Is Your Bank Taking Money Directly from Your Account?

Posted on August 11, 2013 by Staff Writer

Many people don’t realize that if you are in default on a bank loan (for a mortgage, car loan, personal loan, etc.), the bank has the right to take those funds from any accounts you may have at that bank – and without any notice they are doing so. This is known as “right to set off”.

According to the law, when you deposit money into a bank account, the money becomes the property of the bank. This now makes you one of the bank’s “creditors” for the amount of money of the deposit. The deposit becomes essentially the bank’s promise to pay you. When you then borrow money from the same bank, you have now developed a “mutual debtor-creditor” relationship and that’s what gives the bank the right to withdraw money from your account should you default on the money you owe them.

The right to set off only applies to banks you owe money to. For example, if you have a savings account at Bank A and defaulted on a car loan you have with Bank B, Bank B doesn’t have the right to set off your account at Bank A.

There are also other restrictions as well. The account the bank is attempting to withdraw from and the loan that is owed must be the same customer. And the loan and the bank account must be in the same capacity. In other words, if you have an individual car loan with a bank, they cannot withdraw from an account you own jointly with another individual.

If you have accounts with a banking institution where you also have loans, you may want to consider ways to protect yourself from the right to set off. Keep low balances in your accounts. Open up a bank account with a bank which you don’t have debt with. It’s particularly important to research just which banks you owe money to, especially with items such as credit cards, because it’s not always obvious which bank actually owns the “loan”.

If you have had funds seized by your financial institution, consult with an experienced Arizona bankruptcy attorney to contest the seizure and try to get your funds back.

How Filing Bankruptcy Will Affect Child Support

Posted on July 16, 2013 by Staff Writer

There are various reasons why a person may file bankruptcy such as illness, loss of a job, or a divorce, but getting out of paying child support should not be a reason. When a person files bankruptcy, if qualified, certain debts are forgiven. However, with child support this obligation cannot be forgiven. That means that although a person can file bankruptcy if he or she has a court order to pay child support, that obligation will not be dismissed because of the bankruptcy.

Likewise, if you receive child support and the non-custodial parent files bankruptcy, he or she will still be required to pay child support. However, having other debts forgiven may make meeting the child support obligation easier for non-custodial parents.

Although child support is never forgiven, Filing chapter 13 may provide a temporary stay, which means that collection efforts must cease during the process. In addition, filing bankruptcy could provide necessary relief if you are overcome by other debt. If you qualify, Chapter 7 would forgive the debt, whereas a chapter 13 will offer a reschedule of lower payments to your creditors. Once you have filed, your creditors will be notified and must not contact you during the process. Reestablishing credit after filing bankruptcy is also possible.

The process for filing bankruptcy can be complicated. Some people may find the process intimidating and therefore may never consider it. For some Arizona residents and others, filing is their way out from under a mountain of debt. If you or a loved one is considering bankruptcy as a means to a fresh start or if you have questions as to how doing so could affect child support and outstanding debts it may be time to contact an experienced bankruptcy lawyer today. The consultation is free.

Image courtesy of freedigitalphotos.net

Why Does Bankruptcy Exist?

Posted on April 5, 2013 by Staff Writer

At its core, consumer bankruptcy exists to give people a fresh start and a second chance. Since the “great recession” began several years ago millions of people in this country have filed bankruptcy. People have found themselves trapped in a cycle of endless debt—struggling just to make their minimum payments each month. Often through illness, divorce, death, job loss, or poor choices people find themselves hounded by unrelenting creditors.

These creditors can garnish paychecks and levy bank accounts. In most states a creditor with a judgment can garnish 25% of a person’s gross paycheck. That’s approximately 40% of a person’s take-home-pay! Most people struggle to live off of 100% of their paycheck let alone only 60% of it. Additionally, these creditors can also “levy” bank accounts by seizing the available funds.

