The following are based upon actual bankruptcy questions we have received and provided answers to:

1. I am currently storing my grown son's tools in my house. My son has asked me to hold the tools for him while he is away. In my bankruptcy, do I have to exempt or claim these tools?

You do not have to worry about exempting property that is not yours. But, you do have to claim and exempt anything that you have a “legal” or “equitable” interest in and you/your spouse’s interests in community property that are under your sole, equal, or joint management and control. All this property becomes property of your bankruptcy estate. By “equitable,” I mean that you may not be the official owner but you have a real right to the property, such as your being a beneficiary of a trust or life tenant.

While your son’s property does not need to be exempted, the property should still be listed in item 14 of your “Statement of Financial Affairs” as property you’re holding for another person. This is because your son’s property is in your home and under your control until he takes it back. For those who are not familiar with the bankruptcy paperwork the gets filed with the bankruptcy court, your “Statement of Financial Affairs” is a required document that you must file in your bankruptcy within 14 days of filing your bankruptcy petition (or can also be filed with the petition).

For more information on what is property of your bankruptcy, see 11 USC § 541.

For information on what you have to file and do in a bankruptcy, see 11 USC § 521 and Rule 1007 of the Federal Rules of Bankruptcy Procedure.

2. In a chapter 7 bankruptcy, can I exempt money added to an IRA account in a lump sum after age 59 1/2 but before I file for bankruptcy? I have $5,000.00 that I need to exempt and want to protect it by putting in my IRA.

Adding money to an IRA account close to the filing of your bankruptcy could be considered to be a fraudulent transfer under 11 USC § 548. Speak to your bankruptcy attorney before taking any action, as there may be a better way to protect the money without have to put all of it in an IRA. To give you a general idea of what kind of exemption protection there is for IRAs/pensions (assuming your contribution is not considered to be fraudulent transfer):

First, you need to figure out whether you are using the exemptions of your state or federal exemptions. For more information on which exemptions to use, see my guide on what is protected from creditors at http://www.olgazlotniklaw.com/bankruptcy-guide-what-is-protected-from-creditors.htm

If you are using state exemptions, determine whether there is an exemption for IRAs/pensions. Sometimes state exemptions for IRAs will have a limitation on how much you can contribute to the IRA within a certain period of time before the bankruptcy. For example, under Arizona’s exemption law, section 33-1126(B) of the Arizona Revised Statutes, contributions to IRAs made within 120 days before the filing of the bankruptcy are not exempt. If your state’s exemption law on IRAs is similar to Arizona’s, then your contribution may not be protected in the bankruptcy (depending on the day of the contribution and its proximity to the filing date of your bankruptcy). If you are relying on the exemption laws of your state and your state’s IRA exemption does not protect you, you will probably still be able to exempt the contributions/IRA under a special federal exemption for IRAs/401ks under 11 USC § 522(b)(3)(C), which allows you to protect retirement funds that are exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the IRS Code of 1986 (you will have to check to make sure your IRA meets this criteria – most types of pensions/retirement accounts are covered). Unlike Arizona’s exemption for IRAs, this exemption does not have a limit on how much of your contribution can be protected prior to the bankruptcy. But, to ensure protection, your contribution to the IRA should be within the yearly IRA limits (in 2012, you could contribute up to $5,000.00, assuming you earned at least $5,000.00 in income for the year and up to $6,000.00 if 50 or older by the end of the year, assuming you earned at least $6,000.00 in income for the year).

If instead of state exemptions you are using the federal exemptions under 11 USC § 522(d), then there is protection for IRAs under 11 USC § 522(d)(12), with no limitation on how much can be contributed prior to the bankruptcy (to qualify, retirement funds must be exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the IRS Code of 1986). Again, the contribution should be within the yearly IRA limits (see above). Because there are a lot of moving parts to this complex issue and to ensure you do not lose this money in your bankruptcy, it is best to seek legal advice before moving forward in this matter.

To learn more about Arizona’s exemptions, see http://www.azb.uscourts.gov/documents/arizona_exemptions.pdf

For more information on the federal exemptions, see 11 USC § 522(d)(1).

3. I filed for chapter 7 bankruptcy without my husband. Do I have to list my husband's vehicles in Schedules B and C and can we keep the vehicles? The vehicles are titled in my husband's name.

