Arizona Chapter 13 Lawyer Blog

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To clarify: Although my father and our firm's founder, has passed away, he had forged a team of people strong enough to continue his work in his stead. We still continue to provide both people and businesses with expert Bankruptcy representation. In the very same compassionate way he taught us to serve our clients with professional distinction.

To meet with our firm for a free consultation, we only ask that you review the HOMEWORK first, then either call the office or email myself (sean@bankruptcyattorneyaz.com) or Steve (steve@bankruptcyattorneyaz.com) and we will set you up with an appointment.

It is with an extremely heavy heart that I write this on behalf of Joseph's staff and myself. As many of you may already know, and for those of you who may not have read or heard, Joseph C. McDaniel passed away unexpectedly last week.

Joseph cared deeply about the profession of law and his chosen niche, bankruptcy. He devoted his career to becoming the absolute best at what he did. He became a Certified Specialist in bankruptcy, was AV rated by his peers and led the Bankruptcy Section of the Bar. His bankruptcy blogs reflected his amazing bankruptcy knowledge. He had a zest and a passion for sharing his knowledge with other attorneys especially those new to the practice of law. Many a lunchtime he would block out time to sit down with others and talk about what he loved most....bankruptcy law.

He lived his life with passion and enthusiasm, which was the way he did everything - always learning, then studying and then sharing what he knew. He became a prodigious blogger and savvy web marketer - rising to number one for the most competitive bankruptcy phrases in Phoenix. Joseph was always willing to support and encourage, he worked and strived for the best, and kept pushing for even better. Being good was fine, but Joseph wasn't good, he simply was the best.

He had a charm about him that people admired and a laugh that put a smile on your face. The joyful laugh at hearing something profound...the sparkle and glee of excitement about birthing and nurturing a new thought or idea...that was the essence of the man that I knew and so admired.

I want others to know what a special man Joseph was. His legacy, I believe, is to make each and every one of us care as much as he did, live our lives to the fullest, as he did, love life which he did, and teach and share with others. I can only try to do what Joseph did and will do my best to encourage the best in others. He always had a twinkle in his eye and a smile on his face. His light burned bright and that flame lit the way for others.

High ethical standards... the bar was set high. The staff and I will meet and exceed those client expectations. Joseph set the standards and would have expected us to carry that legacy forward. That spark, the enthusiasm, that charm and zest for life has been handed over to us...to pass on to others.

The only regret is there wasn't enough time. His life was cut short too soon. We can only try to do what Joseph did and we will do our best to teach and to encourage the best in others. The world is better for his having lived. We are better for having known him. Though his life may have ended too soon, it was a life complete in so many ways.

Rest in peace Joseph, your work is done and your torch will be carried on.

Jean Rice

I have another bankruptcy blog, Bankruptcy Crossroads.

And that blog has been getting a lot of attention lately!

Here are the top ten bankruptcy blogposts this week in Bankruptcy Crossroads; enjoy!

Protests on Wall Street
Stern v. Marshall: Everything Old is New Again! Hissyfits About Jurisdiction.
Student Loan Defaults: Threat or Menace?
Happy Jobs?
Student Debt: The Ultimate Solution (and No, It's Not a Bankruptcy!)
Worldwide Bankruptcy? Economic Armegeddon? Inquiring Minds Want to Know!
Bankruptcy Does Not Solve All Problems: Danielle Chiesi Would Go to Jail, Anyway.
What's Good About Poverty and Homelessness? Togetherness!
Did Russell Armstrong of Real Housewives Commit Suicide over Finances?
Sugar Babies, Sugar Daddies, and Sex for School Loans; This Lost Generation

Phil Hamilton is a modern Jessie James, guilty of crimes against humanity.

Just kidding. Actually, as far as I can tell, he ticked off the wrong guy.

How else could he have been convicted of bribery and extortion for trying to get a job?

Now, however, he's got a new set of problems; he had filed a Chapter 13 Bankruptcy case, and he failed to meet a deadline for an amended plan.

So his case was dismissed.

Now, a dismissal isn't normally the end of the world, although it's bad. It deprives a debtor of the protections of the automatic stay, and permits creditors to do their will.

