Bankruptcy Resources

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Welcome to our Bankruptcy Resources Page.

Navigating through bankruptcy can be daunting, but you don’t have to face it alone. This section is crafted to support and guide you through every step of the process. Here, you will find comprehensive resources, insightful FAQs, and essential links that address common questions and challenges encountered during bankruptcy. Whether you’re seeking to understand the different types of bankruptcy, looking for tips on managing your finances post-bankruptcy, or needing advice on how to rebuild your credit, our goal is to provide you with the necessary tools and knowledge to make informed decisions and start anew.

At Thompson Law Group, we’re committed to easing your journey through this complex legal landscape.

FAQs

General FAQs

Talk to a bankruptcy attorney immediately. Any good bankruptcy attorney is going to tell you if a bankruptcy is the right path for you now, sometime in the future or maybe not at all. You owe it to yourself to find out how you can protect your assets and settle your debts before you do something that harms your financial situation. Many times, I have had clients spend all of their retirement or get a Home Equity Line of Credit (HELOC) to pay debt and avoid bankruptcy, but they still end up filing bankruptcy because they did not pay it all. Unfortunately, when they did file bankruptcy, they had no retirement left or additional debt on their house which all could have been avoided.

NO, NO and NO!!! You are a human that has had life happen. To be clear, bankruptcy is a tool to help those who have had an unforeseen event cause a financial crisis get a much needed fresh start. People who file a bankruptcy are not failures. Under no circumstances keep that narrative in your head. It is a myth perpetuated by the uneducated and ill-informed.

Not really, unless they specifically search, or you tell them. There is no requirement for the bankruptcy filings to be published in a newspaper or anywhere. Bankruptcy filings are public records, but there are rules and costs to access the bankruptcy court filings.

Maybe, if you let it have power over you. I know you are scared, and you think that your life is over if you file bankruptcy, but it is not, I promise. I can 100% guarantee that this too shall pass and that we will (as a team) get through it. I think the uneducated will never understand bankruptcy unless they are ever in financial distress such that they need to file bankruptcy.

There will always be a few that abuse the system, but in my experience, it is very, very, very rare, yet those cases are the only ones that anyone knows about and drive the public perception. My clients, generally, have lost a job, had a family member get sick with little or no insurance, got divorced, had a business fail or had some combination of all four. Bankruptcy was not the master plan, but they can use it as a tool to rebuild and move forward (better and stronger).

You should talk to an attorney located where you live. The Internet is a beautiful thing and information is power. I applaud people getting educated and informed. However, really look at the source, but also look at the location where the source is located. Bankruptcy varies wildly by state and even between Southern Arizona and Northern Arizona counties. The federal procedure for bankruptcy is the same everywhere, but the specifics of how it is applied may be very different. Be sure the information you are getting is for your specific location. For this reason, we only handle bankruptcies in Southern Arizona which includes Pima, Cochise, Santa Cruz and Graham counties.

Every single U.S. citizen may file a bankruptcy case on any given day regardless of whether they have filed bankruptcy before or when, what debt they have, what assets they own or what income they receive. The questions really are: Should the person file a bankruptcy and what Chapter bankruptcy should they file? There is no qualification to file a bankruptcy case, but there are requirements to be in different chapters of bankruptcy that hinge on income, type of debt, assets, previous bankruptcies and debt amount. Still, this should never scare anyone from finding out what bankruptcy can do for them because ALL chapters of bankruptcy will eliminate debt and get you where you need to be.

Aside from sending us all of your documents and filling out our questionnaire, the only thing you need to do is to take the online Credit Counseling class. Calling it a class is really a misnomer as it is more of a questionnaire that you complete online or by phone. The cost is less than $20 based on the company you use. We will send you information on the company we work with, but you may use any company that has been approved by the court. We will need the certificate showing you have completed the class before we can file your case. The company we use will email it directly to us. Certificates of Completion are good for 6 months.

Yes. Many times, folks with high income are able to maintain their monthly minimum payments but are never going to dig out of the debt. A Chapter 13 bankruptcy provides a way to stop interest rates from increasing the debt and allow you to pay what you can over a period of 5 years to eliminate the credit card debt. Again, you should talk to an attorney to see if bankruptcy is right for you.

If you are in a place where bankruptcy is a good idea for you, your credit score is not going to remain high for long. If bankruptcy is truly a good idea for you, rip off the band-aid and file the bankruptcy case so you can move forward. You will be able to rebuild your credit so that it is excellent again and you will be able to do it faster than you think.

Exemptions (Automatically Protected Property) in Bankruptcy – Will I Lose My Stuff?

An “exemption” is the property that you are automatically allowed to keep when you file any type of bankruptcy. Exemptions vary wildly from state to state. You must still pay for the exempt property if you owe money on it, but you do not need to pay money to your creditors otherwise to keep it. If property is not exempt, you do not have to give it up, but you need to pay over the amount of equity to your creditors. This is always doable one way or another, so speak with a bankruptcy attorney to discuss your options.

The most common exemptions for the State of Arizona are below. You calculate your exemption amount; by finding the value of the property and then deducting the amount you owe on it to determine the equity.

Homestead (where you live): $414,800 in equity as of 1/1/24

Vehicle (one per spouse): $15,600 in equity as of 1/1/24

Proposition 209 increases the exemption amounts for vehicles and homestead annually based on inflation so the amounts listed will be a bit higher.

No, so long as you pay for them. If you are behind on payments you may need to file a Chapter 13 bankruptcy to deal with the arrearage, but you will not lose your house or your car(s) so long as you can afford them. In fact, sometimes we are able to modify your home mortgage through the bankruptcy court’s Mortgage Modification Mediation (MMM) program. We also may possibly be able to adjust the interest rate on your vehicle or the amount you have to pay for it in a Chapter 13 bankruptcy.

You can surrender any property that you owe money on and give it back to the creditor when you file a bankruptcy case. If you are underwater on either your vehicle or your house, you may want to consider surrendering the property or consider other options through the MMM program or in a Chapter 13 bankruptcy. If you surrender property in your bankruptcy case and it is sold for less than what you owe on it, you will not have to pay any deficiency balance.

