AMR to File for Bankruptcy

Posted on June 30, 2012 by Staff Writer

AMR. Corp. (AAMRQ), parent to the third-largest U.S. airline American Airlines announced today that it would seek to extend its right to file a bankruptcy reorganization plan by three months. Efforts to secure $315 million in cost concessions have been slowed by a pilot’s union vote on the matter. The extension request may come as soon as next week according to Bloomberg BusinessWeek.

Union leaders agreed to let members vote on the cost concessions this week, but balloting will not end until Aug. 8. The union is required to take six weeks to brief members before voting on the contract. That timeline was not considered by AMR in its original petition, or in New York Bankruptcy Judge Sean Lane’s ruling that AMR void existing contracts by today.

The extension of the deadline from Sept. 28 to Dec. 27 means the company will likely miss AMR Chief Executive Officer Tom Horton’s goal of exiting bankruptcy by 2012. AMR’s plan calls for nearly half of the proposed $2 billion in annual spending cuts to come from labor costs. Judge Sean Lane has delayed ruling on whether American can reject contracts of stock clerks, flight attendants and mechanics until August 15, after the pilots vote.

The extension request will also delay a possible takeover by US Airways. While a formal merger request to AMR creditors has not yet been made, the Tempe, Arizona based airline has already secured agreements with all of American Airline’s unions that would take affect if the airlines combined. The company has also been building support for its plan, which cannot be offered until AMR’s exclusivity rights end, with AMR’s creditors.

If you or your company is considering filing for bankruptcy, you need the best legal representation possible. Contact a caring and qualified Arizona bankruptcy attorney for a consultation. They will help guide you through the legal process and get you started on the path to financial recovery.

How Bankruptcy Affects Your Credit Score

Posted on June 29, 2012 by Staff Writer

In most cases, the filing of a Bankruptcy and the eventual Discharge actually helps improve a persons credit score.

If a person has a negative credit history, unless the negative effects ogf the history are removed, the credit score remains weak.

The filing of a Bankruptcy can remove the past due debts and “clean-up” the old credit history by eliminatng those debts that could not be paid. Once the debts are eliminated through what is called the “Discharge”, then one can start to rebuild their credit. If the past due debts are not eliminated and remain on the credi report then those past due debts continue to result in a weak credit score and it is difficult to rebuild or strenghten the credit score.

If you are having difficulty making your debt payments, consult an attorney. You just might learn that you could improve your credit score much more quickly if you elected to file a Bankruptcy because your “fresh start” will allow you to begin rebuilding a positive credit score.

Can an individual file for Chapter 11 Bankruptcy?

Posted on June 29, 2012 by Staff Writer

Chapter 11 Bankruptcy, also known as a reorganization, is often used by corporations to stay in business while mapping out a plan to pay back creditors. But this chapter is not only used by large companies to file bankruptcy. Individuals can also file under Chapter 11.

If you are a partnership or a sole proprietor, you have the ability to file bankruptcy under Chapter 11. In some cases, qualified creditors may file Chapter 11 against you, in what is called an involuntary filing. While a corporation exists as separate from its stockholders and a stockholder’s personal property is not at risk in bankruptcy, things aren’t as clean and neat for partnerships or sole proprietorships.

Even if a sole proprietor keeps his or her business finances separate from personal ones, many times it’s almost impossible to keep the business apart from the individual. Legally speaking, the business does not have an identity separate from the individual who runs it, which puts the person’s personal assets at risk during a voluntary or involuntary filing of Chapter 11. All assets may be used in order to pay the person’s debts.

If you are in a partnership, and your partner is about to file or will have a Chapter 11 bankruptcy filed against him or her, you must take steps immediately to file for bankruptcy protection, or your assets will be in danger. As a partner, your personal assets may be used to pay off creditors.

If you are a sole proprietor or partner who is facing bankruptcy, you owe it to yourself and your business to get the best legal representation possible. Contact one of our bankruptcy lawyers today for a consultation regarding your case.

The Rich and Well to Do and Filing Bankruptcy

Posted on June 27, 2012 by Staff Writer

The problems associated with the long down turn in the economy have affected people of all income levels and all walks of life. Debt levels have increased as people try to survive in difficult financial situations and navigate through unexpected circumstances.

The most commonly filed chapter of bankruptcy is Chapter 7 Bankruptcy, which is often referred to as “liquidation” bankruptcy. Chapter 7 deals with common consumer debts like credit cards, medical bills, unsecured loans, etc. A filer must qualify for Chapter 7 Bankruptcy based on her income. Chapter 7 does not depend on the amount of unsecured debt a filer (debtor) has accumulated, but rather, whether she has the income to repay portion of the debt. Chapter 7 presumes that the filer does not have the income to repay any of the dischargeable debts. Therefore, if the debts meet the Bankruptcy code’s criteria, they are discharged in their entirety.

