Rosenstein Law Group

When it comes to filing for personal bankruptcy, there are two ways to do it: Chapter 7 bankruptcy, in which property is liquidated, or Chapter 13, in which a payment plan is structured and must be carried out over the next several years.

For the most part, Chapter 7 bankruptcies are pretty straightforward and easy, assuming an individual is OK with having to give up most of their property. Unfortunately, there are several circumstances that can draw a trustee’s eye, and make a Chapter 7 filing much more complicated.

For instance, if you have a young son/daughter and are paying for their vehicle, insurance, or gas, the U.S. Trustee may object. This may seem like a fairly standard thing, since teenagers often cannot afford their own vehicle, and require one to be able to drive to work or school. The U.S. Trustee does not believe that claiming such a vehicle is acceptable either on Schedule J or in the means test, because they believe that paying off creditors takes a higher priority than paying for your child’s vehicle.

Along the same lines, you may find objections filed against you if you are paying for a child’s support in attending college. This can mean paying for room and board, tuition, meal plans, or any financial support for a dependent. The Trustee will consider these expenses as discretionary income, and will object to them being classified as anything but “disposable income”. This is done in order to try to push Chapter 7 bankruptcy filers into filing for Chapter 13 instead.

If you have any questions or concerns related to filing for bankruptcy, and how certain forms of income or expenses will need to be filed, do not be afraid to call your attorney and ask. They will be able to provide you with legal advice as to how you should proceed.

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Seen as both a good sign and a bad sign, depending on who you ask, bankruptcies for the valley had a significant drop again for the month of April, this time being a 27% decline over the same month for 2011.

This decrease, which is just the next step in what has been a 2-year trend, puts the number of bankruptcies for April at one short of 2,000, which is not only down 27% percent from April 2011’s number, which was 2,748, but also a 4% decrease from March 2012.

Phoenix bankruptcy attorney Scott Cohen said that this is news that the financial conditions around Arizona are improving, and that banks are beginning to lend money out again. He said “there are some reasons for optimism, and there’s additional liquidity that wasn’t there last year.”

Some are less optimistic though, saying bankruptcies are declining due to tightening bankruptcy regulations, and the fact that most of those with financial difficulties have already filed for bankruptcy. A lot of times, these same individuals state that they believe banks lending out money on a regular basis again will lead the economy to a second debt-inspired crash like we have experienced in the past few years.

This 27% decrease outpaces the national bankruptcy trend, in which bankruptcies declined by 16% compared with April 2011. However, the monthly decrease of only 4% from March was not up to national trends, in which bankruptcies declined by 11% compared to March 2012.

A recent study that was done online by the National Foundation for Credit Counseling states that despite the numbers of bankruptcy declining regularly since 2 years ago, over 75% of all survey respondents said that they are in need of a personal finance tune-up. They admitted though that their numbers are possibly skewed, due to the fact that individuals looking at their website are bound to be more money-stressed than average Americans anyway.

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American Airlines has been all over the news recently, with their reported financial troubles, pending bankruptcy case, laying off over 10,000 workers, attempting to nullify union contracts, and rumors of possible mergers or sales.

Recently the parent company of American Airlines, AMR Corp. has said that as part of an agreement with the unsecured creditors committee taking part in its bankruptcy case, the company has started to look into options including a potential sale of the company.

According to one individual who requested to stay unnamed, the unsecured creditors committee pushed for this outcome specifically so that AMR Corp. would review a notice by US Airways Group Inc. which stated their intention of mounting a takeover bid.

This is almost a complete 180 from what AMR Corp. CEO Tom Horton had initially stated, which was that his intention was of having the company completely out of bankruptcy proceedings before the group would consider any potential sale or merger. That initial statement was supported by American Airlines’ unions, but had been under fire from advisers that had been hired by US Airways.

An attorney on the unsecured creditors committee released a statement saying that there will be a “joint exploration protocol agreement” between the group and AMR Corp. which will be reviewing “strategic alternatives against which the company’s stand-alone business plan will be vetted”.

Beverly Goulet, who is the Chief Restructuring Officer at AMR Corp. also released a statement, in which she backed CEO Horton’s statement, saying “what’s best for our company, our people and our financial stakeholders will be determined by the facts in a disciplined manner and process. This includes whether American will choose to pursue any combination down the road.”

In response to this news, shares of US Airways rose in value to $11.32, which is their highest point since January of last year. The airfare industry in the United States has seen consistent improvement so far this year, after years of struggling.