Don’t panic. You are not alone. Every person that files a bankruptcy case has non-exempt property, but generally it has little to no value. If you have property that is valued over the exemption (protection) amount, you will have to pay over the difference between the exemption amount and the value of the property. For example, if your car is worth $17,000 (free and clear) and the exemption amount is $15,200, you would need to pay your unsecured creditors $1,700 which can be done in a lump sum after you file your bankruptcy or handled through a Chapter 13 bankruptcy plan.

Yes, 99% of all retirement accounts are 100% protected in bankruptcy unless as account exceeds $1,000,000. Please do not use your retirement accounts to pay off debt without first speaking with a qualified bankruptcy attorney.

In the State of Arizona, you may have up to $5,000 in your bank account on the DAY you file your bankruptcy case or if you are married, you may have up to $5,000 in two different bank accounts or $10,000 in one bank account. This only matters for the DAY of filing your bankruptcy case. Once the bankruptcy is filed, the amount in your bank accounts is not an issue and you may use and receive income as you normally do.

Types of Bankruptcy

A Chapter 7 bankruptcy is what most people think of as a typical bankruptcy. It is called a “liquidation” which is kind of a silly name as most people don’t have any assets to liquidate and in Arizona, we do not really liquidate assets. The idea is that the person that files bankruptcy has some automatically protected (exempt) property and some non-exempt property. The non-exempt property gets sold and the creditors get their pro rata share of the proceeds from any sale. The reality is if a person has non-exempt property in Arizona, we generally either pay for it in a Chapter 13 bankruptcy or pay the Chapter 7 Trustee cash to keep it. Sometimes the Chapter 7 Trustee will let us pay the amount over a period of time, but that is not guaranteed and if paid in installments, generally the full amount must be paid within 6 months. Both individuals and businesses may file a Chapter 7 bankruptcy. There are no debt limits for a Chapter 7 bankruptcy, but individuals must be under a certain income level to qualify based on the means test.

A Chapter 7 bankruptcy is not an option for businesses that want to continue to operate. Businesses have no requirements to qualify for a Chapter 7, but they have no exemptions, and all of the businesses assets will be sold (liquidated) to pay creditors on a pro rata basis. I rarely file Chapter 7 bankruptcies for businesses as I find that there are other alternatives for dealing with the business debt that are more effective. Still, a Chapter 7 bankruptcy for a business is a tool in the arsenal and there are no debt limits.

The “Means Test” is considered a measurement to determine if an individual’s income is low enough to qualify for a Chapter 7 bankruptcy. It also allows individuals with high income to determine the amount of their Chapter 13 Plan payment. First, we look to the median income for the State of Arizona. We calculate the last 6 months of your gross income, multiply by 2 and that is considered your annual income for means test purposes. If you are under the median amount, the inquiry stops there. If you are over the median amount, we look to your actual expenses and IRS standards to see if after those are included, you are still above the median amount. If so, you may need to file a Chapter 13 bankruptcy. This is not a bad thing as a Chapter 13 will get you where you need to be with your debt and there may be other benefits to you in a Chapter 13. You should always speak to a bankruptcy attorney about the means test. The means test is not a time for DIY.

If your debt is over 51% non-consumer debt, you do not have to pass the means test to file a Chapter 7 bankruptcy. Consumer debt is considered any debt that was incurred to benefit the health and welfare of your family vs. non-consumer debt which is generally personal guarantees for your business and some taxes.

A Chapter 13 bankruptcy is what we call a “reorganization”, and it is for individuals only. The debt limits for a Chapter 13 are up to $465,275 in unsecured debts and no more than $1,395,875 in secured debt. Individuals propose a plan of reorganization which commits any disposable income from the means test to pay their creditors (whatever that amount may be, if any). Chapter 13 Plans of reorganization may also be used to pay priority taxes, lower the interest rate on a vehicle, decrease the amount to be paid for a vehicle (if it has been owned for more than 2.5 years), pay mortgage arrears and pay vehicle arrears. Chapter 13 bankruptcies are 3 to 5 years long depending on your specific circumstances. If you need to save a house or a vehicle, you will need to file a Chapter 13 bankruptcy case so you can pay the arrearages as well as the ongoing monthly payments.

“Secured debt” is any debt that can be paid by taking back property. For example, your car or your house would be secured debts. If there is a lien on any of your property to secure a debt, that debt is considered secured. “Unsecured debt” is debt with no collateral. Typically, credit cards, medical bills and personal loans are unsecured debt.

A Subchapter V, Chapter 11 bankruptcy is generally for businesses that want to remain operational. A Subchapter V may also be filed by individuals that exceed the debt limit for a Chapter 13 and a Chapter 7 bankruptcy is not a good option for them for some reason. A Subchapter V is a hybrid between a traditional Chapter 11 (generally large businesses) and a Chapter 13. It is designed to be a cost-effective solution to reorganize businesses or individuals with no more than $3,024,725 in total secured and unsecured debt. Many of the requirements of a traditional Chapter 11 have been eliminated in the Subchapter V and it operates much like a Chapter 13 with the creation of a plan and monthly payments.

Chapter 13 Bankruptcy – Specifically

If you have a way to pay all of your debt in less than 5 years or you will pay less on your overall debt without a bankruptcy, do it. Generally, Chapter 13 Plan payments are less than your monthly minimum credit card payments and interest stops on all of your credit card debt, so you still pay a lesser total amount over the length of your Chapter 13 bankruptcy than without a Chapter 13 bankruptcy.

Just because you are in a Chapter 13 bankruptcy does not mean you cannot live your life. You are not stuck. As we all know, things can change (jobs lost, cars need to be replaced, people need to move or sell/buy a house, etc.). All of these things are possible while you are in a Chapter 13 bankruptcy. Think of your Chapter 13 bankruptcy as a refinance plan for your debt that can be adjusted for your changing circumstances.

A Chapter 13 Plan is the repayment plan you propose to resolve your debt. It is based on your income as well as what debt you are required to pay like taxes and sometimes a car or mortgage payment. Think of your Chapter 13 Plan like a plan to refinance your debt. You begin making a monthly payment 30 days after we file your bankruptcy case, and you continue to make a monthly payment for the duration of your bankruptcy which is no less than 3 years and no more than 5 years depending on your circumstances. Chapter 13 plan payments may be made electronically through www.tfsbillpay.com.