A bankruptcy filing gives someone a fresh start. From the minute a bankruptcy is filed it becomes illegal for creditors to ever contact a debtor attempting to collect on a debt. The automatic stay prevents creditors from garnishing, levying, or liening the bankruptcy filer’s property. The unrelenting stress is gone and bankruptcy filer can begin their new financial life. Credit ratings slowly rise, credit becomes available, and it will eventually be as if the bankruptcy had never happened.

Get the fresh start and second chance you deserve by contacting one of our skilled bankruptcy attorneys today!

What Happens if A Creditor Files a Relief From the Automatic Stay?

Posted on March 24, 2013 by Staff Writer

One of the most important protections a debtor automatically receives upon filing for bankruptcy is the “automatic stay.” The automatic stay is imposed upon all of a debtor’s creditors preventing those creditors from actively collecting on a debt. The stay binds all creditors, not just unsecured creditors. Upon filing for bankruptcy protection, a creditor can no longer harass, garnish wages, levy bank accounts, foreclose on a property, repossess a vehicle, or even pursue an eviction. The stay remains in effect while the bankruptcy is pending but is lifted once the bankruptcy case is discharged. At that point, the discharge acts as an injunction from your creditors from actively collecting on those debts that were discharged in the bankruptcy.

However, the stay can be lifted during the bankruptcy upon motion by a creditor. Motions to lift the stay are not as common as one would think. When a creditor files a motion to lift the automatic stay, the debtor is entitled to notice and a hearing. The burden is on the creditor to convince the bankruptcy court that there is a very good reason to lift the stay, and the court is predisposed to continue the bankruptcy protection. For instance, the court will not lift the stay when an unsecured debt will be included in the debtor’s discharge.

Generally, secured creditors are the most common type of creditor that would seek to lift the stay. (A “secured debt” is a debt that is secured to a form of collateral, i.e. a mortgage or car loan.) Secured creditors often file motions to lift the stay when the debtor is not making payments. Since property used as collateral must be paid for or returned during bankruptcy, the court will normally lift the stay unless the debtor can bring the payments current or show another good reason to deny the motion (for example, the debtor will use one of the available methods for dealing with secured debts in Chapter 7 bankruptcy, or the debtor has provided for payment of the debt in a Chapter 13 repayment plan). For example, if you are behind on your mortgage when you file for Chapter 7 bankruptcy, your mortgage lender is likely to ask the court to lift the stay so it can continue with foreclosure.

A landlord may also seek relief in order to evict for non-payment of rent. A bankruptcy debtor’s rent obligation is divided on the bankruptcy filing date into pre-bankruptcy and post-bankruptcy debts. Pre-bankruptcy rents are dischargeable, and post-bankruptcy rents are not dischargeable and not subject to the automatic stay. This means that while the automatic stay would prohibit the landlord from collecting on unpaid pre-bankruptcy rent, the landlord may evict if post-bankruptcy rents are not paid.

Reform of Complicated Mortgage Forms to Help Potential Homeowners

Posted on February 28, 2013 by Staff Writer

On June 20, 2012 the Consumer Financial Protection Bureau (CFPB) testified before the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity to highlight CFPB solutions to the problems with the current federal law regarding consumer mortgages. In a presentation, CFPB Deputy Director Raj Date explained that the two forms consumers must agree to under federal law have overlapping information and inconsistent language. “Not surprisingly,” he said, “consumers often find the forms to be confusing. It is also not surprising that lenders and settlement agents find them burdensome to provide and explain.”

The first of these developed under the Truth in Lending Act (TILA), and the other by the Real Estate Settlement Procedures Act. (RESPA) According to Date, these forms did not properly detail how mortgages worked with consumers. “For example,” he said, “many consumers select a loan based on their ability to afford the mortgage payments. But some consumers experienced “payment shock” because they did not understand that they payments could include unaffordable amounts a few years or even months after closing.” The Dodd-Frank Act transferred authority of the TILA and RESPA to the CFPB in 2011.