It is important to note that the statements released referring to mergers and sales have never mentioned US Airways by name. When asked to comment, a spokesman at US Airways said that they “look forward to engaging in the AMR process to demonstrate the significant advantages of our plan to maximize value for all constituents.”

Spokeswoman Michele Kropf of British Airways, which is an alliance partner to American Airlines, released a statement in which she mentioned the airline’s assistance in any future negotiations, saying “AA is a strong partner to IAG. We continue to work with AA as they complete their restructuring process.” IAG is International Airlines Group SA, which is British Airways parent company.

This is all the latest move in a bankruptcy proceeding that started in late November 2011, when after what would be their 4^th consecutive year of financial losses, US Airways filed for bankruptcy protection. American has proposed cutting $1.25 billion from their annual expenses, mainly by making labor reductions and outsourcing certain parts of the airline’s operations. US Airways also has recently reduced their expenses by roughly $800 million a year. The industry as a whole has had to put quite a few cost-cutting measures into place.

These cost-cutting measures are extremely unpopular among unions, who are organizing to argue in bankruptcy court on the 14^th, in order to prevent their labor contracts from being voided. One union in particular, the Transport Workers Union, is going to be proposing a different way for AMR to reduce their labor spending by 20%, which would enable fewer jobs being lost.

Many union members view the merger as the best possible outcome for everyone involved in the company’s operations. One particular man, a spokesman for a pilot union, said “we have no confidence in the current management that got us in this mess to lead us out. We believe the US Airways business plan represents our best chance to succeed both as a company and a pilot group.”

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As anyone currently filing for bankruptcy could tell you, the goal is for the process to go as smoothly as possible. For the most part, as long as everything is reported completely, Chapter 7 bankruptcies run very smoothly. However, there are a few different situations that can increase your chances of drawing a trustee’s eye.

In one particular situation, trustees are more closely watching cases where an individual’s gross income is higher than the median income by a significant margin. If you are filing for Chapter 7 and find yourself in a means test, then it is almost guaranteed a U.S. trustee will examine your case. They will bring in analysts who turn your filing into a spreadsheet, looking for a category that they can file a challenge on. According to trial attorneys in the U.S. Trustee’s office, this is done to force people away from Chapter 7 and into Chapter 13.

In another situation, if you have a 401(k) that came up in the means test, then the U.S. Trustee will object to any allocation for a 401(k) repayment. This is done because the trustee does not see 401(k) as a secured debt. It stands to reason that a trustee would also raise objections to putting a 401(k) repayment in your Schedule J, since the trustee could claim that you are planning on repaying yourself at the creditors’ cost. Defaulting on a 401(k) loan can lead to tax issues, but trustees state that repayment of creditors should always come first.

If either of those situations apply to you, then you should bring the issue up with your bankruptcy attorney, and see if they have any advice on the matter as it pertains to your exact case.

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A San Tan Valley investment company has recently come under investigation as part of a recent string in which individuals will fraudulently label themselves as investment firms, and take advantage of desperate lenders, pushing many towards bankruptcy.

The firm, called Insight Investment Group LLC, is run by 57-year-old Elizabeth Kingsley-Young, and offers investment help by securing private equity loans for individuals who have had foreclosures on their records, or possess otherwise poor credit. This is all, of course, done for an up-front fee.

Kingsley-Young’s company promises people that it will find housing for families with bad credit and/or low income. The company’s website states that the company specializes in offering residential and commercial financing, no-money-down loans, rent-to-own properties, financing seminars, and housing grants.

The company also has a non-profit partner, Empowering Resources, which it states gives “hope and restoration in the lives of individuals and families affected by poverty or any of life’s other crippling obstacles.”

Complaints of lack of delivery of goods have been filed against Kingsley-Young, which prompted investigations into her business.

According to records, the company’s owner has over 10 aliases, a criminal history that reaches back more than 3 decades, and has been incarcerated in Texas, California, and Minnesota prisons for charges of fraud, counterfeiting, and forgery.

When interviewed about her past, Kingsley-Young quickly pointed out that she has never been charged with any crimes in Arizona, and also said “you can’t judge somebody’s present by their pasts. This is a situation that has two sides.”

When investigators have looked into her company, they found that neither she nor her companies are licensed mortgage-lenders or real-estate agents, that none of her companies are registered as corporations in Arizona, and that the IRS never granted them legal non-profit status.