It depends. Mainly, it depends on why you are in a Chapter 13 bankruptcy. If it is because your income is above the threshold for a Chapter 7, your income will determine your Chapter 13 plan payment. If you are in a Chapter 13 to pay back taxes, your Chapter 13 plan payment may hinge on the amount of taxes you are required to pay (called priority). If you are lowering a car payment or resolving mortgage arrears, your plan payment will include your lower car payment and/or your mortgage payment. Chapter 13 Plan payments for only credit card debt rarely are more than the minimum monthly payments on those credit cards (but after 5 years the debt is gone). Really, it depends on your situation, and we will not be able to tell you until we see all of your paperwork. I can give you an educated guess of an estimated plan payment at our consultation, but it will only be a guess.

We will adjust your Chapter 13 plan according to your new income. Many times, losing a job will make a difference in your Chapter 13 Plan payments if your income was high at the time of filing your bankruptcy.

What to Do and Not Do Before Filing Bankruptcy

Do NOT pay friends and family back for any loans or make large purchases using credit cards. Do not use your retirement accounts or get a Home Equity Line of Credit (HELOC) to pay credit card/medical debt. Until you talk with a bankruptcy attorney, do not sell, transfer or pay off any property.

Pay your mortgage and car and regular bills (stop paying for what you don’t need or what you will not be keeping). Also, continue to pay spousal maintenance/child support. If your house is in foreclosure, you will not be able to pay your mortgage unless you can get it current. In that case, pay utilities and the other bills for the things that you are keeping (car, car insurance, cell phone, water, gas, etc.). Do not use or pay your credit cards.

Do not hide from your mail or a process server that comes to your door. If you get a certified letter in the mail, go get it. If you get mail, open it. No attorney can truly help you if we do not know everything that is happening. We also need to know all of your creditors so that we give everyone notice of the bankruptcy, so they stop contacting you. This is not the time to put your head in the sand.

Yes. It is likely that somewhere long ago in a galaxy far away, you signed an agreement with your bank that gave it permission to take funds from your account when you did not pay for your credit card. It is generally best practice to switch your bank account to a bank or credit union where you do not owe money to be sure that none of your money from your account is used to pay the credit card debt that you will discharge in bankruptcy. If you owe your credit union money on a credit card, you definitely need to change banks prior to filing bankruptcy as the credit union will close your account based on your credit union membership agreement. If you only have an account at a bank or credit union to facilitate payment for your mortgage or car and you do not bank there, there is no reason you need to change or close those bank accounts. There is also no reason to close your account if you bank where you owe money. Best practice is to draw down the amount in the account to a small amount and then use the new bank account for your future banking.

Don’t ignore it. Breathe. Put it in your pile to give/can to us so we have contact information for all the creditors, collection agencies, collection attorneys and anyone else we will need to send notice to. Keep in mind they can do nothing to you UNLESS they sue you and if they sue you, your bankruptcy will stop the lawsuit.

Ignore them. You can block the number. Anyone you truly need to talk to will leave you a voicemail. Any messages from debt collectors may be deleted. They likely will not stop until you are able to give them a bankruptcy case number. You can also answer unrecognized calls if you want, but you are not required to.

Yes, if they are for credit card debt or any other debt that we will eliminate in bankruptcy. If you have your utilities or other monthly expenses (like insurance, cell phone, etc.) on autopay, those will remain unaffected. If you change banks, you will need change the autopay settings for the bills that you need to continue paying. If you are paying for your vehicle or mortgage though autopay, they will likely not allow you to do that while you are in bankruptcy so be sure to obtain the most recent statements so you can continue to make those payments by mail (or by having your bank send a check) while you are in bankruptcy.

If you can get a good deal and you really need a newer vehicle, go ahead and purchase a vehicle prior to filing your bankruptcy case. However, understand that you will not be able to lower the amount you have agreed to pay for it, and this will be a monthly payment that you will make after bankruptcy so make sure it is affordable. If you cannot get a decent deal on a newer vehicle and you can wait, file the bankruptcy and purchase a vehicle either after your Chapter 7 bankruptcy discharge or after you have received approval (confirmation) of your Chapter 13 Plan. One other important note if you are purchasing a newer car prior to filing bankruptcy, the lender MUST perfect its lien (file it with the Arizona Department of Motor Vehicles) against the vehicle within 30 days of its purchase so potentially, the Trustee could avoid (ignore) the lien and you would have to work with the Trustee to keep the vehicle. There is no way for the public to search the Arizona Department of Motor Vehicle’s database electronically, but you can contact a third-party title company in town to run a search or go to the DMV directly and ask.

It is generally best practice to keep your social security money separate from any other income you receive. The reason to do this is because social security money is 100% protected and other income is not. What this means is you may have a bank account with $40,000 of social security funds in it and it is 100% protected. However, the social security money may not be mixed (co-mingled) with any other money. If you can, have all of your other income diverted to another bank account. Spend any non-social security money first and if you need to spend social security money to pay bills. You can spend social security money with no problem but mixing it with other money means it is no longer considered social security money and is no longer 100% protected. We can discuss this at our consultation.

Lawsuits and Garnishments

Yes. Filing a bankruptcy case at any time during a lawsuit will stop the lawsuit from proceeding any further. I prefer to file bankruptcy for my clients before a judgment is obtained as I do not want the judgment to be recorded against their homestead. If you are being sued, talk to bankruptcy counsel as soon as possible.

Keep a record of the date you are served. The Summons you receive will state that you have 20 calendar days to respond. However, if you don’t respond within 20 calendar days, the Creditor must file and mail you what is called an Application for Entry of Default. Once you receive that you have 10 days (excluding weekends and holidays) in which to file an Answer. If you do not, the Creditor will be allowed to request a judgment against you which generally takes a few weeks (but this is not guaranteed to take that long). Once a creditor has a judgment against you, the creditor may record it as a lien against your homestead and also start proceedings to garnish your bank account(s) as well as your wages.

Yes. Filing a bankruptcy case will stop a wage garnishment at any time. Creditors who have received monies in the last 90 days prior to the date of the bankruptcy filing may be required to give the money back so it may be paid to your creditors.

Maybe. If your bank account has been frozen by a bank garnishment and you file bankruptcy prior to the creditor receiving the funds, a bankruptcy will stop the disbursement of the money to the creditor. If the funds have already been sent to the creditor and it is within 90 days of the bankruptcy filing date, the creditor may be required to send the funds to your Trustee so the money may be distributed to all of your creditors (pro rata). No further bank garnishments will occur if the underlying debt is included in your bankruptcy.