But if it had happened in Arizona, for instance, the brutality of the process might have been limited, except for that whole IRS thing.

The first judgment creditor in line could garnish his net salary for up to 25% (although Judges normally reduce that amount to 15% on the allegation of hardship), and the other ordinary creditors would have needed to stand in line until after the first judgement creditor had been paid in full, with interest.

The IRS has more impressive collection abilities then an ordinary judgment creditor, but an offer and compromise can be an effective tool to suspend collections activity until the IRS decides whether to accept the offer and compromise.

My guess? Unless he's lost his job (a high probability under the circumstances), Phil will re-file, either as a Chapter 13 debtor, or, if his debt levels become too high in the meantime for a Chapter 13, then as a Chapter 7.

But he who lives longest sees the most!

Let's give this some thought.

Suppose you're trapped in a Chapter 13 five-year plan because you didn't pass the Means Test, and your lawyer didn't tell you about the various ways that you could pass the Means Test.

So you're plugged into a payment plan that runs five loooooooonnnnnnnnng years. Because that's what happens when you can't find a way to pass the Means Test, and you have to file a personal, consumer bankruptcy.

I don't count personal Chapter 11 Cases, because the risks, uncertainty, and expense of those is brutal.

No kidding.

All three.

So there you are, and the cost of coffee goes up 85% in one year.

Does that make your Chapter 13 impossible?

Of course not.

And let's suppose you wanted to strip down your second mortgage by half, because that's the amount it was undersecured on the date of the Chapter 13 Bankruptcy filing in Phoenix, or Scottsdale, or Chandler, or...you understand. Anyplace in AZ.

So you notice that in an ordinary year, the U.S. sees about 100,000 trustee's sales and mortgage foreclosures. But this year we'll go way, way, way past a million.

So what are the chances your strip-down will result in a reduction of your second mortgage to the correct number at the end of your five years in Bankruptcy Hell?

Putting it a different way, predicting a result that will happen in five years...are you the greatest economic analyst of all time, Jackie?

Yeah, that's what I thought.

p.s. what if the price of gasoline goes up by...an insane amount? Will that hurt your calculations, or your ability to buy food in your Chapter 13 Plan?

Take a look at some official U.S. Statistics from the labor department, and see what the increase in categories was during a year. Then understand that you need to survive those increases for five long years in a Chapter 13 driven by a failure to pass the Means Test.

Consumer Price Index Summary:

Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city
average


Seasonally adjusted changes from
preceding month
Un-
adjusted
12-mos.
Dec. Jan. Feb. Mar. Apr. May June ended
2010 2011 2011 2011 2011 2011 2011 June
2011

All items.................. .4 .4 .5 .5 .4 .2 -.2 3.6
Food...................... .1 .5 .6 .8 .4 .4 .2 3.7
Food at home............. .2 .7 .8 1.1 .5 .5 .2 4.7
Food away from home (1).. .1 .2 .2 .3 .3 .2 .3 2.3
Energy.................... 4.0 2.1 3.4 3.5 2.2 -1.0 -4.4 20.1
Energy commodities....... 6.4 4.0 4.8 5.5 3.1 -1.9 -6.3 35.1
Gasoline (all types).... 6.7 3.5 4.7 5.6 3.3 -2.0 -6.8 35.6
Fuel oil (1)............ 4.9 6.8 5.8 6.2 3.2 -.8 -2.2 37.3
Energy services.......... .6 -.6 1.1 .2 .6 .6 -1.1 1.0
Electricity............. .3 -.5 .4 .7 .2 .8 -1.6 1.5
Utility (piped) gas
service.............. 1.7 -1.2 3.4 -1.4 1.9 -.3 .4 -.8
All items less food and
energy................. .1 .2 .2 .1 .2 .3 .3 1.6
Commodities less food and
energy commodities.... -.1 .2 .2 .1 .4 .5 .5 1.6
New vehicles............ -.1 -.1 1.0 .7 .7 1.1 .6 4.0
Used cars and trucks.... -.1 -.3 .1 .8 1.2 1.1 1.6 5.1
Apparel................. .1 1.0 -.9 -.5 .2 1.2 1.4 1.9
Medical care commodities
(1).................. .1 .5 .7 .5 .5 .0 -.1 2.9
Services less energy
services.............. .1 .1 .2 .2 .1 .2 .1 1.6
Shelter................. .1 .1 .1 .1 .1 .2 .2 1.2
Transportation services .2 .6 .5 .5 .2 .1 -.3 3.1
Medical care services... .3 -.1 .4 .1 .3 .3 .3 2.9

Student loan defaults are not a new thing, but they are about to be the next big thing.