In Schedule B, you must list all property that you have a “legal” or “equitable” interest in and you/your spouse’s interests in community property that are under your sole, equal, or joint management and control. When in doubt, it is best to disclose/list the property. If the vehicles were your husband’s separate property prior to the marriage (i.e. he owned them prior to the marriage), then you may be able to argue that the vehicles are not property of your bankruptcy estate at all and therefore, should be excluded from your bankruptcy. Either way, you should still list the vehicles in Schedule B, indicate in Schedule B that the vehicles are excluded from the bankruptcy estate (if you are making this argument), and to be extra safe, try to exempt the vehicles in Schedule C, if possible. You will be able to keep the vehicles if they are not property of your bankruptcy and/or they are exempt. But remember, if the vehicles do not have any equity, there is nothing to exempt and you will probably be just fine.

For more information on is property of your bankruptcy, see 11 USC § 541.

To learn more about Arizona’s exemptions, see http://www.azb.uscourts.gov/documents/arizona_exemptions.pdf

For more information on the federal exemptions, see 11 USC § 522(d)(1).

4. I filed for a chapter 7 bankruptcy in Arizona and have a 50% ownership interest in my home. Is it exempt and under what law?

Assuming you were domiciled in Arizona during the 730 days prior to the filing date of the bankruptcy, you would use the exemption laws of Arizona. Because the exemption laws of Arizona prohibit you from using the federal bankruptcy exemptions, you do not have a choice of using either the federal bankruptcy exemptions under 11 USC § 522(d) or Arizona’s exemptions. You must use Arizona’s exemptions. Under section 33-1101 of the Arizona Revised Statutes or Arizona’s homestead exemption, you get to exempt $150,000.00 worth of equity in the home so long as you reside in the home. So if your home has $50,000.00 worth of equity and you own a 50% share, your $25,000.00 equity in the residence would be fully protected by your $150,000.00 exemption.

It is not clear from your question whether your home has any equity. When we talk about exemptions, we are really talking about exempting/protecting the equity in your home (value minus mortgage balance). But even if your home has no equity right now, it is better to use an exemption with regard to the home just in case it gains equity.

To learn more about Arizona’s exemptions, see http://www.azb.uscourts.gov/documents/arizona_exemptions.pdf

For more information on the federal exemptions, see 11 USC § 522(d)(1).

5. I recently filed a chapter 7 bankruptcy in March, 2012 in Arizona. I received paperwork from my bankruptcy trustee saying that I had to give the trustee my tax refund. Can the trustee take my refund and how much of it can he take?

Assuming you lived in the Arizona the two years before filing the bankruptcy and are using Arizona’s exemptions, the trustee can take a portion of your refund. Arizona does not have an exemption for tax refunds or a “wild card” exemption that will allow you to protect the refund. Unless you worked out a different deal with the trustee and assuming you are using the calendar year as your tax year, the trustee can keep about 1/4 of your refund (or maybe a little less, depending on the exact day in March you filed). Usually how it works with tax refunds is as follows (assuming your tax year is based on the calendar year, which starts on on January 1): The trustee is entitled to take the portion of your tax refund that accounts for up through the time of year you file. So, if you filed on March 31, 2012 and received a tax refund of $1,200.00 for tax year 2012, the trustee is entitled to take approximately 1/4 (3/12) or $300.00 of your refund. The earlier in the year you file, the more of your tax refund you will get to keep. If you filed bankruptcy later in the year, say November 30, 2012, the trustee will be able to keep approximately 11/12 of your refund or $1,100.00 of the $1,200.00 refund.

To learn more about Arizona’s exemptions, see http://www.azb.uscourts.gov/documents/arizona_exemptions.pdf