Divorce and Single Spouse Bankruptcies

It really depends on your circumstances, and you should seek the advice of an attorney sooner rather than later. Keep in mind that if both you and your spouse speak with a bankruptcy attorney and later one of you wants to file bankruptcy with that attorney after the divorce, that attorney would need a waiver of conflict from the non-filing spouse in order to file the bankruptcy. Also, if you jointly file bankruptcy prior to obtaining the divorce and at ANY time, you do not get along or cannot agree, your attorney will have to withdraw, and you both would need to hire your own bankruptcy attorney. My best advice is for one or both of you to seek bankruptcy advice independently from different attorneys to see what the attorneys say. It may not be a good option to jointly file bankruptcy and they may recommend that you file two separate bankruptcies after the divorce is final. You may only file a joint bankruptcy while you are still legally married. If you file by yourself before a divorce is final, you may stop the divorce proceedings until the bankruptcy is complete and you may also have to pay your ex-spouse for debts discharged in the bankruptcy. Again, the best advice is to seek counsel to know your options.

Yes, there is nothing that prevents one spouse from filing bankruptcy. Given that Arizona is a community property state, creditors may generally look to both spouses for payment of a debt even if only one spouse is on the credit card. I rarely see it happen, but it can, so it is something to consider. Also, regardless, both spouses will need to provide their income information as well as a list of all of their assets if only one spouse is filing the bankruptcy.

Yes, if a Chapter 13 bankruptcy is filed and a discharge obtained. A property settlement debt is not discharged in a Chapter 7 bankruptcy.

Foreclosure

Contact bankruptcy counsel IMMEDIATELY. You do not have time to wait. Many attorneys will not handle urgent bankruptcy cases because there is no time to prepare. You can still negotiate and speak with your mortgage company, but many times that will not resolve the problem and by the time you know that it is too late to properly prepare your case. You can still file an emergency bankruptcy, but it is not ideal, and this is when big mistakes occur. Bankruptcy might be a better alternative to any negotiation because the Mortgage Modification Mediation program offered through the bankruptcy court allows you to negotiate with the mortgage holder under court supervision. Regardless, you need to speak with counsel as soon as possible so you know your options so you can make educated decisions.

Any person that files a bankruptcy case may apply to be in the Mortgage Modification Mediation (MMM) Program. The MMM program allows borrowers to apply for a loan modification through the bankruptcy court. All supporting documents are submitted through a secure portal so there is no chance that any document is misplaced such that you have to resubmit it repeatedly. The servicers will review the application for modification and either offer a loan modification, or not based on their internal guidelines. Currently, there are no mandatory federal loan modification guidelines in effect. In the MMM program if a borrower is denied a loan modification, borrowers are entitled to a mediation to discuss the basis for the denial. Many times, the mediation helps resolve miscommunications between the parties. Regardless, the servicer may not foreclose on your house while you are in bankruptcy. Even if you do not obtain a loan modification, you will still have options to handle the foreclosure through standard bankruptcy procedures, so you do not lose your house.

Unfortunately, I cannot control third parties, and neither can your mortgage lender. Here is what happens. When you file a bankruptcy, the mortgage lender stops the foreclosure so they will not sell your house on the appointed date. However, they state only that they are “continuing” the sale to a different time, generally about 90 days from the first foreclosure date. They are allowed to do this, and it is a good practice. The reason is a lot of people file bankruptcy with no intention of following through. The mortgage lender does not want to start the foreclosure process all over if the debtor is dismissed from the bankruptcy. As such, the mortgage lender will continue the sale multiple times until (generally) the Debtor’s Chapter 13 Plan is confirmed. At that point, they know the Debtor is serious and the mortgage situation will be resolved by the bankruptcy, and they will cancel the foreclosure sale. In the meantime, house buyers are only hearing that the sale is being continued and not that you are in bankruptcy so they will constantly try to buy your house by scaring you into thinking that it is still going to be sold. First, they are wrong. Second, they have no right to be on your property so call the cops if they do not leave. Third, if you do speak with them, tell them you are in bankruptcy. If they are savvy, they will get what that means and if not, they may be back in another 90 days. Sorry about that, but they are independent agents working on their own so there is nothing the mortgage company or I can do about it.

Student Loans

Maybe. Depending on your circumstances, you may be able to fully or partially discharge your federal student loans. Additionally, in July 2024, borrowers in a Chapter 13 bankruptcy with Direct Loans will be credited for their student loan payments while they are in bankruptcy (whether the government receives payment through the Chapter 13 Plan or not). These borrowers will be 5 years closer to forgiveness of their student loan debt at the end of their Chapter 13 bankruptcy. This alone may be a reason to choose to file a Chapter 13 bankruptcy over another type of bankruptcy as sometimes the payments in a Chapter 13 bankruptcy plan are less than what the student loan payment would be. As a general rule, federal student loans are not dischargeable and will be a debt that needs to continue to be paid after the bankruptcy is complete.

Private student loans are generally not dischargeable in bankruptcy. However, many private “student loans” may not actually be “student loans”. Depending on the college and the circumstance of the student loan, you may be able to challenge the characterization of the debt as a student loan and make it dischargeable. Also, private lenders have recently been more willing to work with borrowers in bankruptcy to create a workable repayment plan. However, as a general rule, private student loans are not dischargeable and will remain a debt that needs to be paid after the bankruptcy is complete. That said, after the bankruptcy, you will have more disposable income to make the payments on the private student loan so depending on your circumstances, bankruptcy still may be a good solution to your financial situation.

Debt Consolidation/Settlement Programs

They do sound good. Be sure to read the fine print. Also, be sure to talk with a bankruptcy attorney before you decide to go this route. Many times, debt consolidation/settlement companies have you pay an amount to them per month (like a Chapter 13 Plan), and they do not do anything to negotiate the debt until they have received a certain amount of money (generally, their fees). They tell you not to respond to creditors, they tell you to ignore lawsuits as they will handle it and sometimes, you are garnished because nothing has been done. I have many clients who signed up for debt consolidation/settlement only to pay the monthly fees (which are essentially lost) and then file bankruptcy anyway.

Again, read the fine print. If the company is saying or guaranteeing that they have a special arrangement to resolve debts with a certain credit card company, ask to see it. No one can guarantee a resolution of a debt except a bankruptcy attorney. We can guarantee that your debt will be resolved and sometimes without paying the credit card company anything (depending on your circumstances).

