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Are There Gifts Under the Bankruptcy Decision Tree?

Well, maybe.

There are only two things you really want to get out of your Chapter 7 Bankruptcy Case, generally.

You want to keep your stuff (that is, you want your list of exempt property to encompass all your assets, to the extent possible under the exemption statutes in Arizona, assuming that you file here and are entitled to use the AZ exemptions in your bankruptcy case).

Bear in mind that both the trustee and the secured creditor (who must get Christmas Cookies and Milk if you are going to keep your car!) are enemies of the goal, “keep all my stuff”.

The second goal in a Chapter 7 Bankruptcy in Arizona is to lose all the debt, to the extent possible under 11 USC 727 (which really addresses whether you should get a discharge in the first place, and whether you will get to keep it!) and 11 USC 523, which discusses what doesn’t get scraped off your economic shoe when you get your bankruptcy discharge.

Got the goals? Keep all the stuff, scrape off all the debt. To the largest extent possible.

But should you file a bankruptcy?

Well, that’s a little like asking, “Should I live on a beach?” That depends. If your job requires you to live in New York City, because you are doing sophisticated economic trades on a daily basis, maybe not. If your job involves fishing, probably! And if you really, really like to eat enchiladas, it’s probably a bad idea to live in Ireland.

Now, that was a stunted decision tree, but you get the idea.

At the root of the Bankruptcy Decision Tree is the “file/don’t file” issue.

The only place that doesn’t branch is when a creditor files an involuntary bankruptcy petition against you, but that happens very, very seldom. I’ve never seen it happen in a consumer context, and I’ve seen a lot in thirty years as a bankruptcy attorney in Arizona.

What cuts in favor of filing a bankruptcy? Well, you might pass the Joseph C. McDaniel Rule of Bankruptcy Inevitability, for instance. And while that doesn’t make it certain that you’ll file, it shuuuure increases the chances.  Having as much unsecured debt as your yearly income is just that sort of issue that’ll nudge you in the direction of a bankruptcy, you know?

Here’s something that branches against a decision to file a bankruptcy: owning a huge non-exempt asset. If you have a one-third ownership interest in a roller skating rink that’s worth five million dollars, it’s somewhere between crazy and nutty as a fruitcake to file a bankruptcy because you owe a hundred thousand in credit card debt. Even if you are illiquid.

Probably.

If you’re old enough to know better, that tends to cut in the direction of a bankruptcy filing. And that’s simply because it’s hard to save for retirement, and hard to enjoy retirement, if Snidely Whiplash is tying you to the rails and Dudley Do-Right is nowhere in sight!

When you’re old enough to know better, and you want to know how long (if ever) until your credit card debt is paid off (if the answer is never, you may be a candidate for a bankruptcy!), here’s a link to a discussion of a credit card payoff calculator. 

One pending lawsuit doesn’t mean you have to file a bankruptcy, if all the other analytical variables go the other way.

Ten pending lawsuits is sort of like a redneck joke: you may be a bankruptcy candidate if….

One pending trustee’s sale doesn’t necessary require a bankruptcy filing, especially if the Arizona Anti-Deficiency Statute may apply to your situation.

Ten pending trustee’s sales…you’re gonna file a bankruptcy, aren’t you?

Being fired doesn’t exactly count in the “file/don’t file” part of the analysis; it applies to the “which Chapter of Bankruptcy do I get to file” analysis, which is a very important part of the process. Unless you don’t care if you’re stuck in an agonizing five-year payment plan in a Chapter 13 Bankruptcy.

I’ve discussed that branch of the Bankruptcy Decision Tree in prior posts, particularly when I discuss the various exceptions to The Dreaded Means Test, which is what normally determines whether you file a Chapter 7 or a Chapter 13 Bankruptcy Case in Arizona.

So what’s my Christmas Bankruptcy Wish for you this year?

Well, I hope your Arizona Bankruptcy Decision Tree is green and pretty and smells nice, and that you don’t have to file any flavor of Bankruptcy at all!

And if you do have to file, I hope you pass the Dreaded Means Test (here’s a calculator) and that you get to file a Chapter 7 Bankruptcy Case, not a Chapter 13, with five long years of payments.

And I hope your Discharge is plump enough to get rid of all your debt, and that your Arizona Bankruptcy Trustee is cheerful and jolly and exclaims: you get to keep all your stuff!

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