6. Can I take money out of my IRA while my bankruptcy is still pending?

You can but you are taking a big risk in doing so. I would suggest you wait until after your bankruptcy case is closed. While most IRAs are “exempt” or protected in bankruptcy (and assuming you properly exempted the IRA), the IRA still arguably remains a part of your bankruptcy estate until your bankruptcy case is closed, the IRA is abandoned, or at a minimum, the time for the trustee to object to your exemption of the IRA has passed and the trustee has not raised an objection. To be cautious and avoid any issues with your trustee, it would be best to wait to withdraw any funds until after your bankruptcy case is closed. The closing of your bankruptcy case happens after your bankruptcy discharge, usually within a few months of the discharge but it can take longer or less time. If you absolutely can’t wait this long and the trustee does not object to your exemption of the IRA within 30 days of your “Meeting of Creditors,” then the next best option is to file a notice of your intent to “abandon” this property with the bankruptcy court (this option is specific to those who filed in Arizona). In filing this notice, you are telling the court that you plan on removing the IRA from the bankruptcy estate. If no one objects to your notice (such as trustee or a creditor) within a timely manner and after your attorney gives you the green light to do so, you can withdraw the IRA money. If these two options do not work for you, the next best option is to wait at least 30 days after the “Meeting with Creditors,” which is the period of time your trustee has to object to your IRA exemption. If this time passes and the trustee has not objected to your IRA exemption, then the interest in the IRA is considered to be effectively withdrawn from your bankruptcy estate. You should consult with your tax professional regarding the tax implications of the withdrawal.

For more information on abandonment of property of the bankruptcy estate, see 11 USC § 554 and Rule 6007-1 of the Local Rules of Bankruptcy Procedure for the District of Arizona.

For more information on the closing of bankruptcy cases and objections to exemptions, see 11 USC § 350 and Rule 4003 of the Federal Rules of Bankruptcy Procedure.

7. Prior to my bankruptcy, I had a judgment entered against me for $1,000,000.00. My home currently has no equity. Can I avoid this judgment lien against my home and if so, how much of the lien can be avoided?

The answer is yes and the entire judgment lien can be avoided. According to 11 USC § 522(f)(1), a debtor may avoid a judicial or judgment lien against the debtor’s interest in property to the extent the lien impairs an exemption the debtor would have been entitled to. A very common exemption that can become impaired by a judgment lien is one’s “homestead exemption,” which is the property in which you reside. A judicial lien is defined under 11 USC § 101(36) as a lien obtained by judgment or another legal or equitable proceeding.

So, assuming the judgment lien is valid and you have claimed a homestead exemption with regard to the property (although some courts say that you do not need to list a property as exempt in order to avoid a judicial lien against it), you should be able to avoid the entire judgment because the judgment clouds the title to your homestead. Even if you currently have no equity in the property, you may gain equity in the future. To the extent the property appreciates in value to create equity in the future, the judgment lien impairs your homestead exemption. To avoid the judgment lien, you should file a motion with the bankruptcy court to avoid the judgment lien during the pendency of your bankruptcy.

Also, keep in mind that some states, such as Arizona, have laws stating something to the effect that recorded judgments cannot become liens on homestead property and some bankruptcy judges may even deny your motion for this very reason (i.e. judgment lien does not attach so no lien to avoid). Despite these type of laws, it may be best to avoid the judgment lien anyway to clear up any title issues when you want to sell the home in the future.

For more information on Arizona’s law regarding judgment liens on homestead property, see section 33-964(A) of the Arizona Revised Statutes.

For more information on the Arizona and federal homestead exemptions, see section 33-1101 of the Arizona Revised Statutes and 11 USC § 522(d)(1).

For more information on rules governing motions for avoidance of judgment liens, see Rule 9014 of the Federal Rules of Bankruptcy Procedure.

8. Do bankruptcy lawyers take credit cards for the retainer to file a bankruptcy?

Generally, no because credit card payments present a variety of issues for both you and your attorney. If the credit card you use to pay your attorney is paid off by the time the bankruptcy is filed, I don’t see any issues with accepting credit card payment. But, if the credit card is not paid off by the time the bankruptcy is filed, that will become a problem in the bankruptcy. This is because as a debtor, you are required to list all your debts in your bankruptcy. This means that any credit cards not paid off at the time of a bankruptcy filing must be listed as debts in the bankruptcy and therefore, would be eligible for discharge in the bankruptcy. However, when you run up credit card charges prior to a bankruptcy, the debt you incur may be non-dischargeable in your bankruptcy due to fraud-related issues and certain types of debts incurred prior to a bankruptcy, such as consumer debts for services aggregating more than a certain amount of dollars within 90 days before the filing of the bankruptcy are presumed to be non-dischargeable should the creditor decide to bring an action for non-dischargeability in the bankruptcy (i.e. a lawsuit to ensure that the debt will not be discharged). If a creditor brings an action or an “adversary proceeding” for non-dischargeability and the debt is determined by the court to be non-dischargeable, this means the creditor would still be able to collect the debt from you after the bankruptcy is done. By accepting credit card payment, your attorney could be considered to be assisting you in committing a potential fraud against your creditors. Attorneys do not want to put themselves in this position.

