, a bankruptcy judge can deny a debtor’s request to reaffirm a debt if it appears that the agreement would pose an undue hardship. In fact, in 99% of instances the bankruptcy judge will find that there is a presumption of undue hardship and will not approve the reaffirmation agreement.

If a debtor does not have enough income left over, after deducting expenses, to make the required payments. In this situation, you will have to overcome the presumption of undue hardship by showing that you can afford to pay for the property.

reaffirmation agreement hearing

As part of the reaffirmation process hearing is held with the bankruptcy court. The court will approve the reaffirmation agreement only if you can demonstrate that you are financially able to make the monthly payments without it being an undue hardship.

When will the reaffirmation be effective?

If the creditor is a traditional bank, the reaffirmation agreement becomes effective when it is filed with the court unless the reaffirmation is presumed to be an undue hardship.

If the Reaffirmation Agreement is presumed to be an undue hardship, the court must review it and may set a hearing to determine whether you have rebutted the presumption of undue hardship.

How soon must a debtor decide?  

If you decide to enter into a reaffirmation agreement, you must do so before you receive your discharge. The signed agreement is to be filed with the bankruptcy court no later than 45 days after the 341 hearing, so the court will have time to schedule a hearing to approve the agreement if approval is required. However, the court may extend the time for filing, even after the 45-day period has ended.

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

What is an Adversary Proceeding?

An Adversary proceeding in bankruptcy is a lawsuit that takes place within a bankruptcy. The adversary proceeding begins by when a complaint is filed with the bankruptcy court. A trial then takes place within the context of the bankruptcy. Typically an adversary proceeding is filed by a creditor; however, your trustee may also file one on behalf of the bankruptcy estate.

adversary proceeding filed by a creditor

When a creditor files an adversary proceeding, it is typically because the creditor believes that a specific debt owed to them should not be discharged in the bankruptcy. The creditor may argue that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.

adversary proceeding filed by a trustee

Additionally, a trustee may file an adversary proceeding if he or she believes that you intentionally tried to hide assets. The trustee would then liquidate any non-exempt assets to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to undo a transfer of real property. The U.S. Trustee may file an adversarial proceeding to try and force a debtor to move from Chapter 7 to Chapter 13; if he or she believes that the filing of the bankruptcy petition was done in bad faith.

Adversary proceedings are very rare, they are filed in less than 1% of all bankruptcy filings. So unless you are trying to commit some type of fraud the chances of an adversary proceeding being filed in your case are very small. Typically, prior to even filing the bankruptcy we have a good idea if an adversary proceeding is going to be filed.

If you have questions about whether an adversary proceeding will be filed in your bankruptcy case then call us at 480-702-1608 or message us HERE.

* These blog posts are not intended, nor shall they be deemed to render legal advice. Reading these blog post does not create an attorney-client relationship, nor shall it impose an obligation on the part of the law firm to respond to further inquiry. The Dunaway Law Group limits its practice to the great states of Arizona and New York.

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.

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 debts can I wipe out?

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.


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”!

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

* 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 New York.

Steps to Chapter 7 Bankruptcy

What are the Steps to a Chapter 7 Bankruptcy?

Step 1 of a Bankruptcy: Initial consultation: During your initial bankruptcy consultation you will meet with one of our bankruptcy attorneys to review your financial situation and decide if bankruptcy is appropriate. If bankruptcy is appropriate in your situation then we will begin gathering all of necessary documents and complete the bankruptcy questionnaire.

Step 2 of a Bankruptcy: Complete the Credit Counseling Course: Take the online class within 180 days of the bankruptcy filing. A personal bankruptcy cannot be filed without completing this class, regardless of whether you are filing a Chapter 7 or Chapter 13 bankruptcy.

Step 3 of a Bankruptcy: Filing the Bankruptcy: You will review and sign the Petition and Schedules to be filed with the court. These documents are signed under oath and the penalty of perjury. Pay the $335 filing fee to the law firm. As a law firm we are required to file bankruptcies electronically so you are not required to actually go anywhere or do anything on the day of filing.

Step 4 of a Bankruptcy: The bankruptcy Court mails a Notice of Bankruptcy: The Notice of Bankruptcy is mailed to all creditors, the trustee, the debtor and the attorney approximately one week after the case if filed. The Notice of Bankruptcy also contains the date of your 341 Hearing and certain deadlines.

Step 5 of a Bankruptcy: Mail forms and documents to the Trustee: A few days after filing bankruptcy your Trustee will send you a letter asking several questions and requesting documents. You must submit the completed form and all requested documents to the Trustee within 15 days of your 341 Hearing. Your case may be dismissed if you do not meet this deadline!

Pursuant to Arizona Local Rule 2003-2(a)(1) and 2003-2(a)(2) a questionnaire and additional documents must be supplied to the Trustee prior to the 341 hearing.