Yes, you can always file bankruptcy at any time. Stop making the monthly consolidation/settlement payment and contact bankruptcy counsel. Many times, you are able to get a refund of what you have already paid the company, but not always. It never hurts to ask.

Yes, sometimes. I will only attempt negotiation of debt for clients in certain circumstances. The client must have only 1 to 3 debts and be a candidate for bankruptcy. The client must also have funds to pay any settlement or alternatively, be uncollectible because he or she only receives social security as monthly income. The only way settlement works is if ALL creditors agree. If not, you will be back where you started with less money in your pocket. I also use the fact that you are a candidate for and are willing to file a bankruptcy case to attempt a settlement with your creditors. I have had this work many times and many times the creditors just don’t care and will not settle no matter what I say.

Yes, but again, if ALL of your creditors do not agree to reduce your debt to a manageable amount, there is no point. Settling with some and not all of your creditors just takes money out of your pocket unnecessarily.

Businesses in Financial Distress

The business owner’s personal liability for an SBA loan or EIDL may be discharged in a bankruptcy. If the business remains operational, it is more complicated and will depend on whether the business files bankruptcy or the business owner files bankruptcy. It is critical to have detailed records on how the EIDL money was spent before filing bankruptcy. The U.S. Trustee’s office is pursuing cases where the EIDL money was not used entirely for business purposes and asking that the debt not be discharged. Definitely talk to counsel about your particular circumstances and be ready to provide documentation of the expenditures of the EIDL money.

I am not sure if my business debt is secured. How do I find out if there is a UCC-1 on my business assets?

Commercial lenders may file a Uniform Commercial Code Financing Statement (UCC-1) on any secured business debt. It is important to know when planning a business dissolution or bankruptcy if the business debt is secured or unsecured. If there is a UCC-1, the debt is secured and if not, unless it is a vehicle or real property (which are both secured other ways) the debt is likely unsecured. The Arizona Secretary of State maintains the database for UCC-1 Financing Statement liens in the State of Arizona.

I get it. The offers do sound tempting, but generally they are a stop gap before the onset of a larger problem which is paying them back. Before ever getting one of these loans, seek the advice of counsel and see what bankruptcy can do for you and your business. If you decide to get a private loan, read the fine print. Many times, money is pulled from your bank account weekly, the interest rate is high, and some loans require you to agree to a judgment against you and your business at the time you sign the loan. This means if you stop paying the loan, all the lender has to do is file the judgment with the court(s) and begin to collect from you.

Tips for Preparing Your Bankruptcy Case

No, you must list all of your creditors and all of your debts in your bankruptcy documents filed with the court.

Wrong. We must list every debt and every creditor in your bankruptcy case. If you are keeping your house and/or your vehicle, we state that you are keeping them, but they are included. The difference is we make it clear that you will continue to pay for them and that you are not giving them up.

Make sure you have the 6 most recent mortgage statements for your mortgage and vehicle. You may have to mail paper checks/money orders or have your bank send a check to make these payments, so you need to know where to do so. Get any other information you think you may need off of the lender’s website as they may shut you out of it once you file your bankruptcy. If you are filing a Chapter 13 bankruptcy, be sure to make your mortgage payments on the 1st of the month prior to filing your bankruptcy (even if you have a grace period and even if you don’t normally pay on the 1st of the month).

We will pull your credit reports so everything there will be listed when we prepare your case. You can also pull your credit report to verify what we already have (insert link to credit reports). If you know that a certain hospital or doctor, for example, provided you services, but you have not yet received a bill, give us the name and address of who you think you might owe money. It is better for us to list a potential creditor than not to list a creditor. We can amend your documents later to add creditors if we must, but there is a filing fee to do so. Generally, it is best to notice every creditor we know of or think we know at the beginning of the case.

Maybe. It depends on the circumstances, but we absolutely, 100% need to know EVERY piece of property where you may have an interest. Please search the public records to verify that you are not on any real property you did not know about. If you are and we don’t know, the Trustee is going to ask, and you will look like a liar because we did not disclose it or deal with it prior to the bankruptcy. You can search both the Pima County Assessor’s Office and the Pima County Recorder’s Office to verify if you are on title to any properties. If you live in another county, you will need to search your local county databases if you can online or go to the office to have a search on your name run. You should search multiple versions of your name to be sure you have found everything where you are listed or know that it is not you on the title.

Yes. We must list every business you were a part of in the last 6 years. Please verify that the business (LLC, Corporation, etc.) is actually closed with the Arizona Corporation Commission. Just because you are no longer using it, does not mean it does not exist. If it exists, it is still an asset with no value, and we should shut it down prior to filing your bankruptcy case. If you were part of an LLC/Corporation and no longer are a member, officer, manager, director or shareholder, verify with the Arizona Corporation Commission that you have been removed from the public records. Many businesses fail to keep their public records accurate, and it will cause you problems if we do not clean it up prior to filing your bankruptcy case. In addition, if you were a part of a company in another state, you need to verify the same as above with the Secretary of State in the state where the business was formed. If you have a trade name registered with the Arizona Secretary of State or the U.S. Patent & Trademark Office, we need to know about that as well. Please provide us with all information that you have and can obtain from public records for any business that was in existence in the last 6 years (even those that stopped operating but were never closed). More information is never too much and will always protect you in the end.

What Happens After I File Bankruptcy

The second you file any type of bankruptcy case an “automatic stay” is imposed. What that means is that all action (lawsuit, garnishment, other collection efforts, etc.) stops (stay = stop). It generally takes a week or so to stop all the bills from coming to you, but that is because creditors receive notice from the bankruptcy court directly by U.S. Mail and it is not immediate. If you get collection calls after you file bankruptcy, this is the time to answer as if you give the caller your bankruptcy case number they will stop calling. If they don’t and you continue to get collection correspondence after about a month, we can ask the court to make them stop. Keep records of any correspondence or calls you receive after you file bankruptcy.