Additionally, when your bankruptcy attorney accepts credit card payments, the attorney now also potentially becomes a creditor of yours. This presents a conflict of interest for your attorney, especially if the attorney is not paid in full at the time of the filing of the bankruptcy, which means that what you still owe your attorney would be eligible for a discharge in your bankruptcy. By taking credit card payments, the attorney may be in danger of violating the ethics rules on conflicts of interest with regard to current client, as an attorney is not supposed to represent a client if there is a significant risk that representation will be materially limited by the lawyer’s personal interest, i.e. getting paid versus representing you in the bankruptcy. See Ethics Rule 1.7(a)(2) of Arizona’s Rules of Professional Conduct.

For more information on what is not dischargeable in bankruptcy, see 11 USC § 523.

See Rules 7001 through 7087 of the Federal Rules of Bankruptcy Procedure to learn more about how adversary proceedings for non-dischargeability work and are brought.

For more information on Arizona’s rules of professional conduct, see http://www.azbar.org/ethics/rulesofprofessionalconduct

9. Can I get a title loan to pay for a chapter 7 bankruptcy (attorneys' and filing fees)? I know I will have to pay it back to keep my car.

This is a very problematic question for attorneys to answer because debt relief agencies, which include attorneys providing bankruptcy assistance, cannot advise you or even suggest that you incur more debt prior to/in contemplation of filing a bankruptcy as per the Bankruptcy Code and Milavetz case. But can you go out and take out a title loan? You have the right to do that. I would strongly suggest against a title loan, as the interest rates on title loans are very high and you risk losing your car if you fall behind on payments. Assuming you do not need to file the bankruptcy right away (i.e. you are not being sued or garnished, etc.), I would suggest asking your attorney about some kind of a payment plan. That way, you can pay the attorney in installments and it is more affordable for you. Most attorneys will allow you to make payments on their fees, so long as everything is paid off before the time the bankruptcy is filed.

To read the Milavetz case, which was decided by the Supreme Court, see http://www.supremecourt.gov/opinions/09pdf/08-1119.pdf

For more information on debt relief agencies and what they are/are not supposed to do, see 11 USC § 101(12A) and 11 USC § 526–528.

10. Will my daughter's entire income count in the means test?

You are required to count as income the earnings of all members of your household. Many courts take the position that the household size is the number of people living in your household. So, if your daughter is a member of your household, you should count her income. If she is not, you will be required to count any amounts that your daughter pays/contributes on a regular basis towards your household expenses. An occasional/sporadic contribution will probably not count as income. But, regular/monthly contributions will count as income.

For more information on what counts as income in the means test, see 11 USC § 101(10A).

11. I have only been married the past two months. If I file a chapter 7 bankruptcy without my new spouse, how much of her income should be counted in the means test?

Debtors whose debts were incurred primarily for personal, family, or household purposes (this includes all your secured debts as well, such as your home loan and car loan) must qualify for a chapter 7 bankruptcy based upon their income for the six months preceding the filing of the bankruptcy. I am assuming you are in this boat. As a general guideline, I would, at a minimum, count the spouse’s income for the 2 months that you were married (and presumably living together). As for the remaining 4 months that you were not married, I would, at a minimum, count her regular contributions to the household expenses during that four month period. If your spouse was a member of your household during the four months that you were not married, then I would also count her income for the four month period.

12. My wife is being sued for medical debt. The court date is December 11, 2012. What are our options?

First and foremost, don’t ignore the court paperwork (called the “Summons” and “Complaint”). It sounds like you are being proactive about this issue so great job so far! Some people bury their heads in the sand and throw the court paperwork into the garbage (and do nothing). If you ignore the court paperwork, the creditor will eventually get a “default judgment” against you, which means that it can later enforce this judgment, including by trying to garnish wages and bank accounts, and even putting a lien against your real property. Because you have a limited amount of time to respond (20 days if served in Arizona), it is a good idea to consult with an attorney about getting an answer on file with the court along with any claims you may have against the plaintiff (if you haven’t already filed this stuff). If you have already filed an answer with the court, you can try settling with the plaintiff. To this end, any defenses or claims you may have can give you some settlement leverage. Additionally, you may want to consider your bankruptcy options, as a bankruptcy will stop a lawsuit (in the event you can’t settle the lawsuit). If you can’t settle the lawsuit and eventually lose at trial, a judgment will be entered against you and you may also be responsible for attorneys and court fees (so you will owe more than just the amount of the original debt). If you lose at trial, this means the creditor will have a judgment against you and can then enforce that judgment (and can try to garnish wages, bank accounts, etc., as described above). Feel free to read my guide about this exact issue at http://www.olgazlotniklaw.com/bankruptcy-guide-being-sued.htm