This ultimately means that the convoluted TILA and RESPA will be replaced by the CFPB with easier-to-understand forms “that will make the mortgage process easier for consumers and industry.”

Research to come up with the new forms include but is not limited to:

Meeting with consumer advocates, other banking agencies, and credit settlement agents to better understand the issues that consumers and the industry face
Launched the “Know Before You Owe” project—an informative drive on the CFPB website to share prototypes of the disclosure funds and a place for consumer feedback.
A Small Business Review Panel to “gather information from representatives of small lenders, mortgage brokers, settlement agents, and not-for-profit organizations about the costs of the proposals under consideration and potentially less burdensome alternatives.”

While these new procedures won’t help the one in 17 Arizona homeowners who foreclosed in 2010—and those who faced subsequent bankruptcy because of it—it is good new for Arizona residents as the state recovers from its particularly bad housing crash. If you or someone you know does, however need bankruptcy assistance, contact a dedicated Arizona bankruptcy attorney today.

Image courtesy of FreeDigitalPhotos.net

When will my Creditors Stop Calling Me?

Posted on February 22, 2013 by Staff Writer

There are two different events which will stop creditor calls. First, when you hire our law firm you will be able to refer your creditors to us. Once you are represented by a law firm, creditors are no longer to contact you directly but are to communicate to you through your attorney.

We recommend our clients tell their creditors: “I am filing for bankruptcy. I have an attorney and he told me not to talk to you. If you have any questions please call his law office” and then just hang up the phone.

In most instances your creditors really will call our law firm and verify that you are a client. This will stop 99% of the creditor calls. However, pay-day and title loan companies are notorious for continuing the calls until the bankruptcy is actually filed.

Second, once your bankruptcy is filed it becomes illegal for creditors to continue contacting you in an attempt to collect on the debt. Because as soon as a bankruptcy is filed the Automatic Stay of Protection goes into effect. This Automatic Stay of Protection prevents creditors from making any collector efforts. Creditors will be prevented from contacting you in any way, they will not be able to mail, email, or call.

So if you would like to learn how to stop the harassing phone calls, make an appointment to meet with one of our attorneys.

What is an Adversary Proceeding?

Posted on February 20, 2013 by Staff Writer

An Adversary proceeding is a lawsuit that takes place within a bankruptcy. The adversary proceeding begins by when a complaint is filed with the bankruptcy court. A “trial” then takes place within the context of the bankruptcy. Typically an adversary proceeding is filed by a creditor; however, your trustee may also file one on behalf of the bankruptcy estate.

When a creditor files an adversary proceeding, it is typically because the creditor believes that a specific debt owed to them should not be discharged in the bankruptcy. The creditor may argue that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.

Additionally, a trustee may file an adversary proceeding if he or she believes that you intentionally tried to hide assets. The trustee would then liquidate any non-exempt assets to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to undo a transfer of real property. The U.S. Trustee may file an adversarial proceeding to try and force a debtor to move from Chapter 7 to Chapter 13 if he or she believes that the filing of the bankruptcy petition was done in bad faith.

Adversary proceedings are very rare; they are filed in less than 1% of all bankruptcy filings. So unless you are trying to commit some type of fraud the chances of an adversary proceeding being filed in your case are very small.

When I File for Bankruptcy do you send notice to my creditors?

Posted on February 17, 2013 by Staff Writer

Actually, when you file for bankruptcy neither you nor your attorney send the Notice of Bankruptcy to your creditors. The bankruptcy court itself is the one that sends notice of your bankruptcy filing to all of your creditors. A “Master Mailing Matrix” will be created from the creditors you have listed in your Schedules. It is this Mailing Matrix that the Clerk of the bankruptcy court uses to notify your creditors. A hard copy of the notice of bankruptcy is mailed from the Bankruptcy Noticing Center in Virginia to each of your creditors.