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Financial news lately has been filled with articles about recent developments in the American Airlines bankruptcy case. As one of the biggest airlines in the United States, the company’s future can have a drastic impact on our future airline service.

Most recently they have announced that they are planning on cutting 1,200 jobs and outsourcing flights at certain airports as part of a cost-cutting measure which will eliminate $1.25 billion from their annual expenses.

The airports they plan to outsource jobs at will all be the airports that currently have the fewest daily flights. Of the 9 cities they plan to outsource, 7 are in the United States and 2 are in Canada. The U.S. airports are Hartford, Connecticut; Columbus, Ohio; Memphis, Tennessee; Portland, Oregon; Sacramento and Ontario, California; and Reno, Nevada; The 2 Canadian airports are in Vancouver and Calgary.

The airline also plans to close the Admirals Clubs at airports in Washington; Kansas City, Missouri; Panama City; and in Santo Domingo, Dominican Republic.

In addition, the reservations center in Tucson, Arizona is to be closed, and all 680 of the agents working there will be offered transfers to other departments, as well as the ability to do home-based work instead. According to the airline, 800 or so more employees will be moved to work-from-home positions, and a small number of part-time positions will be cut. Some workers will have their base pay reduced, but others will have their base pay increased.

These are interesting moves for a company that was well on its way to its 4^th consecutive annual loss when it filed for bankruptcy in late November. It remains to be seen what the effects of these moves will be, but analysts are predicting that American will be put into a labor-cost advantage over other airlines.

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As if the financial market hasn’t had enough trouble lately, recently a disturbing trend has emerged that prays on the desperate, driving many to bankruptcy.

The housing market has finally started to turn upwards, but there are many who are looking to get some loan help still, who are unfortunately falling prey to a score of new companies promising financial assistance.

Just like the loan-modification scams that were prevalent in recent years, these companies scam people into thinking that they can borrow money with questionable credit, reduce foreclosure effects, or modify particularly difficult loans. Individuals who fall victim to these predatory companies will usually wind up paying thousands in up-front fees to the business operators, who never end up delivering what they promised.

In commercials and movies, predatory financial companies such as these are always portrayed as someone working out of a dirty-looking basement, only putting on a suit to go to meetings with clients. The reality, however, is that you really can’t tell by looking at a business’s office. Many of these new companies are complex networks of employees, working out of fancy high-tech office buildings all over the country. However, there is one big indicator that is common among almost all of the consumer-fraud complaints and lawsuits: Up-front fees.

According to authorities, with up-front fees, it is entirely too common to not get the service you paid for.

A few months ago in February, Arizona was involved in a fraud lawsuit with the nation’s 5 largest mortgage lenders, which it won $1,600,000,000 from as part of a settlement. According to Arizona Attorney General Tom Horne, since then complaints about fraud related to up-front fees have increased noticeably.

Horne mentioned that in Arizona and all over the country, individuals are paying these up-front fees for services that would otherwise be granted to them for free either on their own or by hiring legitimate companies. “It’s getting worse now. It’s a terrible situation. The people in society who can least afford to lose money are the ones (criminals) go after,” he says. For many, investing their money and not receiving any benefits pushes them over the edge of financial stability, and many are left with no options other than to file for bankruptcy.

This is not to say that all up-front fees are signs of scams, as there are many legitimate businesses that require up-front fees. However, according to Horne, for businesses like mortgage-modification companies, “the real issue is the up-front fee. There are questions of paying fees at all, but it is flatly illegal to charge a fee to modify a mortgage.”

Some of the questionable companies that have drawn investigator’s scrutiny range from small businesses that promise to secure funding for private loans, which customers report never materialize, all the way to national law firms and even some rent-to-own companies.

Regardless of the company involved, if the deal sounds too good to be true and it requires an up-front fee, do plenty of research before you give them any of your money or time. A quick Google search for the company or owner will often provide you will all the information you need to be able to make a smart financial decision.

In our next entry, we will cover some more tips you can use to help identify potentially fraudulent businesses, and save yourself some potential heartache.

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American Airlines, the U.S.’ third-biggest airline, has recently outlined a $1.25 billion annual labor cut, which will eliminate 1,200 airport agent and cargo jobs, as part of a bankruptcy restructuring plan.

In addition to the job cuts, the restructuring plan includes the airline outsourcing all of its current jobs in 9 various cities.