13. I filed for chapter 7 bankruptcy and plan on keeping my house, which my dad co-signed for me. Will this bankruptcy affect my dad's credit? Should I reaffirm the home loan in my bankruptcy? Who will be the owner of the home after my bankruptcy is discharged? Should I sign any modification/refinance paperwork if my dad decides to refinance/modify the home loan in the future?

Your bankruptcy should not affect your dad’s credit unless you fall behind on your mortgage payments. It is not advisable or necessary to reaffirm a home loan. Bankruptcy discharges your obligation on the home loan, which means that if you don’t want the home anymore in the future, you can just walk away without having to pay the lender anything else. If you reaffirm the home loan, you will be agreeing to pay the entire balance on the loan, which means that if you decide to walk away one day, you may still owe the difference between what the house is worth/what it sells for and the balance of your home loan (also called a “deficiency”).

Titling and loan responsibility issues are different. You could be on the hook for the home loan without being on the title and visa versa. The title to the home will be held by whoever held it prior to the bankruptcy.

If your dad wants to modify/refinance, do not sign anything, as this may make you liable on the home loan, thereby undoing your discharge of the home loan debt. Before you sign anything, have an attorney review the paperwork to protect your rights.

While your bankruptcy will discharge the home loan debt as to you, it will not discharge the debt as to co-signers. Therefore, as a co-signer on this loan, your dad will still be liable for the home loan debt (while you will not be liable, assuming you get a discharge and all goes smoothly). Also, don’t forget to list your dad as a co-debtor in Schedule H of your bankruptcy schedules. For those who are not familiar with the bankruptcy paperwork that gets filed with the bankruptcy court, your schedules are required to be filed in your bankruptcy within 14 days of filing your bankruptcy petition (or can also be filed with the petition).

For more information on the effect of a bankruptcy discharge, see 11 USC § 524.

14. Is a loan modification a new mortgage? I had my home loan discharged in my chapter 7 bankruptcy a few months ago. After the bankruptcy, I requested a loan modification to lower my payments. Today, I received the modification paperwork. The payment is so low, I am tempted to take it. The cover letter states that signing the loan modification will not make me personally liable for the home loan. Should I sign?

You should have an attorney review the paperwork before signing anything. I am doubtful that you can sign a modification without also agreeing to be on the hook for the loan as well. As you say in your question, the bankruptcy discharged your obligation under the home loan. This means that you can stop making payments at any time you want and walk away from the home without being liable for any deficiency on the loan. A deficiency is the difference between what that home is worth/sells for and what you owe on the loan. However, the lender’s lien against the home survived the bankruptcy (bankruptcy generally does not eliminate liens) and if you want to stay in the home, you have to keep making payments. Because the bankruptcy discharged your personal obligation under the home loan, you have to be careful about signing this paperwork, as you don’t want to end up agreeing to pay a debt that you currently don’t have to pay. While a bankruptcy discharge makes it illegal for your creditors to take action to collect/recover discharged debts under 11 USC § 524(a), nothing prevents you from “voluntarily” repaying a discharged debt per 11 USC § 524(f). Your signing these modification papers could possibly be viewed as voluntarily agreeing to repay the entire debt. You worked so hard to get this debt discharged, that is why it is worth your weight in gold to make sure you protect yourself by having an attorney review everything before you sign anything.

15. I filed a chapter 7 bankruptcy and received a discharge a few years ago, including of my home loan. Now, my home is set for a foreclosure. I stopped making mortgage, insurance, and HOA payments. Will I owe any HOA or insurance fees that I stopped paying on? Is there a way I can speed up the foreclosure?

Sadly, you cannot force a lender to foreclose or speed up the foreclosure, which means that you are still responsible for the HOA fees that become due after the filing of your bankruptcy (everything due before the filing date would have been discharged in your bankruptcy). You will be liable for these post-filing HOA fees until the time of foreclosure and possibly even after foreclosure when the trustee’s deed is recorded.