Unfortunately, many mortgage servicers and vehicle lenders will no longer allow you to pay electronically and will not let you have access to your electronic dashboard. They may also not send you a monthly paper statement either. They view this as possibly violating the automatic stay provisions of the bankruptcy code. You will need to pay them by check (which you can do electronically through your bank by having your bank send it to them) or send them a money order by mail. If you send a money order or other payment by mail, be sure to keep records. Also, mark your calendar to be sure you do not forget to make your monthly payments because if you do, the creditor may ask to take the property back. We will receive annual tax information and Notices of Mortgage Payment Changes by mail through the bankruptcy court (so watch your mail for those). If we receive a tax document for you that you did not also receive, we will send it to you.

After you file bankruptcy, you must take the second required class called “Financial Management” which you can do online with the same company as you used for the first class. You will also need to attend (via Zoom) the Meeting of the Creditors. If you are in a Chapter 13 bankruptcy, you will need to begin making your monthly plan payment 30 days after we file your case. Practice using Zoom with our tutorials so you are prepared for your Meeting of the Creditors. We will reach out to you prior to the Meeting of the Creditors so we can jointly prepare and be sure you are comfortable.

No, you do not have to go to court. You will have a Meeting of the Creditors with your bankruptcy Trustee about 45 days after we file your bankruptcy case. We will know the date of your Meeting of the Creditors on the day we file your bankruptcy case so you may get time off work. Prior to that Meeting of the Creditors, we will submit a copy of your photo identification (driver’s license/passport or an acceptable equivalent and your social security card to the Trustee assigned to your case. We will also submit the Trustee’s Questionnaire and any required documentation to the Trustee for you, so you do not need to worry about missing anything.

The Meeting of the Creditors is the time for you to prove your identity to your Trustee and answer basic questions under oath to prove that you have the legal right to file bankruptcy in Southern Arizona. We have created a list of the types of questions that are generally asked in both Chapter 7 and Chapter 13 case for you to review. The name “Meeting of the Creditors” is a bit of a misnomer as 99% of the time creditors do not attend. However, they are allowed to, but only to ask about the information contained in your bankruptcy documents. The Meeting of the Creditors takes approximately 5 minutes, and 4 meetings are set every half hour. All Meetings of the Creditors are by Zoom and you must appear on camera. Please check out our tutorials on Zoom.

This is a very general definition for a “Trustee” in Chapter 7 and Chapter 13 bankruptcies. A bankruptcy Trustee is the person assigned to your bankruptcy case. He or she administers your case which means he/she collects financial information from you (which we will provide to the Trustee, so you do not have to), collects any money that you need to pay your creditors (if any), and pays your creditors their share of the money the Trustee collects.

Sometimes, depending on when you file your case. The Chapter 7 Trustee is entitled to the portion of your tax refund that you will receive for the upcoming year based on the date of your bankruptcy case filing. For example, if you file your Chapter 7 bankruptcy case in June 2024, the Chapter 7 Trustee would be entitled to one half of your 2025 tax refund (June is one half of the year). You should adjust your deductions so you neither owe nor have a large tax refund. Any amounts that you receive as a refund for the Child Tax Credit or Unearned Income Credit listed on lines 27 or 28 on IRS Form 1040 do not have to be turned over. Sometimes we wait to file your bankruptcy case so you can file your taxes, receive your refund and spend it prior to filing your Chapter 7 bankruptcy. Consult with a bankruptcy attorney about the appropriate ways to spend your tax refund before spending it, as there are many pitfalls in how you spend your refund that may cause problems in your bankruptcy case. The IRS has a tax withholding calculator to help you make any adjustments to your deductions that you may need to.

In a Chapter 13 bankruptcy filed in Southern Arizona, you are required to submit a copy of your state and federal tax returns to the Chapter 13 Trustee for every year you are in your Chapter 13 bankruptcy. In addition, you must turn over any amount you receive over $1,000 (amounts on Lines 27 and 28 of IRS Form 1040 are not included and you may also deduct any amounts that you paid for having your taxes prepared) as supplemental funding to your plan. Any tax refunds that are turned over to the Chapter 13 Trustee do not count towards your plan payments so you should adjust your withholdings, so you are not receiving more than $1,000 in a tax refund. The IRS has a tax withholding calculator to help you make any adjustments that you may need to.

Discharge (Final Elimination of Debt)

An “Order of Discharge” is the court’s order stating that you are no longer legally obligated to pay your dischargeable debt.

The most common types of dischargeable debt in ALL bankruptcies are credit card debt; medical debt; deficiencies for repossessed property; and private loans.

Taxes and student loans are generally not discharged in bankruptcy, but sometimes the amounts owed will be reduced and, in some circumstances, some or all of the student loan and tax debt may be discharged. Any debt that was incurred by some type of fraud is not dischargeable (generally, only if the debtor brings an adversary proceeding in the bankruptcy case and proves it). This is not an exhaustive list of nondischargeable debt, but it is a list of the most common type of debts that are not dischargeable. Talk to a bankruptcy attorney about your specific circumstances.

Spousal maintenance and child support are not dischargeable in bankruptcy. If you are in arrears on either, you may be able to pay the arrearages through a Chapter 13 bankruptcy to retire the debt, but you will always have to pay it.

In a Chapter 7 bankruptcy, you will receive your Order of Discharge about 60 – 90 days after your Meeting of the Creditors. In a Chapter 13 bankruptcy, you will receive your discharge after you have completed all of your Chapter 13 plan payments.

Attorney Fees for Bankruptcy

Unfortunately, I cannot work for free. Just like your doctor or dentist do not provide free consultations, neither do I. At our initial consultation, I will provide you with a solid plan to deal with your personal circumstances which many times includes bankruptcy, and sometimes does not, or it does not include bankruptcy at this moment. I will help you structure payment of your bills pre-bankruptcy so you should be able to afford legal fees. If you truly, truly cannot afford our consultation fee, you should contact Southern Arizona Legal Aid or another agency that might provide free assistance.

Maybe we are or maybe we are not. You are welcome to shop around. What I can tell you is, we provide personal service throughout the entire process. You never have to submit documents to your trustee yourself and you never have to wonder what is next. We will help you figure out how to pay for bankruptcy attorney fees and costs. We focus on your peace of mind. Again, shop around and determine what attorney is right for you.

I do not do $0 down agreements because I do not want to charge financing fees to increase the overall amount you pay for your bankruptcy. Read the fine print and make sure you understand the TOTAL cost of your bankruptcy and what services will be provided if you work with a $0 down attorney. I am not saying that you should not do it. Just make sure you are educated about it. Understand that bankruptcy is a big decision, and you only get one chance at doing it right so make sure you are comfortable with your attorney and the attorney’s process before you choose an attorney.

