Udall Shumways’ Arizona Bankruptcy Law Blog

What Information Does My Attorney Require If I File for Bankruptcy?

If you are filing for bankruptcy, your attorney will provide you with a list of the documents required. However, in a nutshell:

Schedule A (Real Estate) requires you to list all of the real estate you own as of the date of filing. This may include your home or any timeshares where you have a deeded interest.  You would also need to list the value of such property on the date of filing and the amount owing on any outstanding secured claim.

Schedule B (Personal Property) includes all other property you own such as bank accounts, jewelry, collectibles, vehicles, etc.

Schedule C (Property Claimed as Exempt) will be property listed in Schedules A and B that are exempt under Arizona law.

Schedule D (Creditors Holding Secured Claims) includes creditors’ names and addresses who can repossess your property (such as your house, vehicle) and the date of origination of the loan, the total amount you owe and any unsecured portion remaining.

Schedule E (Creditors Holding Unsecured Priority Claims) includes priority claims such as child support, spousal maintenance, wages you may owe as an employer to employees, taxes and certain other debts owed to governmental bodies, claims against you for injuries or death caused by intoxication, and deposits that you may hold for others (tenants).

Schedule F (Creditors Holding Unsecured Nonpriority Claims) will include all unsecured debts, such as credit cards, medical bills, personal loans you received from friends, relatives or anyone else. You will have to include the name and address of the creditor and the amount due.

Schedule G (Executory Contracts and Unexpired Leases) has to do with all contracts under which you are obligated on the date of filing your petitioner, including but not limited to any vehicles you lease, cell phone contracts, residential leases (whether you are the landlord or the tenant).

Schedule H (Co-Debtors) is a list of the names and addresses of anyone (other than a spouse who is filing with you) that is also liable on any debts listed, such as parents, boyfriend, girlfriend who signed as a co-signer on a loan.

Schedule I (Current Income of Individual Debtor(s) is a list of current and prospective income after the filing which is averaged out on a monthly basis, based on your income over the last year or what you expect to receive over the next year.

Schedule J (Current Expenditures of Individual Debtor(s) is your average or projected monthly expenses by category, such as rent/mortgage payments, utilities, insurance, clothing, food and charity.


What Does it Mean to “Redeem” Property?

Bankruptcy law allows debtors to “redeem” or buy out personal property secured by liens for the market value of the property rather than what is owed on it.  In that case, you must pay the lender the market value in a lump sum.  Lenders who will finance a loan for the market value often charge high interest rates and are commonly known as 722 Loans.


What is a Bankruptcy Reaffirmation Agreement and Do I Have to Sign it?

If you want to keep property that is subject to a lien, you must enter a reaffirmation agreement, otherwise the court will sell the property and apply the proceeds to what you owe. A reaffirmation agreement allows you to keep the property and continue to make payments. If you sign a reaffirmation agreement and later default on your payments, the lender can still repossess the property and sue you for any deficiency balance. The only benefit to reaffirming a debt is that the payments made after reaffirmation are reflected on your credit report, which will help you reestablish your credit.

Most secured lenders will continue to accept your monthly payments and allow you to keep the property even if you haven’t signed a reaffirmation agreement (known as “retain and pay”).  Some lenders say they will repossess vehicles unless the debts are reaffirmed. Other lenders feel it is better to receive monthly payments under the “retain and pay” option rather than lose money by selling repossessed vehicles at auction prices. It is possible, however, that just when you think your lender has decided to continue to accept your payments, you find one day that your vehicle has been repossessed.  Consider speaking to an attorney before entering into any agreement.


What Can I Do If Debt Collectors Are Calling My Friends and Family Members?

Debt collectors are only allowed to contact your friends and family members if they don’t know how to contact you. If they already know how to contact you or if they are disclosing information about your debt to your friends and family, the debt collector has violated federal law and you likely are entitled to file a lawsuit against the agency. To learn more, contact Bankruptcy attorney Matthew White at 480-461-5304.


Foreclosure Mediation – The New “FMU”

The ASU Sandra Day O’ Connor College of Law Lodestar Dispute Resolution Program has established the Foreclosure Mediation Unit (“FMU”), funded by a grant from the Office of the Attorney General of the State of Arizona, to help address the high level of foreclosures in Arizona. The goals of FMU are to provide impartial mediation services between lenders and homeowners facing foreclosure, to conduct educational programs for the general public with regard to housing issues, and to train law students in commercial mediation skills. After identifying bankruptcy as a potential area of need, FMU’s personnel met with judges, creditors’ counsel, debtors’ counsel and other interested parties in the area.

Ultimately, FMU and the U.S. Bankruptcy Court for the District of Arizona agreed to partner in creating a court-connected mediation pilot program for bankruptcy cases in Arizona involving disputes concerning residential mortgages and foreclosures. FMU then designed a program framework incorporating the best practices from across the country, tailored to local needs and rules.

The Court will identify and select cases based on the Court’s expectation that the parties would benefit from mediation from information presented at contested relief from stay hearings involving the debtor’s principal residence. Cases must meet the following minimum requirements: (a) the property is owner-occupied; (b) the property is the primary residence of the debtor; and (c) the debtor is the borrower on the mortgage loan.