Meanwhile, the lender cannot force you to have insurance or try to collect the insurance amount, as this liability would arguably arise out of your home loan with the lender (the lender’s loan documents would have required you to keep the property insured) and the liability on the home loan should have been discharged through your bankruptcy (assuming you listed this debt). However, it is best to maintain insurance on the property until at/after the time of foreclosure when the property is no longer in your name, just in case something happens to/on the property while it’s under your name (for example, if somebody gets hurt on the property after your bankruptcy case was filed and now sues you). The lender, however, most likely has its own insurance on the property. Also, be sure to maintain the property until the property is no longer in your name.

For more information on the dischargeability of HOA fees in bankruptcy, see 11 USC § 523(a)(16).

16. Can a second mortgage on a home give me problems after bankruptcy discharge? The balance on the first mortgage is higher than the value of the home.

Assuming you did not reaffirm the second mortgage loan, the big problem you have is that while the debt on this loan was discharged in the bankruptcy and the junior lender can’t collect from you, the junior lender’s lien against your home survived the bankruptcy. This means that if you plan on keeping the house, it may be a good idea to work with the junior lender now (when there is still not enough value in the home to pay the junior lender) to try to get the junior lienholder/lender to release its lien. Sometimes these types junior lenders (wholly unsecured) will agree to release their lien for a few thousand dollars or even less. Right now, you have some leverage because the junior lender may want to take some money right now and release its lien instead of hoping that the home gains value one day so that it can foreclose or get paid out of a sale. If you don’t do anything about it soon, the house may gain equity and the junior lender may foreclose on the home in the future, assuming you are not making the payments (or possibly get paid out of a sale, depending on the sales price). Assuming you want to keep the home, I would encourage you to work with the junior lender on a lien release and even think about hiring an attorney to try to get this junior lien released. If you don’t want to keep the home, you could always just walk away and not have to pay anything more (due to earlier discharge of these debts).

17. Can I lose my home in Arizona if my ex-spouse filed for bankruptcy? I took ownership of the home per our divorce settlement and am current on the payments.

Assuming the loan is in the names of both you and your ex-spouse and your ex-spouse discharges his obligation on the loan via his bankruptcy (i.e. files a bankruptcy, jumps through all the hoops to get the bankruptcy discharge, gets the discharge, etc), then you become responsible for the entire balance of the home loan, subject to Arizona’s anti-deficiency laws. For you, this just means that you should continue to make timely payments on the home loan to stay in the home (assuming you only have one loan on the home). If you fail to make the payments on the home, the creditor will only have recourse against you and not your ex-spouse (assuming ex-spouse discharges his obligation via his bankruptcy), subject to Arizona’s anti-deficiency laws (which may ultimately mean that the creditor does not have any recourse against you).
Also, keep in mind that during the pendency of your ex-spouse’s bankruptcy and assuming the titling of the home is in both your names, there is arguably an automatic stay in effect preventing the creditor from taking action against the home (i.e. commencing/continuing foreclosure proceedings, etc.) unless the creditor gets permission from the bankruptcy court to do so (and your being current on the mortgage payments gives the creditor little basis to get that permission).

For more information about the automatic stay in bankruptcy, see 11 USC § 362.

For information about Arizona anti-deficiency statutes, see sections 33-814(G) and 33-729 of the Arizona Revised Statutes.

18. I received a chapter 7 discharge in 2010, including of my home loan. Now, mortgage payment and HOA fees went up. I want to walk away from the house. When should I rent apartment? Should I consider doing a short sale?

First, find out the date of the foreclosure. Once a foreclosure is set, you should receive something in the mail regarding a foreclosure date (usually called a notice of sale). If you are current on your payments or have missed just one payment, it will probably take more missed payments before a foreclosure will be set. In Arizona, a non-judicial foreclosure takes not less than 91 days from the day the notice of sale is recorded with the county in which the property is located. Once you have a foreclosure date (and there may not be one set for a quite some time), have a new place lined up and your stuff moved out of the house before the date of the foreclosure (at least a few days before the foreclosure, to be safe). I have seen some instances where it has taken the lender a looong time to foreclose – months and even years.

