Bankruptcy Credit Counseling Courses

Who Must Complete the Initial Credit Counseling Course?

Everyone filing for bankruptcy must complete the credit counseling course. Whether you are filing for bankruptcy under chapter 7 or chapter 13 the course is still required. Additionally, if you are married, both you and your spouse must complete the credit counseling. If you do not take the class prior to filing the bankruptcy your case will be dismissed.

How is the credit counseling class completed?

Most people complete the course online, however, it can also be completed over the phone if that is more convenient for you. The credit counseling course itself takes about 90 minutes to complete, depending on your personal speed. Typically the class ranges from $20 to $30 depending whether it is done online or over the phone.

Debtor CC Online Bankruptcy Credit Counseling Course is a company who we have had good experiences with.

After completing the credit counseling course the company will generate a certificate as proof of you having taken the course. This certificate will be filed along with your Petition and Schedules.

When does the credit counseling class need to be completed?

The credit counseling course must be completed BEFORE the bankruptcy is filed, however, it cannot be completed more than a 180-days before the bankruptcy is filed.

2nd Bankruptcy Class- After Your Bankruptcy is Filed

Everyone filing bankruptcy must complete a second bankruptcy education course known as the “Debtor Education Course“. The second course is taken after the bankruptcy is filed and preferably before the 341 hearing.

What is Learned from the Debtor Education Course?

The idea behind the Debtor Education Course is for bankruptcy filers to learn new techniques for handling their finances after your bankruptcy has been closed.

Where Can I Take the Debtor Education Course?

The Debtor Education Course can be completed by using any company that provides the service. The Bankruptcy court does not require you to use one company versus another and they do not endorse any particular company. Additionally, the Debtor Education Course can be completed online or by telephone.

If you have questions about whether bankruptcy can benefit you then contact the Dunaway Law Group at 480-389-6529 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 State of Arizona.

When Tenant Files Bankruptcy

What Should You do if a Tenant Files Bankruptcy?

If you receive a notice from the bankruptcy court that a tenant you are trying to evict has filed bankruptcy then stop the process! Bankruptcy law is very complicated with severe penalties for any creditors seeking to take action against someone who has filed for bankruptcy. If a tenant files for bankruptcy before you have obtained the eviction judgment then you must stop with the eviction lawsuit.

As soon as a person files bankruptcy an “automatic stay of protection” goes into effect. The Automatic stay of bankruptcy is an injunction that stops; garnishments, lawsuits, foreclosure, repossession, evictions, etc. It is the equivalent of a restraining order that prevents creditors from taking collection actions.

The Automatic Stay is not Absolute

The automatic stay is not an absolute and landlords are given the right to file a Motion with the bankruptcy court requesting a bankruptcy just to “lift” the automatic stay. By having the automatic stay “lifted”, you may begin the eviction process. It takes approximately 30 days for the bankruptcy court to grant permission to proceed with the eviction. If the tenant files an “objection” to the lift-stay motion then a hearing will be set in the bankruptcy court. If a hearing is required then it may be 2 to 3 months before we can get in front of a bankruptcy judge and get permission to continue with the eviction.

Even under the best of scenarios a non-paying tenant who files for bankruptcy can astronomically expensive for the landlord. Don’t try and go it alone, contact the Dunaway Law Group at 480-389-6529 or message us HERE.

Discharge Contract in Bankruptcy

Generally speaking, courts do not like agreements that attempt to make a debt non-dischargeable in bankruptcy. Bankruptcy courts have been unreceptive to the use of consent decrees and settlement agreements which attempt to create, by contract, a debt that will be non-dischargeable in the bankruptcy of an individual.

Waivers of Discharge

Even the U.S. Supreme Court has held that waivers of discharge are unenforceable. A creditor cannot contract away a debtor’s right to defend his right to a debt discharge by using “boilerplate” covenants of non-dischargeability. Occasionally a creditor will slip language into a contract that says something like: “I understand that this debt is still owed even if I file bankruptcy”. Often this language is put into contracts used by less reputable creditors like Payday lenders or title companies.  The creditor’s hope is that the debtor will believe they are obligated to pay the debt even if they file bankruptcy.

Simply inserting this language into a contract would keep the debt from being discharged in bankruptcy then every lender in the country would put that same language into every contract they entered into. Additionally, this would completely negate the whole purpose behind personal bankruptcy.

Settlement Agreements

Settlement agreements are typically used to bring an end to parties’ disputes and provide a clear outline of the parties’ respective rights and obligations going forward.  Attorneys representing creditors will often spend a great deal of time and energy in trying to ensure that settlement agreements will actually be enforceable.

While, covenants in a settlement agreement that provide for the debtor to waive his right to a discharge are unenforceable as against public policy, creditors will still include such covenants in their settlement documents because this is an evolving area of law. Because settlements agreements related to a fraud claim may provide a narrow exception to the normal rule of discharge ability. If a debtor admits to fraud in a settlement agreement and later files bankruptcy the creditor may try and use the settlement agreement as the basis of a Section § 523 action in bankruptcy court.

If you signed a contract with a non-dischargeability provision and want to know your rights then contact the Dunaway Law Group at 480-389-6529 or message us HERE for a free consultation with one of our Arizona bankruptcy attorneys.

What if I Don’t Pass the Means Test?

The means test was introduced to the Bankruptcy Code in 2005. It is designed to limit those individuals eligible to file for Chapter 7 bankruptcy. 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. For most people who do not qualify for Chapter 7 bankruptcy because of their high income 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.

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

In Arizona, certain home owners are free to stop making payments on their home and walk away from it with no financial recourse against them. These people are protected by what is commonly known as Arizona’s Anti-Deficiency Statute.

Protection for residential borrowers 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 480-389-6529 or message us HERE.