Debtors who need the protection of bankruptcy and do not qualify for Chapter 7 relief may be able to protect themselves against creditor actions by filing Chapter 13 Bankruptcy. Debtors with a higher income may still be able to stop foreclosures, repossessions, garnishments, judgments, and unwanted creditor collection efforts by filing Chapter 13.

Chapter 13 Bankruptcy is commonly referred to as “reorganization” bankruptcy. Instead of discharging certain debts in their entirety—as is accomplished in Chapter 7—the Bankruptcy Court looks at the debtor’s income in relation to her allowable expenses and calculates a repayment plan. Chapter 13 plans last from 3 to 5 years and require the debtor to make a monthly payment to the Bankruptcy Trustee. The trustee reorganizes the debts and pays them off (in full or in part) according to the approved Chapter 13 plan.

Chapter 13 plans are designed to allow the debtor to pay back what she can afford to repay, while still having the necessary funds to cover her reasonable living expenses. Completion of the plan is normally followed by a discharge of the remaining unsecured debts. In essence, the Court determines at the beginning of the bankruptcy how much the debtor must pay back over the course of the plan before she is eligible for a discharge of the remainder. Most debtors are not required to repay all of their debts, but will likely discharge a healthy amount of their debt upon satisfaction of the repayment terms.

Arizona Bankruptcy Numbers Showing Signs of Stabilization Despite Filing Increases

Posted on June 26, 2012 by Staff Writer

The number of people and businesses seeking bankruptcy relief in metro Phoenix rose to 2,080 in May from 1,999 in April, according to U.S. Bankruptcy Court for the District of Arizona. It was the third increase in the past four months.

The 69,000 jobs created nationally in May was the lowest number in a year, and other signs indicate a slowdown, including a small decline in some forward-looking U.S. economic indicators. Job losses and chronic underemployment are key factors that cause debt-laden people to file for bankruptcy.

A possible rise in metro Phoenix foreclosures could point to more bankruptcy filings later in the year. Still, the number of new bankruptcies remains well below this time in 2010 and 2011, suggesting that filings are stabilizing. Nearly 16 percent fewer bankruptcies were filed in May 2012 than in May 2011, and Valley filings have dropped year-over-year for 16 months.

Statewide filings mirrored the metro Phoenix trend. Arizona bankruptcies rose to 2,856 in May from 2,703 in April but declined nearly 14 percent compared with May 2011.

Chapter 7 filings, which offer a fresh financial start after a person’s non-exempt assets are used to pay creditors, accounted for more than 85 percent of metro Phoenix filings in May, in keeping with another well-established trend. Chapter 13 debt-reorganization plans accounted for most of the rest.

When filing for bankruptcy in Arizona, it is critical to seek guidance from an experienced and caring Arizona bankruptcy attorney who can guide you through the process and give personalized advice on your Arizona bankruptcy case.

The Bankruptcy Process

Posted on June 25, 2012 by Staff Writer

If you are considering filing a bankruptcy, the first thing you should do is contact an attorney so that you can obtain the proper information pertaining to your specific needs.

Don’t be misled by people who, with the best intentions, give you advice as to how the bankruptcy process works and what your rights are. There is a lot of false and misinformation out there.

Generally, the Bankruptcy Process involves: 1) The filing of a Bankruptcy Petition; 2) A hearing in which the peititioner testifies under oath regarding the substance of what was in the petition; 3) A discharge of certain debts; and 4) The closing of the Bankruptcy Case.

Under the new 2005 Bankruptcy Code, all petitioners are required to obtain 2 counseling certificates. One before a petition is filed and one after the petition is filed. The counseling is done through the internet or by telephone and it takes approximately 45 minutes to an hour to complete the work needed to obtain each certificate. It is NOT A TEST but rather general and helpful information that allows individuals to learn about budgets and basic financial matters.

There are two main Consumer Chapters of Bankruptcy:

1) The Chapter 7, which is often referred to as a liquidation of debts, a fresh start or clean start, and

2) The Chapter 13 Bankruptcy which is a repayment of some of the debts through a “Chapter 13 Plan”. The Chapter 13 Plan usually lasts from 3 to 5 years depending on the debts and the amount of income available for the Plan.

Financial Distress Can Happen To Anyone:

Posted on June 23, 2012 by Staff Writer

Plain and simple, no one is immune from financial distress. Even the best of us have had to deal with a weak: economy, job market, housing market, stock market etc. Most people are a victim of circumstance; you invested your savings in the previously mentioned markets and they have all since crashed. This is through no fault of your own and you should not feel alone in your financial problems.

Bankruptcy can be an option out of your financial distress. Millionaires, athletes, entertainers, politicians, artists and industry moguls have all sought out and received financial relief through bankruptcy. The list includes: Abraham Lincoln, Ulysses S. Grant, Mike Tyson, Michael Vick, Johnny Unitas, Oscar Wilde, Mark Twain (Samuel Clemons), Burt Reynolds, Anna-Nicole Smith, Ted Nugent, Marvin Gaye, Wayne Newton, Tom Petty, Larry King, Henry Ford, Walt Disney, Donald Trump, and the list goes on and on… Remember that all these high profile people, some who could be considered well off, all filed for bankruptcy protection. If someone that well off can get into financial trouble it can happen to anyone. These notable people took advantage of their constitutional right to use bankruptcy to address their financial problems and were given a chance to get a fresh financial start and get their financial affairs back on track.