In specific, the Wall Street Journal talked about "soaring" student loan defaults when they went to 6.9 in 2007.

The U.S. Department of Education

announced that the FY 2008 national cohort default rate is 7.0 percent, up from the FY 2007 rate of 6.7 percent. The default rates increased from 5.9 to 6 percent for public institutions, from 3.7 to 4 percent for private institutions, and from 11 to 11.6 percent for for-profit schools.

So here's my question: what's more than "soaring"?

Exploding? Tsunami-ing? Erupting?

And if you think I think it's funny, you don't know me very well.

On the other hand, student loan defaults are a symptom. In a country where real unemployment passed "soaring" a year ago, graduates can't get jobs.

And those in the bottom 40% of their high school classes, who are courted by schools of higher education, very seldom graduate.

But they're still stuck with those huge student loans!

Also note: some students are attacking the attacker! They're filing suit against their schools for feeding them cooked statistics about hiring prospects and earnings prospects.

Every now and then I see an idea that's so dumb, and so profoundly wrongheaded, that even I flinch.

And I've seen a lot of bad ideas, because I've been a bankruptcy lawyer for thirty years.

Anyway, the bad idea of the day is investing in real estate in college towns.

Why?

Well, as best I can tell, the next big bubble to go is going to be the University Bubble.

Kids are spending about $29,000 in borrowed money to go to Universities, and they won't keep that up once they figure out that the debt will crush them for their entire lives if they don't get a high-paying job immediately.

And since they won't get a high paying job even if they move to India (because outsourcing provides jobs to India, but the entire point is to pay Indians less than their U.S. counterparts), they're in deep kim-shee if they stay in an overpriced school getting a four-year degree in More Elaborate Ways to Make Bayberry Candles.

And W.C. Fields pointed out that you can't fool all the people all the time.

So kids will eventually figure out that a two-year degree from a community college with no debt afterwards beats the stuffing out of a four-year degree from a University with no job prospects afterwards.

Capeesh?

So if you buy real estate as an investment in a college town, good luck!

You'll need it!

And you may need a bankruptcy lawyer, as well!

Does it seem to anybody else that the world has turned upside down?

Now China is lecturing the United States, and telling it to live within its means.

I don't think anybody needs or likes lectures.

I know that ordinary consumers in Phoenix, Arizona, don't need them.

Generally, after all, consumer bankruptcy cases of all kinds are driven by unemployment, underemployment, failure of investment real property, and similar outside issues.

But some folks, a very few, do become credit card junkies, just because it's more fun to spend than to save.

Do you think that happened in Washington? Apparently, for the last few decades, spending in Washington has just kept going up!

A similar spending problem recently reached a head in Greece, which is no longer in control of its own taxation policy or its own spending.

Its lenders decided that Greece needed an intervention.

And that scares my hair all the way to white!

This video surprised me a little. I've read a good deal of commentary about the Central Falls Chapter 9 Municipal Bankruptcy. Some people think it should have been filed years ago, and some feel it should have never been filed.

Some feel that it could have been avoided if different decisions had been made five years ago; and you'll see that young lady speaking in this video.

That leaves this question: if a city is on the hook for $80,000,000, and is going negative about five million dollars a year, what alternatives does it have to filing a Chapter 9 Bankruptcy?

And this appears to me to be the first of a series of Chapter 9 Filings that may help some cities and counties (like Jefferson County) regain some spending control.

Because as hard as it is for ordinary citizens to rein in their credit card use, it's apparently much harder for elected officials at all levels.

If the City couldn't get voluntary concessions from its creditors, this appears to be the only other choice available to it. Similarly, if credit card companies don't agree to be reasonable, people file bankruptcy cases.

That's just the sequence of events in the real world these days!

Bankruptcy Judges toil in the fields of the law day in and day out, and get remarkably little credit for their good decisions.