American has begun testifying in a bankruptcy court to persuade the judge into letting them nullify their current union contracts, which they claim are making them unprofitable, and formulate new ones that will allow them to cut costs. This is most likely a result of American attempting to negotiate with its unions, but the talks not succeeding. Talks with the unions are allowed even during the bankruptcy court proceedings, so it remains to be seen if some of the unions will decide to accept the new agreements instead of having a bankruptcy judge throw them out.

A reassuring letter was recently released by American Airlines, which was signed by 3 top executives, senior vice president for customer experience Craig Kreeger, senior vice president for marketing and planning Virasb Vahidi, and senior vice president of operations Jim Ream. In it, they more or less accept that tough decisions sometimes need to be made, but that “not a single decision that affects a single employee was made lightly.”

The airline’s overall goal is for each separate work group to reduce their costs by at least 20%, which would translate into roughly $95 million in reductions for the 10,000 current cargo and airport agents. The airline has stated that most of these changes will come into effect during the next 2 to 4 months.

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When it comes to Chapter 13 bankruptcy and the 5 year repayment plan afterwards, it is fairly common to see the scenario where for some unforeseen circumstance, the debtor falls behind on their payments to the trustee, and the trustee files a Chapter 13 Trustee’s Motion to Dismiss. This usually causes the payment plan to extend past the original 60 months, in order to recover the lost amount. Instead of doing that, the debtor can agree to make a lump sum payment to the trustee for the total amount that is past due, and the remaining balance paid out over time as per the original plan.

This is not always possible, however. In fact, in most situations it is not possible, since the original circumstances which caused the debtor to fall behind on payments in the first place generally cause the debtor to not have a large sum of money with which to pay a lump sum. In cases such as these, the judge would either sustain the motion to dismiss, or the debtor would not oppose the motion in the first place.

The end result for either will be the dismissal of your Chapter 13 bankruptcy case. When that happens, your creditors are allowed to pursue any and all collection methods against you, which includes everything from harassing phone calls, to lawsuits for balances, and even foreclosure on your home.

For instance, say your bankruptcy plan required re-payment of $0.10 on the dollar. If your case is dismissed, you will be responsible for the full amount owed, and creditors will be able to pursue the full balance plus any accrued interest (which they undoubtedly will).

If this happens to you, you will be able to re-file for Chapter 13, with some caveats. When re-filing, the automatic stay is only valid for 30 days, requiring a special motion filed by your attorney to extend that past 30 days.

If the dismissal was as a result of something beyond the debtor’s control, judges will usually approve an extension of the automatic stay, and will approve a 2^nd plan, but Chapter 13 trustees are more suspicious, and will be even pickier the second time around.

If you are in danger of missing any payments to the trustee, contact an experienced bankruptcy attorney immediately! You may have legal options that could save your case.

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Chapter 13 bankruptcy plans are lengthy things, with the repayment taking 5 years after the plan is accepted in bankruptcy court.

5 years is a very long period of time, but it is important to stay absolutely on top of your trustee payments for the entire time period. Not only is it a wise idea to set multiple alerts and mark your calendar in gigantic letters when the payment is due, but it’s also a good idea to see if automated payments can be taken out. Sometimes it is possible to have payments auto-deducted from paychecks. During the time it takes to get that payment going, however, you will need to mail in your own payments. It is even recommended that you send in a physical payment for the time period that the first automated payment is scheduled to come out, just in case.

It is extremely common for confirmation hearings to be postponed because the debtor is one or two payments behind because they didn’t realize they were supposed to make physical payments, or even how to.

The period before the confirmation hearing is used as a sort of “probation,” in which payments are tested, and it is determined whether or not the original plan needs to be amended at all. Another problem can rise from the amendments, unfortunately. If your payments are auto-deducted, many times the person processing the deduction from your paycheck will not realize that the amount has changed, which can cause problems. If your Chapter 13 plan is changed during the confirmation hearing, make sure you check up and make positively sure that the correct amount is being withdrawn.

After confirmation, you are expected to continue making the payments for 5 years. Many things change during this period, such as employment, or even wage at your current job. If you experience any change in your employment/pay during the 5 year period, contact your bankruptcy attorney immediately. If you don’t notify anyone, and fall behind on your trustee payments, often time they will file a trustee Motion to Dismiss, which can (and usually does) cause a significant increase in your monthly payments, if it doesn’t require a lump sum payment outright.

You do not want to find yourself in that situation. Contact an attorney immediately if you have any questions or concerns about making your trustee payments.

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