Former Arizona Pitcher Schilling Company Files for Bankruptcy Protection

Posted on June 23, 2012 by Staff Writer

Former Arizona Diamondbacks pitcher Curt Schilling’s troubled video gaming company, lured to Rhode Island with a $75 million state loan guarantee two years ago, filed for bankruptcy protection on Thursday, and federal authorities have begun an investigation into it.

The filing by Providence-based 38 Studios, which laid off its staff last month, was made in U.S. Bankruptcy Court in Delaware, where the company is incorporated as a limited liability corporation. Its sister operation in Baltimore also filed for bankruptcy.

The Rhode Island company owes $150.7 million and listed its assets at $21.7 million, according to court filings. 38 Studios Baltimore owes more than $121.4 million and has assets of more than $335,000, the filings show.

The company is seeking liquidation. In both filings, the firm lists its biggest liability as $115.9 million in debt from bonds backed by the state, interest on the bonds and fees to Rhode Island.

Schilling, who also pitched for Baltimore, Houston, Philadelphia and Boston, and won the World Series three times, owns 83 percent of the company, according to the filings.

Jim Martin, a spokesman for the U.S. attorney in Rhode Island, said his office had been in contact with the FBI and state police but didn’t say exactly what it’s investigating.

38 Studios was lured to Providence from Massachusetts in 2010 when Rhode Island officials offered a $75 million loan guarantee they said would bring hundreds of jobs and millions of dollars in tax revenue. Gov. Lincoln Chafee, who vigorously opposed the loan guarantee in 2010 on the campaign trail, said he would do everything he could to salvage at least some of the state’s investment. “If there’s a penny that we can get, or a nickel or a dime, we’ll get it,” he said.

Can Members of the Military file for Bankruptcy Protection

Posted on June 22, 2012 by Staff Writer

The short answer is, absolutely military personnel can file for bankruptcy. Military members are required to maintain their finances and stay out of bad debt. Active duty members have the same rights as civilians when it comes to bankruptcy. They can file for protection from creditors should their finances reach a point where bankruptcy seems to be the only way to keep from losing their homes or any other possessions. Active duty members who are stationed overseas may need to get a power of attorney for someone to file on their behalf at their stateside location or jurisdiction.

However, filing for bankruptcy can be harmful to an active duty member’s career. When members require access to classified information, they are required to fill out a background history that includes questions about their finances. Specifically, questions will ask if a member has ever been or is currently over 90 days and/or 180 days delinquent on accounts. There are also questions that ask about wage garnishment and if any judgments have been made against the member. Federally contracted investigators perform credit checks and compare the information members have listed with the information they find. They report the information to a government agency that will deem if a military member should have access to classified information or not. If an active duty member shows that he has filed for bankruptcy, it could lead to a suspension of classified access until the matters are resolved. If a member has filed for bankruptcy and did not report it on the original investigation, that will most likely lead to an immediate suspension of classified access with a much more difficult path to getting reinstatement.

New Guidelines for Chapter 13 Bankruptcies in Arizona

Posted on June 18, 2012 by Staff Writer

One June 1 2012, new guidelines for “approving flat fee arrangements as part of the Chapter 13 plan confirmation process” went into effect in the state of Arizona, according to the District of Arizona United States Bankruptcy Court. A Chapter 13 bankruptcy, according to the Federal Bankruptcy Court, is one in which an adjustment of debts “of an individual with regular income” are allowed to be readjusted, which “allows a debtor to keep property and pay debts over time, usually three to five years.”

The new guidelines put a cap on the maximum fee that a bankruptcy attorney in Arizona can charge at $4,500, but, according to the new ruling, “if such fee is not sufficient to fairly compensate counsel for the legal services rendered in the case, the attorney may apply for additional fees.” It’s good news for consumers, as the court will not approve additional fees unless a detailed plan is issued. This can relieve already financially strapped clients from hidden costs, especially those that often cause the financially insolvent to be wary of hiring an attorney to begin with.

The new guidelines also dictate specific attorney responsibilities that must be fulfilled by any bankruptcy attorney hired in the state of Arizona, including but not limited to:

Review of financial documents and client consultation
Representation at a 341 Meeting
Review and analysis of creditor claims, including attendance at related hearings
Preparation / filing of affidavit of no income regarding tax claims
Preparing / filing of bankruptcy notice in State Court actions

Arizona residents should note that the new guidelines apply specifically to Chapter 13 filings, not the more common Chapter 7. If you or someone you know is considering a Chapter 13 bankruptcy, contact a dedicated Arizona bankruptcy lawyer today.

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