Bankruptcy

Are Consumer Bankruptcy Cases in Arizona Simple or Are They Very Complex?

By Joseph McDaniel, Esq.

They're both.

Two, two, two things in one!

It's possible that a consumer bankruptcy can be simple.

A debtor who received zero income from any source for the six months prior to filing, who owes five thousand dollars in debt to five different credit card companies, who has not used the credit cards in the 90 days prior to the filing, who is a citizen of the United States and who has been living in Arizona for the two years prior to filing, and who has not filed a bankruptcy under his or any other name or social for eight years, and who owns only a car worth five thousand dollars (high private party sale value, per Blue Book) and his clothes could have a simple bankruptcy case.

Mind you, all of the issues have to be considered in a simple case as well; did the debtor transfer a million dollar piece of dirt to his daughter before he came in to talk? Did he pay support for his parents in Sri Lanka for three months prior to filing? For ten years prior to filing? Did he really have six credit cards and only want to talk about five? Did he have a safety deposit box full of raw emeralds?

Believe me, at the Bankruptcy Court, inquiring minds want to know.

On the other hand, there are other cases that sound like brain surgery instead of bankruptcy law, because they have every single issue without exception known to mankind.

Starting with too much dough to pass the means test for the last six months.

But they just lost their jobs. Okay, calendar the filing for the date that they'll pass, with another thirty days as a safety margin. No problem.

And they did transfer dirt, but it was overencumbered dirt. Is that going to be a problem? Haven't decided yet. Why did they transfer it? Was it to delay, hinder or defraud creditors, or was it because they wanted to reduce their monthly overhead so they could avoid bankruptcy and pay their creditors in full?

But they may be entitled to an inheritance, except that it's unclear when Grandpa will go to heaven; he's hanging on by a thread, but he may have changed his will. Do we wait to see what happens, or file and send him Vitamin C?

Remember that if we file, and Grandpa goes to his just reward with a loving God, he doesn't get to take it with him; and if you filed a bankruptcy and Gramps checks out within six months of the filing date, and you therefore became entitled to receive his bounty (not received it; became entitled to receive it-probate takes forever, a little like bankruptcy, which it strongly resembles in some ways), it's property of the estate pursuant to 11 USC 541(a)(5)(A).

And what about that lawsuit for Fraud and Racketeering? Do we try to settle that prior to filing or after? Maybe all the work to settle it was just plain dumb, because its existence as business debt might permit the debtor to file a Chapter 7 notwithstanding large income because of the "primarily business debt" exception to the means test!

And what about that business? You know, not the brick-and-mortar business that the debtor closed six-months ago, and liquidated inventory to pay all the debts (note: were there preferences to insiders paid during the pay-off orgy?), but the cool online business that hasn't made any money yet but is poised to take off like a rocket?

Does the debtor just close that down and list the value as zero or does the debtor list it and try to buy it back from the trustee, which is a good deal more frustrating these days?

Note that in the good old days, formerly known as these trying times, buying back an asset from a trustee was a great deal easier, because we'd just do what was called "a global settlement". The deal would recite that the debtor would pay x dollars to purchase the exercise machine, and settle an alleged preference matter and all other areas of conflict with the estate" or some such.

And we could all move on to the next case.

Now it's an issue-by-issue process, and it takes longer, and costs more, and is a larger pain in the rubber doughnut.

Do I have a point here?

Well, yeah.

When I'm king of the world, there will still be bankruptcy laws.

But I'm gonna make 'em a heck of a lot simpler, you know?

Because essentially everybody who goes to file a bankruptcy is an honest debtor with overwhelming debt, and forcing those folks, who are usually both depressed and overstimulated by creditor phone calls and creditor lawsuits, to try and help make decisions about quite complex issues of law...it's hard on 'em.

I wish the system were more debtor friendly.

I've gotten to watch the New Code of 1979 become less and less easy to use by consumers, and more and more hostile to their legitimate needs.

So I hope that if Washington ever decides to actually listen to the cries of the poor, it does so with both ears and heart.

And with the brain? That would be good also.

p.s. it's not so much whether a case is or is not complex; the real issue is what degree of scrutiny will it be subject to at the Court; that means you have to assume that all the cases in the hopper will be subject to intense scrutiny, and screen all cases as though they were going to get the extra special love that is sometimes brought to bear on perfectly ordinary, nothingburger bankruptcy cases.

You have to assume that all of your cases will get the treatment. Seriously.

Which is why I get such a kick out of it when I see a personal injury lawyer transmogrify overnight into an experienced Arizona bankruptcy expert, because they think it's going to be easy!

And then six months later the Instant Bankruptcy Expert gets out of bankruptcy practice, because you know what? It's not nearly as easy as it looks!

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 June 10, 2010 (boomark / email).