Step 6 of a Bankruptcy: Financial Management Class: This post filing class is required to receive a discharge of your debts. The certificate must be filed within 45 days of your 341 Hearing. Do not delay in taking this class; you will not receive your discharge until this class is completed!

Step 7 of a Bankruptcy: 341 Hearing: About 30 to 45 days after the bankruptcy is filed; you and your attorney must attend a 341 hearing. The hearing is held in different courthouses depending on which county you live in. During this meeting the Trustee will ask you a set of generic questions. Creditors will also have the opportunity to appear and ask questions—though creditors rarely take the opportunity to appear.

Step 8 of a Bankruptcy: Discharge of Debts: Roughly 70 to 90 days after your 341 hearing you will receive a Discharge Order in the mail. Click HERE to see an actual Discharge Order. This same discharge is mailed to all relevant parties, i.e., creditors, Trustee, and your attorney.

Step 9 of Bankruptcy: Trustee’s Report of Distribution: A bankruptcy trustee’s report of no distribution that has been filed in your case states that there are no funds or assets to distribute to creditors because all of your assets are exempt (protected from liquidation). In a Chapter 7 bankruptcy case, unexempt assets are liquidated by the trustee, and the proceeds from the sale of these assets are used to pay off creditors to the extent possible. Once the report is filed, creditors are notified that there will be no distribution in your case. This means that the creditors will be put on notice that they will not receive any payment from the bankruptcy estate, and their claims are discharged. Of course, unless they fall into specific categories of non-dischargeable debts. Such as child support, alimony, tax debts and student loans.

Step 10 of a Bankruptcy: Close of Bankruptcy: Your Trustee will normally close your case within 120 days of your bankruptcy Discharge. Click HERE to see a actual notice of no distribution. However, cases can remain open for several years if the Trustee took money or property and needs time to sell the property and distribute the money to creditors.

Step 11 of a Bankruptcy: Taxes–the following year: Once you file your taxes for the tax year in which you filed bankruptcy, you must send complete copies of your Federal and state tax return to your Trustee. Depending on the timing of your bankruptcy and tax filings this may be more than a year after the bankruptcy was filed. In addition to sending your tax return to the bankruptcy Trustee you must also send your tax refunds. In most cases the Trustee will take any refund that was owed to you on the day the bankruptcy was filed. This last step is not an option; failure to comply may jeopardize your bankruptcy discharge.

  1. Preparing Your Paperwork
  2. Documents for Trustee-Several weeks after your bankruptcy is filed but before your 341 hearing you will receive a letter from your trustee requesting documents from you. Your trustee wants you to send these documents directly to them as a way to double-check that the information I submitted in your bankruptcy petition and schedules is true and accurate.
    • Additionally, you must sign an affidavit verifying that all of the information you’ve submitted is true and correct.

Less Common Steps of Bankruptcy

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

* 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 New York.

Dictionary of Legal Terms

Adversary proceeding– A lawsuit arising in or related to a bankruptcy case that begins by filing a complaint with the court, that is, a “trial” that takes place within the context of a bankruptcy case.

Affidavit– A written or printed statement made under oath.

Assets– Property of all kinds, including real and personal, tangible and intangible.

Assume– An agreement to continue performing duties under a contract or lease. For example, a person might “assume” a friend’s lease agreement.

Automatic Stay of Bankruptcy– An injunction that automatically stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed.

Bankruptcy code– The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

Bankruptcy estate– All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.

Bankruptcy judge– A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

Bankruptcy petition– A formal request for the protection of the federal bankruptcy laws.

Bankruptcy trustee– A private individual appointed in all Chapter 7 and 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

Belongings– (Compare with Personal Property. See below).

Builder’s risk insurance is a type of insurance that covers residential and commercial structures while they are under construction or being remodeled, or renovated. Builder’s risk insurance is “coverage that protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.”

Business bankruptcy– A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.

Case Law– The law as established in previous court decisions. A synonym for legal precedent. Akin to common law, which springs from tradition and judicial decisions.

Cash on Hand– This is a term used in bankruptcy cases. Cash on hand is any money in a bank account, safety deposit box, wallet, under the mattress, etc.

Chapter 7 trustee– A person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the creditors. The trustee’s responsibilities include reviewing the debtor’s petition and schedules, liquidating the property of the estate, and making distributions to creditors. The trustee may also bring actions against creditors or the debtor to recover property of the bankruptcy estate.

Chapter 11– A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.

Clerk of Court– The court officer who oversees administrative functions, especially managing the flow of cases through the court. The clerk’s office is often called a court’s central nervous system.

Collateral– Property that is promised as security for the satisfaction of a debt.