For Chapter 7s, we ask for the full flat fee which includes the court filing fee ($338) and the costs of obtaining your credit reports ($80). Flat fees are based on the complexity of your case. We will give you a quote at the time of our initial consultation. For Chapter 13s, we require an upfront deposit which will include the court filing fee ($313) and the costs of obtaining your credit reports ($80). Since we will be representing you for 3 to 5 years in a Chapter 13 bankruptcy, we charge hourly which allows you to control (to some extent) the fees to be paid. All of our hourly Chapter 13 fees after the bankruptcy filing are paid through your Chapter 13 Plan so they are included in your monthly Chapter 13 Plan payment. After you file your bankruptcy, there is no additional payment to us outside of your bankruptcy as it is all included in your Chapter 13 Plan payment. The court must approve any of our bills for fees as well.

No, you may not pay your bankruptcy attorney fees or costs by credit card.

Life After Bankruptcy

Yes, absolutely. In fact, you will be inundated with junk mail offering credit cards and offers to purchase a vehicle. After you have completed your bankruptcy, you are a good credit risk as you will have no, or virtually no debt. The bankruptcy will be on your credit report for 7 to 10 years, but that does not mean that you will not be able to do what you need to do. Savvy lenders understand that sometimes people have to file bankruptcy and that you are a good credit risk because you have handled your debt.

Unfortunately, no. So long as the bill is addressed only to your business, the creditor can send it. If it is addressed to and demands money from you personally, that is a problem, and you should contact me. Your business is closed. It has nothing. It is not going to pay. The bills are a waste of paper, but there is nothing we can do about it. If you have been discharged from your bankruptcy (and unless I have told you otherwise specifically), you are not personally responsible for these bills. You may ignore them.

Many times, even after a debt has been discharged or still part of an active bankruptcy the lender will sell the debt in bulk with others to a collection agency or debt buyer. They do not tell the new debt owner about the bankruptcy. Send a copy of your Order of Discharge to the new debt owner and see if that stops the efforts to collect. If not, please contact us, but send the Order first. If you receive a collection notice or a bill while you are still in your bankruptcy, send them the Notice of the Meeting of the Creditors that we provided to you as that will give the existing creditor or the new debt owner notice of your bankruptcy. Again, if you do that and it does not stop, contact us.

Useful Links for Bankruptcy

Business Information and Trade Names

Arizona Corporation Commission

This link will allow you to search the status and history of all LLCs and Corporations formed or registered in the State of Arizona. It will also list any trade names and Limited Partnerships registered in the State of Arizona, but their status and history must be searched on the Arizona Secretary of State website.

https://ecorp.azcc.gov/EntitySearch/Index

Arizona Secretary of State

This link will allow you to search the status and history of all trade names and Limited Partnerships (LPs, LLPs, and LLLPs) registered in the State of Arizona. It will also list any LLCs or Corporations formed or registered in the State of Arizona, but their status and history must be searched on the Arizona Corporation Commission website.

https://apps.azsos.gov/apps/tntp/se.html

Uniform Commercial Code Liens (UCC-1s)

The Arizona Secretary of State maintains the database for Uniform Commercial Code liens (UCC-1 Financing Statement) in the State of Arizona. Use this link to search for any liens against your business or yourself personally. It is important to know if any debts against your business are secured (there is a UCC-1) or not. Please provide us the information showing the existence of a UCC-1 or the report that no records were found.

https://apps.azsos.gov/apps/ucc/search/

United States Patent and Trademark Office

The link below will allow you to search any trademark that has been registered nationally.

https://tmsearch.uspto.gov/search/search-information

Classes Required for Bankruptcy

Credit Counseling Agencies

The link below is a list of all of the approved Credit Counseling Agencies that provide the (pre-bankruptcy filing) credit counseling class (1st class).

https://www.justice.gov/ust/eo/bapcpa/ccde/CC_Files/CC_Approved_Agencies_HTML/cc_arizona/cc_arizona.htm

Financial Management Counseling Agencies

The link below is a list of all of the approved Financial Management Counseling Agencies that provide the (post-bankruptcy filing) financial management counseling class (2nd class).

https://www.justice.gov/ust/eo/bapcpa/ccde/DE_Files/DE_Approved_Agencies_HTML/de_arizona/de_arizona.htm

Credit Reports

You can and should check your credit reports once a year. This link is the most accurate way to obtain your credit reports from all three credit reporting bureaus. It is free for one report from each credit reporting bureau annually. If you are filing a bankruptcy case with us, we will obtain this information, but you should monitor your credit reports once you have completed your bankruptcy.

https://www.AnnualCreditReport.com

Paying Chapter 13 Plan Payments Electronically

TFS Bill Pay is the only way to electronically make your payments to the Chapter 13 Trustee in Southern Arizona. Payments may be made manually or automatically, and you may split your Chapter 13 Plan payment into more than one payment. You can set it up to have a portion of your plan payment paid automatically each time you get paid. The Chapter 13 Trustee prefers Chapter 13 Plan payments be made electronically.

https://www.tfsbillpay.com/debtors

Means Test

Means Test Median Income by State for Qualification for Chapter 7 and calculation Disposable Monthly Income for Chapter 13 Plan payments

The U.S. Trustee’s Office which is part of the U.S. Department of Justice generates the income levels for the means test based on the U.S. Census data. They are updated twice a year. The link below will provide you with the means test numbers for your state.

https://www.justice.gov/ust/means-testing

IRS National Standards for Food, Clothing and Other Household Expenses

The means test includes IRS standard deductions for many items. You can use higher numbers if you have documentation that what you spend monthly is higher than the IRS standards.

https://www.irs.gov/businesses/small-businesses-self-employed/national-standards-food-clothing-and-other-items

Monitor Your Chapter 13 Bankruptcy Case

National Data Center

The NDC website allows you to monitor the status of your payments in your Chapter 13 Bankruptcy. We strongly suggest that you have an account and check it frequently.

https://www.ndc.org/debtor-registration

Real Property Public Records in Pima County, Arizona

Pima County Tax Assesor’s Office

The Pima County Assessor’s Office provides information on the ownership of real property. It is not definitive as it generally lists the party responsible for paying real property or other personal property taxes, but many times it is a good way to check to see what transfers have occurred for the property so you can verify full ownership with the Pima County Recorder.

https://www.asr.pima.gov/Parcel/Search

Pima County Recorder’s Office

The Pima County Recorder’s Office holds all the public records for ownership of real property and foreclosures in Pima County, Arizona. You can verify if you are on the title to any real property or if there are any foreclosures filed against your property on this website. To be sure you have done a thorough search, cross reference with the Pima County Assessor’s Office and use multiple versions of your name.

https://www.recorder.pima.gov/PublicSearch

Tax Information

Filing your federal Tax Returns for free

The IRS provides tax forms and information about filing your federal Tax Returns for free.