Please be aware that you are responsible for paying the HOA fees that became due after the filing of your bankruptcy up until at/after the foreclosure, as these would not have been discharged in your bankruptcy (so good idea to stay current on HOA fees even if you are not keeping the house). Also, you should keep the property insured and maintained until after the foreclosure. This is because so long as the property is in your name, something can happen on the property and you could be sued (if, for instance, someone gets hurt on the property and sues you).

If you consider a short sale, I would highly recommend getting an attorney to review any paperwork you sign to make sure that your interests are protected. Your bankruptcy should have discharged your liability on this home loan and you don’t want to sign anything where you may possibly agree to be liable for a deficiency on the home loan (thereby undoing the benefit of your bankruptcy discharge).

For more information on the timeline of trustee’s sales, see section 33-808 of the Arizona Revised Statutes.

For more information on the dischargeability of HOA fees, see 11 USC § 523(a)(16).

19. I filed for a chapter 7 bankruptcy years ago and received a discharge. Home loan was included. Will removing my wife's name from the title on the home help us qualify for new home loan sooner? I don't want my wife to get hit for this debt on the home.

The debt on the home loan has been discharged (which means that the debt still exists but it is no longer collectible) so there is no reason why your wife should be getting “hit” for the discharged debt. You/your wife’s credit reports should list the debt on the home as being discharged and not delinquent. Debts discharged in your bankruptcy should arguably be listed on your credit reports as having a zero balance. Debts incorrectly reported as being delinquent and/or having a balance will negatively affect your credit score and make it more difficult or costly to get credit. You should check your credit report and file a dispute with credit reporting agencies if this information is not correct.
Titling and loan responsibility issues are different. You could be on the hook for the home loan without being on the title and visa versa. I don’t believe that taking your wife’s name off the title will have an effect on her responsibility for the loan (which was discharged) and how that responsibility is being reported on her credit report, which is really what is at issue when you are talking about qualification. I would start with your credit report and make sure your discharge is being accurately reflected and then go from there.

20. In Arizona, can I file the financial management course completion certificate before the 341 ¨Meeting of Creditors¨?

The deadline to file the certificate is within 60 days of the 341 meeting but you can certainly file it earlier.

For more information on the filing deadline for the financial management course, see Rule 1007(c) of the Federal Rules of Bankruptcy Procedure.

21. In my bankruptcy, am I going to be appointed a U.S. trustee or a local trustee?

Both are involved in each bankruptcy case. From my experience, the U.S. Trustee does the big picture things such as review any issues dealing with qualifying for the bankruptcy (if they think you don’t qualify and/or need more information about your income, you/your attorney will be hearing from them) and ensure you filed your bankruptcy in good faith. The U.S. trustee makes certain that you comply with the bankruptcy law and is a federal employee. You probably will never hear from or see the U.S. Trustee, unless there is an issue with your bankruptcy. The local trustee is a government contractor and the person you meet with during your “Meeting of Creditors,” being more interested in finding any unexempt or unprotected assets and liquidating them for the benefit of your creditors. If unexempt assets are found, the local trustee liquidates them and distributes the funds to your creditors.

22. I recently filed a chapter 7 bankruptcy and have health issues that may require a hospital stay. Because I have not filed my bankruptcy schedules yet and feel unprepared, can I continue my 341 ¨Meeting of Creditors¨? What happens if I fail to file my schedules?

The easiest way to try to get the hearing continued is by calling your trustee and talking to him/her about a continuance (or have your attorney do that) due to your needing additional time to prepare for the hearing. Whether this call will be successful really depends on your trustee. If you show up to the hearing unprepared (i.e. without the paperwork the trustee requests from you), then the trustee will probably continue your hearing anyway, which means that you will have to show up to another 341 hearing.

Please note that all debts that arise after the filing of your bankruptcy will not be discharged in your bankruptcy, i.e. any medical bills that you may now be accruing. If your bankruptcy case is dismissed and you file a bankruptcy at a later date, you will probably be able to discharge any additional bills (such as credit card debt and medical bills) that arose after this bankruptcy was filed up until the time of the filing of the new bankruptcy. Getting a voluntary dismissal of your case may not be easy and depends on the practices of your area. The trustee may object to a dismissal and you will usually have to show that creditors will not be prejudiced. But, if you fail to file the schedules in a timely fashion (within 14 days of the filing of the bankruptcy), your bankruptcy case will be dismissed automatically. If your case is dismissed due to not filing the schedules and you refile another chapter 7 bankruptcy case within one year, the automatic stay that prevents debt collection activities as well as actions against your property (i.e. foreclosure, etc) will terminate on the 30th day after the new filing (unless you ask the court to continue the stay and the court agrees) and you may also be barred from filing another bankruptcy for six months if your bankruptcy was dismissed with prejudice.

