Bankruptcy

One Reason People Don't Save, and Then File Bankruptcy, Whether a Chapter 7 or a Chapter 13 or a Chapter 11 Bankruptcy in Arizona

By Joseph McDaniel, Esq.

In fact, generally, the "reason" people file a bankruptcy isn't the real reason at all. It's just the last straw.

Three of the most common precipitating factors that make a potential bankruptcy debtor consult with a bankruptcy lawyer in Phoenix or Mesa or Tempe or Chandler are the following: job loss, lawsuit, and trustee's sale (what would be called a mortgage foreclosure in most of the country; that's a little different, but the creditor's goal is the same).

Because of the means test, of course, the debtor often can't file a bankruptcy immediately after a job loss (because the means test is a six-month rolling lookback); but since they see the inevitable coming their way, that's just the wake-up call to open their eyes and smell the insolvency.

With others, the triggering event is a lawsuit, even a small lawsuit, because lawsuits are frightening and perceived as "sudden", even if they were preceded by substantial collection activity. And they are outside the skill set of even very-well educated potential bankruptcy filers, like doctors, cpas, and dentists.

And with another large percentage, the triggering event is the notice of a trustee's sale, because that's another sort of wake-up call telling a debtor he can't just keep on keeping on.

Note that it's often the second mortgage that causes the triggering event of a lawsuit, because so many second mortgages today are underwater in Arizona, especially in Chandler. But remember that Mesa and Tempe and Paradise Valley aren't far behind in underwater second mortgages.

Because a second mortgage is so often unsecured, it frequently gives rise to a lawsuit, and that frequently causes a debtor to examine her position and visit a bankruptcy attorney in Phoenix or someplace else in Arizona.

Are there other reasons that debtors reach the decision to file a bankruptcy in Arizona?

Absolutely.

One is a simple moment of clarity, as twelve-step folks say.

When a smart person discovers with an online debt payoff calculator that it will be twenty years, at their present rate until they can pay off their debts, even if the credit card companies DON'T raise their interest rates, that often causes thoughts of bankruptcy to dance like sugar-plums in their heads.

Especially when the payoff period is twenty years, and they're sixty-five years old.

Or when they figure out that they're thirty, and can't start saving for retirement until they pay off their debts? And that the payoff will be a thirty year process?

And that means they can start to save for retirement when they're sixty?

Uh. Yeah.

Sometimes bankruptcy is simply the rational, required and necessary choice in Arizona, during a recession (and you know it's really a depression).

Now, do medical bills not paid for by insurance cause bankruptcy cases to get filed in Arizona?

Well, sure. And so do lawsuits generally, trustee's sales, and job losses.

Along with moments of clarity, followed by the realization of insolvency.

And then there's divorce as a contributing factor, but that's a discussion for another day.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on May 23, 2010 (boomark / email).