Bankruptcy Process – August 2016 Interview

Katherine:

Hello everyone, our friend, Pete Moak, Attorney Moak is joining us again to talk with us about bankruptcy matters. He’s answered a lot of questions and he’s gone in great details, but today he’s going to talk to us about the bankruptcy process. He’s going to let you know things to expect and how to prepare yourself. Hey, I want to say welcome back to This Needs To Be Said, Pete, how are you?

Pete Moak:

I’m good and wonderful. How are you today?

Katherine:

I am wonderful. I have a cat family that moved outside of my place where I live. I don’t know how I feel about that, they just moved in, but otherwise I’m fine.

Pete Moak:

They’ll pull at your heartstrings until they get inside.

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Katherine:

I know, that’s why I keep trying not to look and I won’t feed them. Don’t tell anyone, I didn’t say that, but I’m doing fine today but that was just something interesting that happened to me.

We’ve been talking with you about bankruptcy and with all of your experience you’ve given us very detailed explanations of different parts of the process, well, today you’re going to tell us about those process of filing bankruptcy. I’m going to turn it over to you and take notes.

Pete Moak:

Great. Katherine, I like to tell this story as a somewhat of a cartoon explanation of the bankruptcy process. If someone were to come to me and describe their circumstances I would just basically tell them, “Well, this is probably similar to what you’re experiencing.” Imagine yourself in a deep swimming pool, deep enough to where you can’t touch bottom with your toes and keep your nose above the waterline. Well, of course that’s got to be a problem for you because in order to live you’ve got to breathe air, and that means you’ve got to tread water. You’ll be paddling your feet and paddling your hands to keep your head above the waterline. This can go on for a while, but pretty soon you get exhausted and all of your muscles start to get so tired that you feel like you’re just going to give up and sink to the bottom.

Now you would like to go to the edge of the swimming pool and hang on for a while to rest, but the problem is, is all of your creditors are lining the inside of the swimming pool and they won’t let you rest. They want to push you back out away from the edge. They’ll pull you under. They’ll splash you and just generally harass the heck out of you, and that’s the life of the creditor collection agency.

In my little cartoon, imagine on the side of the swimming pool where the lifeguard sits is the bankruptcy judge. Now he has a whistle in his hand and he’s waiting for your attorney to file the bankruptcy paperwork. Now the bankruptcy paperwork consists of various schedules, a total of about 65 or 75 pages of documents. It contains the petition, the schedules and statements, the means tests, etc. All of those paperwork gets filed with the judge. Now in my cartoon the judge touches the paperwork and then blows the whistle.

The truth is, that when we file these things they’re filed electronically and the judge doesn’t see them unless later there’s a need for a hearing of some kind, but in my cartoon the judge touches the paperwork, without even looking at the papers he blows the whistle and orders all of the creditors to get out of the swimming pool and stay away from the petitioner who filed for bankruptcy, the debtor. This is called the Automatic Stay Order, this is a very important process of the bankruptcy because this is the beginning of the protection that you get from filing bankruptcy. That protection means that all the creditors have to leave you alone. They can’t call you to try to collect the money. They can’t send you dunning letters. They can’t do anything to try to collect the debt. They can’t start a lawsuit. They can’t continue a lawsuit if it’s already been filed. If there’s a garnishment it stops. All kinds of collection activity ceases as soon as the bankruptcy case is filed.

Now then the judge turns over that paperwork to a trustee. Now the trustee’s job in the bankruptcy is basically to look out for the interest of the creditors, but he also has some administrative duties where he has got to interview under oath the debtor or debtors pitfall for bankruptcy. He asks some basic questions identifying that they are the people who have filed, that their Social Security Numbers match up with the petition that was filed. That they enlisted all of their assets and all of their debts, that they reviewed the petition and are able to testify under oath that the information on the petition and schedules is true and accurate to the best of their knowledge.

Now the trustee is also looking for things that he might be able to sell to pay some money to the creditors. He’s going to ask a few other questions about what the debtor may own that might just pop up something like, “Do you have a lawsuit, where you could sue somebody to collect money or property?” If so, then the trustee is going to be able to take over that lawsuit and collect the money for the benefit of the creditors. He’ll ask a few other questions too, but basically that interview takes place after about 4 to 5 weeks from the time that the case is filed.

Now in the meantime, the trustee after he gets the paperwork he looks it over and then he sends out a letter to the debtor asking the debtor to send them some documents, and also to complete a short questionnaire, usually about 10 or 12 questions that are covering some of the same things that he’s going to ask at the meeting of creditors.