Commercial Leases– Are treated differently than residential leases and are controlled by different statutes. Click HERE for an in-depth look at commercial leases in Arizona.

Consumer bankruptcy– A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer debts– Debts incurred for personal reasons, as opposed to business, needs.

Contingent Claim– A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.

Deposition– a 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.

Discharge– A release of a debtor from personal liability for certain dischargeable debts. Notable exceptions to dischargeability are taxes and student loans. A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor or the debtor’s property to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including through telephone calls, letters, and personal contact.

Dischargeable Debt– A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.

Disposable income– Income not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.

Docket– A log containing the complete history of each case in the form of brief chronological entries summarizing the court proceedings.

Credit Counseling Courses– Generally refers to two events in individual bankruptcy cases: 1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and 2) the “instructional course in personal financial management” in chapter 7 and 13 that an individual debtor must complete before a discharge is entered.

Debtor’s Plan– A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Equity– The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. Example: If a house valued at $60,000 is subject to a $30,000 mortgage, there is $30,000 of equity.

Exempt assets– Property that a debtor is allowed to retain–during and after bankruptcy, free from the claims of creditors who do not have liens on the property.

Exemptions, exempt property– Certain property owned by an individual debtor that the Bankruptcy Code or applicable state laws permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.

Emergency Petition– A bankruptcy case filed either without schedules or with incomplete schedules listing few creditors and debts. Emergency filings are often made for the purpose of delaying an eviction or foreclosure.

Felony– A serious crime, usually punishable by at least one year in prison.

Fraudulent transfer– A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.

Fresh start– The characterization of a debtor’s status after bankruptcy, i.e., free of most debts.

Insider– Any relative or close friend of a debtor who has filed bankruptcy.

Interrogatories– A form of discovery consisting of written questions to be answered in writing and under oath.

Joint Petition– A bankruptcy petition that is filed by both a husband and wife.

Joint and Several Liability– Joint and several liability occurs when multiple parties are held 100% liable for the same event or act. In cases of joint and several liability, the party harmed by several parties could recover damages from any one, several, or all of the liable parties.

The liable parties would be required to pay the entire judgment, which could be split among multiple parties or could come from just one party. Each party is liable for ALL of the damages, or up to as much as all of the damages.

Joint Pre-Trial Statement– This is a document created by opposing attorneys as part of discovery in a case that is being litigated.

Judgment– The official decision of a court finally resolving the dispute between the parties to the lawsuit. In many instances, a judgment requires the losing party to reimburse the victor for all of their attorneys’ fees and costs.

Jurisdiction– The legal authority of a court to hear and decide a certain type of case. It also is used as a synonym for venue, meaning the geographic area over which the court has territorial jurisdiction to decide cases.

Lawsuit– A legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty which resulted in harm to the plaintiff.

Lien– A charge on specific property that is designed to secure payment of a debt or performance of an obligation. A debtor may still be responsible for a lien after a discharge.

Lis Pendens– Is an official notice to the public that a lawsuit involving a claim on a specific real property has been filed. Lis pendens is connected to the concept that a property buyer must assume any litigation that exists pertaining to the property. A lis pendens can only be filed if a lawsuit has already been filed. the lis pendens should be recorded with the appropriate county recorder.

Litigation– A case, controversy, or lawsuit. Participants—plaintiffs and defendants—in lawsuits are called litigants.

Liquidation– A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.

Liquidated claim– A creditor’s claim for a fixed amount of money.

Means test– Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

Moot– Not subject to a court ruling because the controversy has not actually arisen, or has ended.

Motion– A request by a litigant to a judge for a decision on an issue relating to the case.

Motion to lift the Automatic Stay– A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.

Motion for Summary Judgment– A pleading filed with the Arizona court where one party is asking the judge to rule in the case without having a trial. In order for summary judgment to be granted, there must be “no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law”. This means that the undisputed facts presented entitle one side to win because of the existing law relating to that issue.

No-asset case– A Chapter 7 case in which there are no assets available to satisfy any portion of the creditors’ unsecured claims.

Nondischargeable debt– A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution of a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud may be declared nondischargeable only if a creditor timely files and prevails in a nondichargeability actions.

Nonexempt assets– Property of a debtor that can be liquidated to satisfy claims of creditors.

Objection to dischargeability– A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargable debts. Common reasons include allegations that the debt to the discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.

Objection to exemptions– A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.

Opinion– A judge’s written explanation of the decision of the court.

Personal Property– movable property; belongings exclusive of land and buildings. Compare with Real Property.

Petition– The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter, and estimated amount of assets and liabilities.

Plan– A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Preferential debt payment– A debt payment made to a creditor in the 90-day period before filing bankruptcy (or within one year if the creditor was an insider) if it gives the creditor more than the creditor would have received in the debtor’s chapter 7 case.

Priority– The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in a chapter 13 case in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.

