Bankruptcy in Arizona, as in all states, is subject to a complex set of federal statutes as well as specific state laws that govern bankruptcy exemptions and other issues. Many people who are interested in bankruptcy as a debt relief option are aware that significant changes to the U.S. Bankruptcy Code took effect when Congress passed and President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005.
One important part of these changes was the introduction of a “means test” to determine eligibility for Chapter 7 bankruptcy and compute the amount of disposable income a Chapter 13 debtor has available for reimbursement of creditors. Earlier this year, the U.S. Supreme Court interpreted the section of the bankruptcy code that defines the expenses that a debtor can deduct when carrying out a Chapter 13 or Chapter 7 means test.
The bankruptcy code defines an individual or couple’s monthly expenses using national and local standards for basic necessities, as well as Internal Revenue Service (IRS) expense tables for federal income tax purposes in the debtor’s area of legal residence. In addition to housing, food and transportation costs, specifically defined expenses include “reasonably necessary health insurance, disability insurance, and health savings account expenses” for the debtor and his or her spouse and dependents. Monthly expenses of the bankruptcy applicant do not include any payments for debts.
Judicial Resolution of Complex Bankruptcy Disputes
The recent Supreme Court case, Ransom v. F.I.A. Card Services, involved a Chapter 13 petitioner who had named FIA as an unsecured creditor. In compiling information for his bankruptcy petition, he listed among his assets a car that he owned outright with no car loan or lease payments. To determine his allowable expenses, he specified a car-ownership deduction at the allowed maximum as well as a separate deduction for the costs of car operation and maintenance.
FIA objected to the inclusion of the car ownership deduction, which would have reduced his disposable income over the duration of the 60-month bankruptcy repayment plan by $28,000. The U.S. Bankruptcy Court for the District of Nevada agreed, and its judgment was affirmed by the Bankruptcy Appellate Panel and the U.S. Circuit Court of Appeals for the Ninth Circuit.
The Supreme Court agreed to review the case, and focused its analysis on section 707(b) of the Bankruptcy Code, which provides that a debtor is not allowed to claim all monthly expenses, but only “applicable” expenses. The Court defined applicable to mean “appropriate, relevant, suitable or fit,” and in the bankruptcy context the Court concluded that this meant that a debtor must have actual costs related to the category of deduction.
A nearly unanimous Supreme Court held that the category of car-ownership deductions “encompasses the costs of a car loan or lease and nothing more,” and concluded that the petitioner could not claim the deduction because he had no lease or financing payments. The lone dissenter, Justice Antonin Scalia, took the side of the bankruptcy petitioner, a position that had also been followed by three other U.S. Courts of Appeal. Justice Scalia noted that the majority’s interpretation of applicable “produces a situation in which a debtor who owes only a single remaining payment on his car gets the full allowance.”
Arizona Bankruptcy Attorneys Help Clients Get a Handle on Financial Complexities
The common characteristic of all meaningful long-term debt relief strategies is that they require a thorough look at the hard numbers behind a couple or individual’s financial situation. A debt relief lawyer can help a client understand the pros and cons of every option, including the significance of deductibility of expenses for Chapter 7 and Chapter 13 means tests.
The Supreme Court’s recent decision regarding vehicle-ownership expenses could have significant implications for a client who considers pursuing a Chapter 7 or Chapter 13 bankruptcy. A Phoenix bankruptcy lawyer can explain precisely why this may be so under a client’s unique circumstances. For those who fail to qualify for Chapter 7 liquidation, a clear understanding of the latest legal developments can provide a clearer assessment of the advantages of a Chapter 13 reorganization, including the effect on mortgage foreclosure and a host of other debt-related issues.
Why should you hire our firm to represent you in bankruptcy?
Great question. Here are a few reasons:
- 1. Bankruptcy is our sole area of practice. Attorney Wright has over 10 years of experience in the field of bankruptcy and has helped over 1000 people successfully file.
- 2. Attorney Wright has an accounting background that is useful in analyzing complex financial documents. Prior to law school he obtained a degree in accounting from the University of Wisconsin School of Business. He exercised his strong numerical aptitude in the field of accounting, including several years with The Kohler Co., before ultimately deciding to pursue a law degree.
- 3. New clients meet with an attorney during their first visit. We understand your time is valuable. It is important your questions are answered quickly and accurately so you can take appropriate steps to secure a better financial future and eliminate fear and stress.
4. In business, referrals are the highest form of professional compliment. We frequently receive referrals from other lawyers and previous clients.
- 5. Our firm is small which enables us to focus on quality over quantity. We don’t have billboards on the I-10 or banners affixed to public transportation. Our approach is a bit more understated. We care about people and doing things right and it shows in our low employee turnover and positive reviews.
- 6. Perhaps the most important consideration is the cost of filing bankruptcy. We continuously assess our fees to ensure we offer fair and competitive pricing. We want to offer you a deal without sacrificing the quality of your experience.
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What our clients are saying…
Mr. Wright and his staff were amazing. They made a negative situation a lot better and turned it into a positive. Could really tell they care helping people and I will refer their Phoenix Bankruptcy Attorney firm to friends and family. Thanks again.
I called around looking for the right bankruptcy lawyer and came across Benjamin Wright. He personally called me for the consultation seeing how I live in Kingman AZ. He was very helpful from the start and his staff was very friendly and explained any questions I had, sorry for all the questions. I would definitely recommend Wright law offices, and I do!! Thanks for everything, you made what seemed like a hard thing to do simple!! You guys rock!!!
Great lawyer, he really helped my mother out of a jam. She was totally new to bankruptcy and he talked with us for about an hour and a half to make sure she wouldn’t be worried.
Ben is a kind and down to earth attorney. He worked around my busy schedule as a single mom (school, full-time job, and daycare pick up and drop off times). He explained absolutely everything to me and was good about e-mailing. I am writing this review as a THANK YOU.
I had a very positive experience with Attorney Wright. He or his staff returned my e-mails and calls promptly (even after business hours occasionally). His fees were reasonable. He was patient with me when I showed up in court missing an important document. He is aggressive, but fair and nice.