Now about 4 to 5 weeks after the case is filed, the trustee has this meeting of creditors that we’ve talked about, and the creditors are invited, but almost never do they show up. It essentially ends up being a meeting between the trustee and the debtors and the attorney, and it takes about 5 to 10 minutes if things go smoothly, and hopefully in all my cases they do. I sometimes see some disasters going on with other people who have not got an experienced attorney, but in this interview it takes about 5 to 10 minutes and then it’s concluded. This starts a very important time period of 60 days, during which the creditors have the opportunity to look over everything and to determine whether or not they want to file an objection to the person receiving a discharge. Now they have to have a legal basis for the objection. They’re not going to get paid anything, in almost every chapter 7 case, it is objectionable to them, but they have to have a legal reason to file an objection. That would be highly unusual in any bankruptcy cases, for a creditor to file an objection.

After that 60 days goes by the debtor is going to receive a discharge. Now there’s one thing they have to do after the bankruptcy case is filed and before they can get a discharge, and that is to complete the Debtor Education Course on Personal Financial Management. Once that course is completed, and it’s a short thing that you can do on the computer, it takes about an hour to an hour and a half. It’s designed to teach you some things about managing your finances, so that hopefully you won’t end up in a bankruptcy court again.

After that certificate is filed and 60 days has passed, the clerk’s office is going to review the file and then essentially push a button that generates the production of what is called a Discharge of Debtor Notice. This is mailed out to all of the creditors that are on the creditor matrix, which is part of what is filed in that 65 pages, the list of the creditors and their addresses. At the end of getting that 60 days passing, completing the Debtor Education Course, the issuance of the discharge is what the person filing bankruptcy for. Essentially that’s a permanent order that converts that temporary order which is the Automatic Stay Order into a permanent order, meaning that the debtor has no more legal responsibility to pay those debts. That’s the end of the process in pretty much every case.

Now if it’s a case involving some assets that the debtor owns that are not exempt, that the trustee thinks is valuable enough for the trustee to go after, then he will administer those assets by gathering them in, selling them at an auction, converting them to cash and then distributing the money to the creditors. Nevertheless, there will be a discharge issued even before the creditor has completed that process in many cases, but the case will remain open. It won’t be closed until the trustee has completed the administration or liquidation of the debtor’s assets. That’s the bankruptcy process from the time that it’s filed until the time that you get your permanent order of discharge.

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Katherine:

I like that you give that illustration of swimming and you want to grab the side of the pool and your debtors are right there around the edges. It did draw a picture in my head for me of, “Yeah, you know, that could get tiring,” and how do you relax and be able to overcome this and not be harassed, as you put it or feel in the panic, [inaudible 00:10:07] feel panic if there’s pressure or you can’t get to the edge, you can’t get out. I like that illustration and this gives a step by step of what to expect.

Now, what if someone happens to not come to you, when they should come to you, and what happens if they don’t come to you for this process? Do you have some interview questions, I guess, that they should be asking? Because they won’t know if this person will follow the same process that you laid out here until they’re in the mix which will be too late. How can they screen an attorney to make sure that they are going to be following the steps as you’ve laid out?

Pete Moak:

Well, I want to say that the most important thing if anybody is going to be hiring an attorney is to find out the attorney’s experience. In other words if they occasionally file a bankruptcy case they probably aren’t up on the things that are changing and what’s going on in the court locally and that’s an important thing. I assure my clients that I’ve been practicing law in Arizona for over 40 years. I’ve filed thousands of bankruptcy cases over the years, so this is not a new process. Yes, they do need to screen their attorney and find out of the attorney is doing something that he’s completely knowledgeable about. That’s important.

Katherine:

All right, well, Attorney Moak, I want to say thank you so much for being here on This Needs To Be Said once again, and educating us on the things of bankruptcy and today it was the process of filing bankruptcy. How can people get in touch with you outside of this interview?

Pete Moak:

Well, of course they can call our office which is 480-755-8000. If they are a person who’s looking for help or would like to talk to an attorney, they should dial extension number 1 and that will connect them to the person who schedules my appointments. They can set up an appointment for a free 30-minute consultation with me, at that time I will interview them and determine whether or not they can qualify for bankruptcy and whether or not they would benefit from bankruptcy. Then we go over what would be necessary for us to be hired and an explanation of what they need to do in order to get their bankruptcy case filed. 480-755-8000, extension 1 for an appointment or to talk to an attorney.

Katherine:

Awesome. Thank you and until next time, have a wonderful day.

Pete Moak:

Thank you very much.

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