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“13 Drastic Changes to the Arizona Bankruptcy
Law”
By
Joe Volin
Arizona Bankruptcy Lawyer
The bad news is that Congress is on the verge of
passing a new creditor backed bankruptcy law that stacks the law in
favor of creditors against the average consumer. The good news is
that the proposed bankruptcy bill has not yet become law.
Congress did not pass the new law in the 2003 session. However,
Senator Grassley has stated that the bill will be back as early as
possible for action in the 2004 session.
Many experts believe that the
proposed bankruptcy bill will become law now that the Republicans control both
the House and Senate. President Bush has already spoken out in favor
of bankruptcy reform. Its not too late to avoid the drastic changes
of the new bankruptcy law. To find out what your options are under the
current law, call Joe Volin, Arizona Bankruptcy Attorney, at 480-820-0800 or send an email to
joe@volinlaw.com. The most important changes the new
bankruptcy law will
make are:
1. The new law will not allow you to
file Chapter 7 bankruptcy when you can afford to pay a small amount each month to
your creditors. The new law is designed to stop you from being
able to file a Chapter 7 bankruptcy. This creditor backed new
bankruptcy law turns
the Bankruptcy Courts into the credit industry’s tax supported
collection agency. Any person whose family earnings are more than the
average for their state will not be allowed to file a Chapter 7 case
if they will have as little as $166 dollars in discretionary income.
This will leave no money to save for emergencies, retirement, or
children’s education. Instead, the new bankruptcy law will require that your
bankruptcy case be dismissed or turned in a Chapter 13 bankruptcy repayment plan.
2. The amount the
Bankruptcy Court says you can
afford to pay might be based on income you no longer have. The
new bankruptcy Court rules will assume you still make what you averaged over the
six months before your bankruptcy case was filed. Many people need to file
bankruptcy after
a job loss or illness. You might not be earning the same income you
did over the last six months before filing bankruptcy. Apparently this will not matter under
the new bankruptcy law. You could be prevented from the protection of the
bankruptcy court just because you used to make more money.
3. The
Bankruptcy Court may require you to
adjust your living expenses to unrealistic low levels. How much
can you afford to pay each month? Under the new bankruptcy law, the
Bankruptcy Court won’t ask you, the Bankruptcy Court will tell you. First,
the Bankruptcy Court will assume you
are still making the same income you did over the last six months.
Then, the Bankruptcy Court will assume that your expenses are the same as what the IRS
allows delinquent tax payers. The IRS’s expense guidelines will
mandate how much the Bankruptcy Court will allow you to spend on living expenses
for housing, utilities, food, clothing, transportation and other
necessary expenses.
4. Your
bankruptcy case will take longer to
prepare and will cost you more money. More documentation will be
required to file your bankruptcy case. The new bankruptcy law provides that your
bankruptcy attorney
may be fined if a thorough investigation was not done before your
bankruptcy case
is filed. Like everyone else, bankruptcy lawyers need to be paid for their
time. The new bankruptcy law will require more work and effort to prepare your
bankruptcy case. That means it will cost you more money to be properly
represented in the Bankruptcy Court.
5. You will be required to attend
credit counseling before you are allowed to file bankruptcy.
What do credit counselors do? Every one I have heard about makes
their income only if you allow them to setup a repayment pay with your
creditors. That is why the major credit counseling service in this
part of the country receives a lot of its funding from major financial
institutions. Although I believe credit counseling is sometimes a good
alternative to filing bankruptcy, requiring you to meet with your adversaries
before filing bankruptcy is hardly a good policy. People should be
free to seek independent advice. Not forced to accept information
from their bill collectors.
6. Attendance at a personal financial
management course will be required to receive a bankruptcy discharge (in addition
to the credit counseling you were required to attend before the
bankruptcy case
was filed). Regardless of the reasons for filing your bankruptcy
case, you will have to attend a personal financial management course.
Presumably, you will have to pay for the course. Since most
bankruptcy filings are caused by reasons outside your control it is unlikely
that this “education” is necessary.
