[icemann427]

Even though bankruptcies are protected and adjudicated under federal statutes, guidelines, and courts, each state has their own laws under which their residents must abide, which to a degree, are somewhat similar.

In Arizona, a Chapter 7 filing allows the debtor to have an unlimited amount of debt forgiven without repercussion, and is used primarily when the debtor has few, if any, assets to protect. To qualify, the debtor must have a monthly income, that more or less, equals its monthly expenses, and must itemize all assets, with the ability to keep certain ones (home, clothing, jewelry, cars, pensions, cash, etc.) dependent upon strict exemption guidelines set by the court that limit the values and/or equity of most items/assets prior to the trustee assigning them for the benefit of the creditors (cars have a $5,000 equity exemption; homes have a $150,000 equity exemption). There are no exemptions for items such as boats, ATC's, etc., which the court may take if it so chooses). If a Chptr 7 debtor makes quite a bit more than its monthly expenses, it will be forced to file a Chtr 13 to at least partially payoff its creditors.

Most debtors file a Chptr 13 filing to protect and keep their residences from foreclosure. However, their unsecured debt can not exceed approximately $336,000 with total debt exceeding a little over a million dollars. If those levels are exceeded, the debtor must then file a Chptr 11. The Chptr. 13 filing allows the debtor to protect and keep certain assets (its residence, cars, boats, etc.) by restructuring its debt and arrearages on those assets, so that the creditors who hold secured positions become current and/or whole by the end of the plan's 60 month term. Again, the debtor must qualify based upon income/expenses/assets in a manner somewhat consistent with a Chptr 7 filing. If the debtor makes a monthly income in excess of its monthly expenses, that difference will be paid to the creditors over the plan's 60 month term.

There are couple of interesting things about Chptr 13 filings. The first is that if you happen to have a junior lien/loan/mortgage on your residence that is now totally unsecure based upon your residence's reduction in value during these great economic times, that junior lien/loan/mortgage can be fully eliminated under the plan. Somewhat the same for a car. If you have had a loan on your car for a term of at least 30 months, the court can remove the difference between the loan's outstanding balance and the value of the car, lowering the amount you owe and lowering your monthly payment.

I find that many elderly debtors file because of medical bills, and find it quite disheartening that they find themselves in this situation at this point in their lives. Almost all of them have had perfect credit all of their lives and most feel completely ashamed that they have to file. Most others find themselves in this situation because of the current state of the economy. I would say that about 10% of the filers are taking advantage of the system, and I quite frankly need to take a shower after working their cases. But all in all, the filers are good people who are in trouble and need some room to breathe.

My 2 cents...

Geoff