Priority claim– An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

Pro Per or Pro Se– A slang expression sometimes used to refer to a pro se litigant. It is a corruption of the Latin phrase “in propria persona”.

Probate– Used to establish the validity of a will.

Property of the Estate– All legal or equitable interests of the debtor in property as of the commencement of the case.

Punitive Damages– Punitive damages are considered punishment and are typically awarded at the court’s discretion when a defendant’s behavior is found to be especially harmful. Punitive damages are normally not awarded in the context of a breach of contract claim.

In the case of tort liability, courts may choose to apply punitive damages. However, they will typically only do so if the plaintiff can prove that the defendant engaged in an intentional tort and/or engaged in wanton and willful misconduct.

In National By-Products Inc. v. Searcy House Moving Co., the Arkansas Supreme Court found that awarding punitive damages requires evidence that the defendant proceeded intentionally with an unlawful action after knowing that the act was likely to cause injury.

With regard to a principal-agent relationship, courts are reluctant to award punitive damages on the principal for the reckless actions of the agent. One exception to this preference is when the principal encourages or causes the agent’s recklessness.

Distinguishing Punitive Damages in Contract Law

Some contracts will list certain “liquidated damages” as a consequence of a breach. A court, however, may choose to ignore this clause if the liquidated are actually punitive damages. There is a 2-part test that courts will typically use to determine whether to apply a liquidated damages clause:

  1. The agreed damages must be a reasonable forecast of just compensation for the harm that is caused by the breach
  2. The harm must be incapable of accurate estimation 

If the clause meets both of these elements, then the court will typically apply the clause, finding no evidence of punitive damages.

Applying Punitive Damages

Courts apply punitive damages in about 5% of verdicts. Recently, courts have begun to evaluate the appropriateness of assigning punitive damages in comparison to the amount of compensatory damages assigned. While the Supreme Court has not assigned a particular test to use when courts consider punitive damages, in State Farm v. Campbell (2003), the Court wrote that lower courts should focus on reprehensibility and acceptable punitive-to-compensatory damage ratios. Further Reading. For more on punitive damages, see this Yale Law Journal note and this University of Minnesota Law Review note. 

Real Property– Fixed property, principally land and buildings.

Reaffirmation Agreement– An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession.

Schedules– Lists submitted by the debtor along with the petition showing the debtor’s assets, liabilities, and other financial information.

Secured creditor– A secured creditor is an individual or business that holds a claim against the debtor that is secured by a lien on property of the estate. The property subject to the lien is the secured creditor’s collateral.

Secured debt– Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.

Service of Process– The delivery of writs or summonses to the appropriate party.

Settlement– parties to a lawsuit resolve their dispute without having a trial. Settlements often involve the payment of compensation by one party in at least partial satisfaction of the other party’s claims, but usually do not include the admission of fault.

Statement of financial affairs– A series of questions filed with the original bankruptcy concerning sources of income, transfers of property, lawsuits by creditors, etc.

Statement of intention– A declaration made concerning plans for dealing with consumer debts that are secured by property of the estate.

Statute– A law passed by a state of federal legislature.

Statute of Limitations– The time within which a lawsuit must be filed or a criminal prosecution begun. The deadline can vary, depending on the type of civil case or the crime charged.

Summary judgment– A decision made on the basis of statements and evidence presented for the record without a trial. It is used when it is not necessary to resolve any factual disputes in the case. Summary judgment is granted when—on the undisputed facts in the record—one party is entitled to judgment as a matter of law.

Tenancy at Sufferance– Is the period of time after a lease has expired during which a tenant does not have tenancy because the landlord has not given permission for the tenant to possess the property.

Undersecured claim– A debt secured by a property that is worth less than the amount of the debt.

United States Bankruptcy Trustee– An officer of the U.S. Department of Justice responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties.

Unliquidated claim– A claim for which a specific value has not been determined.

Unscheduled debt– A debt that should have been listed by the debtor in the schedules filed with the court but was not.

Unsecured claim– A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.

Voir dire– is a legal phrase that refers to a variety of procedures connected with jury trials. It originally referred to an oath taken by jurors to tell the truth, i.e., to say what is true, what is objectively accurate or subjectively honest, or both.

Wage garnishment– A non-bankruptcy legal proceeding whereby a plaintiff or creditor seeks to subject to his or her claim the future wages of a debtor. In other words, the creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt to the creditor.

Writ– A written court order directing a person to take, or refrain from taking, a certain act.

341 hearing– (Pronounced three-forty-one) In a bankruptcy proceeding, a meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.

2004 Exam– Provides parties with the opportunity to conduct an examination (similar to a deposition) of a person and/or documents, even though an adversary proceeding has not been filed. A subpoena is typically issued to appear and/or provide documents.

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