Because the Mailing Matrix is made from the creditors listed in your schedules it is important that all creditors are listed. Thoroughly review the credit reports your attorney pulls and make sure all of your creditors are listed. If you know you owe money to a creditor that is not listed on your creditor report make sure you point this out to your attorney so that individual creditor is added to your schedules.

If a creditor is left off the Schedules they won’t be listed in the mailing matrix. If a creditor is not listed in the mailing matrix then they won’t get notice of your bankruptcy. If the creditor doesn’t get notice of your bankruptcy they won’t know that they discontinue their collection efforts. Let our Arizona bankruptcy attorneys help you with your bankruptcy.

Will Any Creditors Appear at my 341 Hearing?

Posted on February 15, 2013 by Staff Writer

It is highly unlikely that any creditors will appear at your 341 hearing. Though creditors are given the opportunity to appear and ask questions they rarely do so.

Approximately 30 to 45 days after your bankruptcy case is filed, you will need to attend a 341 hearing. The hearing gives creditors an opportunity to ask questions of you with regard to the information listed in your petition and schedules. However, in most cases, only you, your attorney, and the bankruptcy trustee actually participate in the hearing. I would estimate that in less than one percent of 341 hearings does a creditor actually appear.

What happens if a creditor does appear?

Once your trustee is through questioning you, he or she will ask if there are any creditors present who would like to question the debtor(s). If there are any creditors present they will come and sit at a specially designated table. Once they have introduced themselves and who they represent they will begin their questioning.

Usually the creditor will ask you specific questions about the paperwork that was filed in your case. For instance, they might ask how you came to the value of a particular asset or why an asset they believe you still own was not listed. This is one more reason why you want an experienced bankruptcy in your corner when going through the bankruptcy process.

Why would a creditor appear?

Creditors usually appear in anticipation of filing an Adversary Proceeding. An adversary proceeding is a form of lawsuit that transpires within a bankruptcy. Creditors typically file an adversary proceeding when they want to convince the bankruptcy court that the debt you owe should still be paid even though you’ve filed bankruptcy. So if a creditor appears at your 341 hearing there is a good chance that they will file an Adversary Proceeding against you.

Why do creditors rarely appear?

First, it’s very expensive for a creditor to hire a bankruptcy attorney to represent their interests in your bankruptcy. Often the attorneys that represent creditors charge $400 – $500 an hour. Because it is so expensive for the creditors to hire an attorney they rarely do so unless the argument is over a lot of money and they feel they have a good chance of winning an Adversary Proceeding. The whole purpose of bankruptcy is to give debtors a fresh start and so courts are not inclined to require repayment of a debt by a bankruptcy filer except in extraordinary cases.

Secondly, your creditors must have a legal argument for why you should have to repay them. For instance, American Express can’t argue—“this person owes us money and we want it back”—that’s not a legal argument. Typically, creditors don’t have a legal reason for why you should repay them and therefore they don’t show to your 341 hearing.

As you can see bankruptcy is a very complex area of law and having an attorney in your corner can make the whole process much more enjoyable.

Am I allowed to keep any credit cards I had prior to filing bankruptcy?

Posted on February 11, 2013 by Staff Writer

Most likely you will not be able to keep any of your credit cards after filing bankruptcy. If a credit card has a balance then it must be listed in the bankruptcy. The credit card company will then be notified that you filed for bankruptcy and close down your account. Now, if the balance on a specific credit card is zero then they do not have to be listed in the bankruptcy and won’t be notified when you’ve filed. However, if they check your credit at a later date and see the bankruptcy then they will most likely close out the card.

As soon as a bankruptcy is filed an Automatic Stay of Protection is created. This Automatic Stay prevents creditors from ever attempting to collect from you again. The penalties for violating the Automatic Stay are very harsh and this is why your credit card company will close out your account—they don’t want to be accused of attempting to collect money from you after filing bankruptcy.

Don’t worry; you will be able to get another credit card after filing for bankruptcy. Most clients report that they are inundated with credit offers soon after filing.