A mediator (neutral third party) will assist both the debtor and creditor in determining whether there is a resolution satisfactory to and in the best interests of all parties in resolving the dispute surrounding the homeowners’ mortgage. Mediators to not represent either party, nor do they provide legal, financial or other advice. Further information is available at www.law.asu.edu/fmu.


Arizona Sees Biggest Dip in Mortgage Delinquencies

In an article published May 8, 2013 by Russ Wiles of The Republic, a new study shows that Arizona is leading in the biggest improvement in mortgage delinquencies over the past year, reflecting that Arizonans are making progress in paying off their debts. According to the article, TransUnion has reported “the proportion of Arizona mortgages 60 or more days past due fell from 6.86% in the first quarter of 2012 to 4.26% in the first quarter of 2013.”  The delinquency decline of 37.9% was the best in the nation followed by California and Colorado.  The article quotes Tim Martin of TransUnion’s financial-services business unit as stating: “The national mortgage-delinquency rate experienced its first major decline since the advent of the housing crisis…. The housing sector as a whole has definitely been improving with prices up, negative equity down and (interest) rates staying low.” It is expected that the mortgage-delinquency rate will continue the downward trend this quarter, finishing near 4.5%.

To read the entire article on azcentral.com, click here.


How Are FICO Credit Scores Computed?


Bankruptcy in AZ FICO Chart


Your FICO* credit score is based on both positive and negative information found in your credit report.  The FICO system analyzes five categories to compute your score:


Payment History

35% of your FICO credit score is determined by your payment history including which of your accounts were paid on time, the amounts owed on each account and the length of any delinquencies. The history also includes any adverse public records such as bankruptcies, judgments or liens.  While missing payments or frequently paying bills late will drastically lower your score, the good news is, FICO favors recent activity, so you can improve your score by making timely payments or working out payments plans that suit your budget.

Credit Utilization Rate

30% of your FICO credit score is based on the ratio of how much money you owe versus how much credit you have available (the “credit utilization rate”). Someone close to maxing out his or her credit cards is seen as a higher risk of default.  It also means that when you open a new account and have more available credit, your credit utilization ratio will go down, so long as they do not incur additional debt.

Length of Credit History

15% of your FICO credit score is based on the length of your credit history.  It includes the length of time your accounts have been open and how long it has been since they have been active. Typically, the longer your credit history, the better.

Types of Credit

10% of your FICO credit score is based on the type of credit you use. Having many different types of credit, including mortgages, credit cards, car loans, revolving and installment credit, will generate a higher FICO credit score.

Other Financial Data

10% of your FICO credit score includes “other financial data” such as searches or “inquiries” for credit.   Applying for or opening too many accounts in too short of a time period is interpreted as a sign of risk and will lower your score.   Rate shopping for one specific type of loan should not have much impact on your score.

The Importance of Understanding Your Score

All of the credit agencies calculate a score between 300 (extremely poor creditworthiness) and 850 (perfect credit). The average score is roughly 710. Your credit score may be used to determine the approval or denial of car loans, mortgages and other major credit purchases, as well as the interest rates available to you.

*FICO – FICO stands for Fair Isaac and Company, the company responsible for developing the software that most credit bureaus in the U.S. use to determine credit scores.


What Happens if a Debtor in Bankruptcy Dies or Becomes Incompetent?

If the death or incompetency of the debtor occurs during a Chapter 7 Bankruptcy, the estate would be administered and the case would continue as usual.  If the case was filed under Chapter 13, the case may be dismissed.  However, if it is possible to continue and is in the best interests of the parties, the case may proceed as usual.


What if I Change My Mind After My Chapter 7 Bankruptcy Case has Been Filed?

Once your Chapter 7 Bankruptcy is filed, it may be difficult to have it dismissed because your assets become property of the bankruptcy estate upon filing.  If your reason for dismissal is to protect your valuable assets, the court is unlikely to grant a dismissal.  However, if you don’t have any valuable non-exempt assets, you may not face opposition from the trustee or creditors if you move to dismiss and your dismissal may be granted.


Myth Busters – Filing for Bankruptcy Protection

Only losers file for bankruptcy protection.

People from all walks of life in difficult financial situations find themselves needing bankruptcy protection.  Even the most responsible people can wind up in a financial trouble.

You can only file bankruptcy once.

The law allows you to file more than one bankruptcy in your lifetime.  Under Chapter 7, your debts can be discharged once every 8 years.  However, other options, such as Chapter 13, Chapter 11 – as well as others – can also be utilized when needed.

Your bankruptcy will become public knowledge.

Bankruptcy court records are available to the public, but it is unlikely that that anyone will know unless you are a public figure.  Furthermore, public records are inundated with names.  If someone attempted to look specifically for your name, it could take a lot research to find yours.  About the only people who would know about your bankruptcy filing are your creditors, the trustee assigned to your case, your attorney and you.

You will lose everything if you file for bankruptcy protection.

The law recognizes that bankruptcy is not a punishment, but a resource for good people in bad situations and thus gives you exemptions to protect your property.  As such, the majority of debtors actually lose absolutely nothing.

Your credit is permanently destroyed after filing for bankruptcy.

Truth be known, banks and other lenders tend to give another chance to people who file for bankruptcy protection.  Bankruptcy wipes out your debt, which also allows you to handle more credit.