Calls and threats

Calls from aggressive collection agents to your home or work are an early, common collection procedure. These calls can be annoying, and even frightening. Calls to you at work can be embarrassing and threaten your job.

When a petition is filed under either Chapter 7, or Chapter 13, the automatic stay automatically stays or prohibits all collection activities of your creditors. Creditors and collection agents must stop their calls or other attempts to collect the debt.

As soon as you retain our office, you may refer your creditors to us, and we will advise them of the status of your case. Although not required to do so, some creditors who have not commenced court action will usually stop their collection activities while we are preparing your case for filing.

Once you have hired us, if a creditor, collection agency or attorney calls you prior to the filing of your case, simply inform the creditor, collection agency or attorney that you have retained McDonald Law Offices to represent you in a Bankruptcy. Instruct the creditor, collection agency or attorney to call us at (480)968-3100 for further information.

Foreclosure

In Arizona, the lender on a home loan secured by a Deed of Trust may hold a sale of that home 90 days after recording a Notice of Sale and giving proper notice. The sale can be stopped only by paying all back payments, late charges and foreclosure fees before the sale date.

The filing of a Chapter 13 can stop the sale. The lender will be required to accept payments through your plan to catch up any payments, late charges and other fees that you owe.

Lawsuits and judgments

When you are served with a Summons and Complaint, the clock starts running. It is only a matter of time before the creditor obtains a judgment against you. When you are served, you have 20 days to file an answer. If a timely answer is not filed, the creditor will end up obtaining a default judgment against you. If you are employed, once the judgment is entered, the creditor will be allowed to serve your employer. If your employer is served, the employer must start withholding 25% of your net pay and begin sending the funds to the creditor. If you file either a Chapter 7 or Chapter 13, prior to the creditor obtaining a judgment, the lawsuit will be stopped.

If you file either Chapter 7 or Chapter 13 after the garnishment has started, the garnishment will stop as soon as your case is filed.

Garnishment is not the only option that the creditor has. Once the creditor has obtained the judgment they may serve your bank. Your bank will then freeze your account to pay the debt. This may cause you to be unable to pay your other debts and monthly payments. If you file bankruptcy, you will stop the creditor from serving your bank.

Once the judgment has been obtained, the creditor may have you served with an order requiring that you appear at a debtor examination. If you are served with such an order and have not filed bankruptcy, you must attend the examination. If you do not attend the examination, the court may enter a bench warrant for your arrest. If a bench warrant is issued and you are pulled over, you will likely be arrested. Filing bankruptcy will stop the proceeding and you will not be required to appear at the debtor’s examination.

Garnishments

Arizona law allows creditors who have obtained judgment to take up to one-fourth (25%) of your after-tax pay directly from your employer. A wage garnishment may continue until the debt, attorney's fees and court costs have been paid. If a creditor posts a bond with the court, it may garnish your bank accounts even before a judgment has been obtained.

Garnishment is stopped immediately when a Chapter 7 or Chapter 13 is filed. At the successful conclusion of the case, the court discharges, or cancels, your debt.

Payday loans

We all know what payday loans can do to you. They will eventually make it impossible to pay your other debts and monthly living expenses. Most people feel trapped and are worse off than before they took out the loan. The payday loans never seem to get paid off. If this is how the payday loans are making you feel, bankruptcy is the only solution. Bankruptcy stops the payday lenders from collecting from you. The debt will be discharged in the bankruptcy. You will never have to make a payment on the loan again.

Repossession

Generally, if you are behind on car payments, the creditor may take possession of your car without notice. Unless the contract gives a grace period, the car can be repossessed if you are only a day late. You are not required to give the car to the creditor, but they may take it from the street or a parking lot. Concealment of the vehicle with intent to hinder the creditor may be a criminal offense. If the car is repossessed, the creditor may sell the car at an auction, and you may still have to pay the balance remaining on the loan after the sale of the vehicle, plus the creditor's collection expenses.

Chapter 13 can stop repossessions.  If a car or other vehicle has been repossessed but not sold by the creditor when the case is filed, the court may order the creditor to return it to you. Under Chapter 13, interest charges may be reduced, and your monthly payments can often be lowered depending on how long you have owned the vehicle and the vehicle’s value.  In certain cases, the balance secured by the vehicle may be reduced to its market value, even if this is much less than the loan balance. In Chapter 13, you pay for the car in a single monthly payment which consolidates all of your bills.  Often this one payment can be lower than your old car payment alone.

Tax liens and levies

Both the Internal Revenue Service and the Arizona Department of Revenue can take wages, bank accounts, and other property through a levy. The government does not need a judgment, and it is not limited to one-fourth of your pay.

Chapter 7 and Chapter 13 stop tax levies. Many taxes are not discharged under Chapter 7 see 11 U.S.C. §523(a)(1) and §507(a)(8). The government will still be able to collect those taxes after a Chapter 7 bankruptcy is finished.  In Chapter 13, taxes will usually be paid from the plan payments. See 11 U.S.C. §§1322(a)(2) and 507(a)(8).

Student loans

Filing bankruptcy does not help you eliminate student loans unless you can prove that the student loans “impose and undue hardship” on you. See 11 U.S.C. §523(a)(8). To qualify for a hardship discharge of your student loans, you have to prove that you will never be able to pay back the loans. Courts have held that unless you can prove that you are permanently and totally disabled and are unable to make any payments at all on the loan the student loan will not be discharged.

Although filing bankruptcy can not eliminate your student loans (unless the court rules in your favor regarding undue hardship), and can not even stop the interest from accruing, Chapter 13 Bankruptcy can stop the student loan creditor from collecting from you for up to 5 years.

If your student loans are in default, you not likely get another student loan. However,11 U.S.C. §525(C) prohibits you from being denied a student loan just because you have filed bankruptcy. Consequently, if you are not in default and qualify for another student loan, you can still get another student loan even if you have filed bankruptcy.

Although student loans are not dischargeable in bankruptcy (absent an undue hardship ruling), there are a number of options to help borrowers with defaulted student loans. The following is an introduction to this topic, and only meant to point you in the right direction.

Loan cancellation may be a federal remedy that is available to you. Not all types of loans are eligible for cancellation. You can contact the National Student Loan Data System at 1-800-4-FED-AID, or online at www.nslds.ed.gov.to find out what type of loan you have.

Federal programs available for student loan cancellation include: Forms can be downloaded from http://www.ed.gov/offices/OSFAP/DCS/forms/index.html.

School closed during enrollment: Applies to Direct Loans, Perkins Loans, and FFELs. You must have been enrolled in school at the time of closure. If you withdrew, the withdrawal had to occur within 90 days of the closure. (http://www.ed.gov/offices/OSFAP/Students/closedschool/search.html).

Total/ Permanent Disability: Applies to Direct Loans, Perkins Loans and FFEL’s. You must be found totally and completely disabled, and you must provide evidence from a physician that you are no longer able to work because of an illness or injury that is expected to continue indefinitely or result in death. If your condition existed when the loan was given you will not be eligible.

If you do not qualify to have your loan canceled, you may be able to have your loan consolidated. You can contact http://www.ed.gov/directloan to explore the possibility of a loan consolidation.