For more information on the meeting of creditors, see 11 USC § 341 and Rule 2003 of the Federal Rules of Bankruptcy Procedure.

For more information on the effect of a dismissal of a bankruptcy case, see 11 USC 362(c)–(d) and Rule 1017-1 of the Local Rules of Bankruptcy Procedure for the District of Arizona.

For information on what you have to file and do in a bankruptcy, see 11 USC § 521 and Rule 1007 of the Federal Rules of Bankruptcy Procedure.

23. I was suing a defendant in Small Claims Court for under $2,000.00. The Defendant filed for bankruptcy and listed me as a creditor? What can I do to protect myself?

The “automatic stay” of the bankruptcy prevents you from collecting the debt you are owed or continuing your lawsuit. As long as the debtor receives a discharge, the debt will no longer be collectible. You should monitor the debtor’s case. If the case is dismissed, you can seek to collect the debt. Also, if property is recovered and liquidated in the bankruptcy, you can seek payment from the proceeds. Additionally, there may be something you can do to make sure that what you’re owed is not “discharged” in the debtor’s bankruptcy, depending on the circumstances surrounding your lawsuit. In bankruptcy, a lot of a debtor’s debts are “discharged,” which means that creditors can no longer collect or take other action against the debtor with regard to the discharged debts. If you do nothing at all, the debt owed you will probably be discharged and you will no longer be able to sue/continue suing the debtor (or take any action against the debtor with regard to this small claims matter). However, if you take certain action in this debtor’s bankruptcy (as described below), you as a creditor may be able to ensure that what the debtor owes you is not discharged, meaning you would still be able to collect on it after the bankruptcy. If the debtor, for instance, made false representations about the debtor’s financial condition to obtain money, property, services, or credit from you, or willfully and maliciously injured you or your property, then you have a basis to bring a lawsuit against the debtor inside the bankruptcy to object to the discharge of the debt owed you (this lawsuit is called an “adversary proceeding”). To see all the different bases for non-dischargeability, check out 11 USC § 523 (listing exceptions to discharge). I must caution you that bringing an adversary proceeding can be very costly, as there is a filing fee with the court and you would probably need an attorney to help you navigate your way (and you probably will not be able to recover your attorneys fees in the lawsuit/proceeding). There is also no guarantee that you will win in the adversary proceeding – it is basically a lawsuit, except it’s inside the bankruptcy (so you could lose at trial and get nothing). If you feel that you have a basis to bring an adversary proceeding to object to the discharge of the debt owed you (as per 11 USC § 523), you may want to consider attending the debtor’s “Meeting of Creditors,” where you as the creditor will be able to ask the debtor questions to build your case for non-dischargeability (you will get a notice in the mail telling you the date/time of this hearing). I would highly recommend consulting with an attorney if you think you may have a claim for non-dischargeability in the bankruptcy, as an attorney would be best able to help build a case/tell you if you have a case. Based on the amount you’re owed, it may not be worth it for you to pursue a non-dischargeability claim in the bankruptcy (it may cost you more than $2,000.00 to do so, especially if you hire an attorney).

For more information about the automatic stay in bankruptcy and what creditors are prohibited from doing after a bankruptcy filing and discharge, see 11 USC § 362 and 11 USC § 524.

For more information on what is not dischargeable in bankruptcy, see 11 USC § 523.

See Rules 7001 through 7087 of the Federal Rules of Bankruptcy Procedure to learn more about how adversary proceedings for non-dischargeability work and are brought.

24. I filed a chapter 7 bankruptcy and listed a title company as a creditor. The title company has lien against my car. The title company has filed a motion for relief from automatic stay. What should I do, file an objection or contact creditor?

I would do both – file the objection and contact the creditor to work something out. The reason why the creditor would have gone through the expense/trouble of filing this motion is because you probably are not or were not current on your payments. It is very important to get current on your payments to maximize your chances of surviving the motion for relief as well as keeping the vehicle.

For more information about relief from the automatic stay in bankruptcy, see 11 USC § 362(d).

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