7. Your tax records will be open to
the public. Would you like telephone solicitors to have a copy of
your income tax return? The new bankruptcy law will require you to
file your tax returns with the Bankruptcy Court. By the way, who do telephone
solicitors work for? I have noticed that many of the ones that bother
me at dinner time work for the credit industry. What possible reason
is there for making these public records? The bankruptcy court
trustees already routinely require that these records be turned over.
Under the current bankruptcy law they stay private. Under the new
bankruptcy law they will
have to be filed with the bankruptcy court and open to public inspection.
8. If you have filed
personal bankruptcy in
the past, you will have to wait longer to file bankruptcy again. Also, your
option to file a Chapter 13 case will be greatly restricted.
Fortunately, most people will never have to file bankruptcy more than
once.
Sometimes one disaster is followed by another. Illness, job loss, and
other personal setbacks, can strike more than once. Under the new
bankruptcy law
you won’t be allowed to file another bankruptcy case within 8 years of a previous
bankruptcy case.
9. More debts will “survive” your
bankruptcy. Some debts that can currently be eliminated in
bankruptcy won’t be
discharged under the new bankruptcy law. One big example are bills you were
ordered to pay in a divorce case. For example, if you were ordered to
pay $15,000.00 in credit card bills by the divorce judge, you won’t be
able to eliminate those in your bankruptcy case. That is true even if your
ex-spouse is a millionaire. Under the current bankruptcy law, you would be able
to eliminate them unless your ex-spouse can prove the bankruptcy would create an
unfair hardship.
10. Many people will be forced into a 5
year Chapter 13 bankruptcy repayment plan instead of having their debts eliminated
in Chapter 7 bankruptcy.
Today most Chapter 13 bankruptcy payment plans last 3 years. The new
bankruptcy law will
require 5 year Chapter 13 cases for many people. If you earn more than an average
income you may not be eligible to have your bills eliminated in a
Chapter 7 bankruptcy. Instead, you may have to live under the
Bankruptcy Court’s
supervision for 5 years while you make monthly payments.
11. A bankruptcy
case will no longer stop an
eviction, even for people who plan to pay back due rent. Today a
bankruptcy case can help you save your home. A bankruptcy will stop an
eviction and give you time to get caught up on your rent. The new
bankruptcy law
will allow a landlord to kick you out even when you just need some
extra time to get the rent current.
12. The IRS and the Arizona Department
of Revenue may be able to have your bankruptcy case dismissed for missing the
deadline for a tax return. You might not even owe any tax, but
the new bankruptcy law will allow the IRS to ask the Bankruptcy Court to dismiss your
bankruptcy case
for being late with a tax return. Not only will the new bankruptcy
law make it harder to file bankruptcy, it makes it harder to stay in
bankruptcy.
13. You will be penalized
in Bankruptcy Court for trying to
pay your taxes before filing bankruptcy. A lot of taxes can be eliminated in bankruptcy.
There are a few complicated rules that need to be followed to
determine when they get discharged and when they don’t. Most people
use bankruptcy only as a last resort. Until it’s clear that the
bankruptcy is unavoidable, they try to pay their bills, including
their back taxes. The new bankruptcy law will make it harder to discharge taxes
for people who work out payment plans with the IRS. Unbelievably, it
will be easier for people to eliminate their tax debts when they have
refused to attempt a repayment plan with the IRS.
You’re Invited to Call or E-mail Arizona Bankruptcy
Lawyer Joe Volin!
If you have questions about Arizona bankruptcy --
and whether it’s the right choice for you -- you’re invited to call
me. I’ll gladly speak with you on the telephone without cost or
obligation.
Update: In 2005 the Bankruptcy Code was
changed. Bankruptcy has become much more complex. Most of
the changes outlined above have become part of the law. Despite
the changes, Chapter 7 continues to offer most people who are
overburdened with debt the opportunity for a fresh financial start.
John Joseph Volin, P.C.
Arizona Bankruptcy Attorneys
Telephone: 480-820-0800 or 1-800-750-0200
Email Address:
joe@volinlaw.com
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