But there's a reason they're so smart: they have to be. The Bankruptcy Code is complex, and generally recognized as a highly specialized area of the law.

On top of that, bankruptcy lawyers are smart; and they're constantly pitching for their bank, trustee, or debtor clients.

In the Dodger's case, the Judge needed more than brains. He also needed wisdom.

Fortunately, he had it in adequate supply to render a "split the baby" decision.

And that was a pretty smart thing, in this case, which calls out for cool heads.

After all, baseball is our national pastime, and still have special treatment under the law.

And the Dodgers is a special team.

I'm glad you asked, Insolvency Breath!

Chapter 13 is the most exclusive kind of bankruptcy. It is only available to actual human beings, who have "regular income", and who have debts below a statutory threshold.

And since the Dodgers Baseball Team is not a "person" for bankruptcy definitional purposes, and since it's far above the threshold for bankruptcy cases, the Dodgers couldn't possibly file a Chapter 13 Bankruptcy.

You can read all about it at 11 USC 109!

I've become more and more unhappy with the state of the economy.

And last night on facebook, a friend posted a link to an article that broke my heart.

According to this article, many, many Americans are living in their cars.

And at first I refused to believe it, and then I went to Google and searched for "people out of work living in cars".

And I encountered a site called VanDwellers.org.

And that, in turn, made a believer out of me.

A sad believer, but a believer nonetheless.

And I can no longer deny that this is a depression.

Note: without "regular income", as defined in the Bankruptcy Code, an individual can't get a Chapter 13 Plan confirmed. On the other hand, if somebody is living out of their car, they have a bigger set of problems than credit card debt.

p.s. here's another article on how to live in your car. This is simply depressing.

Generally, it's not very different at all.

There may be a few additional questions at the first meeting of creditors, but if you know what a Chapter 7 First Meeting is like, you have a pretty good idea what a Chapter 13 First Meeting is like.

Bear in mind that since a Chapter 7 is like a photograph, and a Chapter 13 is like a movie, there will be more activity during the life of a Chapter 13 Bankruptcy Case in Arizona, but that's just to be expected.

And if you want to watch me discuss the questions that are normally asked at a First Meeting of Creditors in Phoenix, Scottsdale, Glendale, Mesa, Chandler, Gilbert or anyplace else in AZ, here a video that will give you a pretty decent idea!

Do you ever get the idea that the grown-ups are making it up as they go along, and that the big kids don't really know what they're doing?

Here's a short article that says a lot: European Bank President Trichet is seeking professional advice on dealing with national bankruptcy cases in Europe.

I suppose there's another way to look at it: he's smart enough to know that he doesn't know the answers!

And here's a little advice for Greece: don't take the second bailout package being offered to you. Instead, default early and often. That way, you get to decide what your taxes will be, not a group of bureaucrats all over Europe, and the "asset sales" don't take place.

I don't know what "assets" Greece is supposed to sell under the proposed second bail-out agreement; but I bet the reason it isn't better publicized is that the Greeks would really riot if they knew the terms that were being shoved down their collective throats.

Finally, consider this: the damage has been done, so Trichet's requests for advice are a little like shutting the barn door after the horses have run away!

Yeah, I'm a bankruptcy lawyer in Phoenix, Arizona. But that doesn't mean I like to read about the Four Horsemen of the Economic Apocalypse!

Unemployment figures are high, and keep getting higher, and the real numbers are far higher than the official numbers. You do know that they changed the way the unemployment figures are calculated so you won't get too scared, right?

Inflation is going up; and once again, the official figures don't come close to detailing the reality of increases in gasoline prices and food prices. Coffee, for heaven's sake, has gone up by 77% over the past year!

Bankruptcy Filings are up 13.8% in 2010 from 2009.

And trustee's sales and mortgage foreclosures are on track for 1.4 million this year. Bear in mind that in a normal year, we would see a hundred thousand.

Now, I like my job, because I get to help businesses and individuals survive insolvency (note that the process of bankruptcy of any kind is a big, fat, pain in the neck).

But it's kinda like being a cancer specialist; yeah, it's good to be busy, but the amount of human suffering out there right now is excessive.

I look forward to a recovery from this depression.