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

Filing your Arizona State Tax Returns for free

The Arizona Department of Revenue (ADOR) provides tax forms and information about filing your federal Tax Returns for free.

https://azdor.gov/forms/individual

Federal Tax refunds

You can check the status of your federal tax refund by using the IRS refund tracker below.

https://www.irs.gov/wheres-my-refund

Arizona State Tax refunds

You can check the status of your Arizona State tax refund by using the Arizona Department of Revenue’s refund tracker below.

https://azdor.gov/wheres-my-refund

Copies of federal Tax Returns and Tax Transcripts

We will need copies of your federal tax returns to file your bankruptcy case. If you do not have copies, you can go to the IRS website and request a Tax Transcript online. A Tax Transcript is an acceptable substitute for a copy of your Tax Return.

https://www.irs.gov/individuals/get-transcript

Tax Withholding Calculator

The IRS provides a tax withholding estimator so you can estimate the amount of taxes you should withhold to reduce your tax refund so you neither owe taxes, nor receive a high refund that will need to be turned over to your bankruptcy Trustee.

https://www.irs.gov/individuals/tax-withholding-estimator

Property Values

Home Values

The websites below will help you determine a value for your home or other real property so you can determine if you are over or under the exemption amount. If your home values at over the exemption amount, don’t panic, you will not lose your home, but you will need to pay for some of the non-exempt equity. We will discuss this thoroughly. We also need realistic valuations of your vehicle(s) to prepare your bankruptcy documents. If you think your house is over the exemption amount ($400,000), please provide a valuation from all 3 valuators below (if available).

https://www.zillow.com

https://www.HouseValues.com

https://www.trulia.com

Vehicle Values

The websites below will help you determine a value for your vehicle so you can determine if you are over or under the exemption amount. If your vehicle values for over the exemption amount, don’t panic, you will not lose your car, but you will need to pay for some of the non-exempt equity. We will discuss this thoroughly. We also need realistic valuations of your vehicle(s) to prepare your bankruptcy documents.

https://www.kbb.com

https://www.NadaGuides.com

https://www.CarQuotes.com

Furniture, Appliances, Business Equipment, Off-Road Toys, Etc.

If you have personal property, like a pool table, coin collection, camera, etc., that you need to value, find three offers on one of the websites below to establish the value of your property.

https://www.ebay.com/

https://craigslist.org/

Boat Values

The below website will help you determine a value for your boat so you can determine if you are over under the exemption amount. We will need a realistic valuation of your boat(s) to prepare your bankruptcy documents.

https://www.NADA.com

Zoom Information and Tutorials

Presenting Your Best Self on Zoom (1 hour)

If you are interested in learning some simple and cost-effective techniques to improve your appearance on Zoom for your Meeting of the Creditors or your job, this seminar is for you. It discusses the best lighting, sound and Internet options to optimize your Zoom experience. (1 hour 39 minutes, YouTube)

Presenting Your Best Self

Practice Joining a Zoom Meeting

This link will allow you to practice joining a Zoom meeting just like you will need to do for your Meeting of the Creditors. You can practice turning on and off your camera/sound and check to be sure that your background is not distracting.

https://zoom.us/test

Zoom Audio and Visual Basics

Learn how to mute and unmute, turn your video on or off, and test or switch your camera or microphone.(<3 minutes, YouTube)

Zoom Audio Visual Basics

Information on Best Practices for Zoom and your Meeting of the Creditors from the U.S. Trustee

This link will provide you with information from the U.S. Trustee on the best practices for your Meeting of the Creditors as well as information on how to get the Zoom app for your phone and computer. We have also provided the pdfs of the same documents on our website.

https://www.justice.gov/ust/moc

PDFs

Instructions for Joining a Zoom § 341(a) Meeting of Creditors

U.S. Trustee – June 2024

Download PDF

Best Practices for Attending Virtual § 341(a) Meetings of Creditors in Bankruptcy Cases

U.S. Trustee – June 2024

Download PDF

Acceptable Photo Identification and Social Security Number Documents

U.S. Trustee – June 2024

Download PDF

Instructions for Changing the Display Language in Zoom

U.S. Trustee – June 2024

Download PDF

Chapter 7 – Sample Questions for the Meeting of the Creditors

Download PDF

Chapter 13 – Sample Questions for the Meeting of the Creditors

Download PDF

Video Resources

Mortgage Modification Mediation (MMM) Program Available in all Chapters of Bankruptcy

Arizona Consumer Bankruptcy Counsel – July 28, 2023

Effective July 1, 2023, the Mortgage Modification Mediation (MMM) Program was expanded to help any person filing bankruptcy under any Chapter of bankruptcy. The MMM Program is designed to streamline the process for borrowers to request a loan modification with court oversight. (56 minutes, YouTube)

Mortgage Modification Mediation Program is Now Available in all Chapters

Talk Softly and Carry a Big Stick: Options for Businesses in Financial Distress

(Arizona Consumer Bankruptcy Counsel Seminar – May 3, 2024)

This one-hour video describes all the non-bankruptcy tools available for businesses in financial distress. There are many options available to businesses who are struggling so that may either cleanly and calmly shut down or reorganize to become financially healthy. (1 hour and 19 minutes, YouTube)

Talk Softly And Carry A Big Stick
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The information provided in this website is meant only as a general description of the current laws as of the date of the writing. It is not meant to be an exhaustive discussion of all the nuances of the law and is intended to be only an overview. Many issues may appear simpler than they are, and an individual should always contact an attorney to obtain a complete, accurate interpretation of the law given the individual's particular circumstances. Thompson Law Group, P.C. makes no representations as to how the law would affect a particular situation and intends only to illustrate areas of concern and give general information.