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Does A Retired Person Need to File Bankruptcy?

          A person retiring to a fixed income with credit cards and other credit debt may find themselves unable to pay this debt incurred while employed. It is then they may consider bankruptcy as an option to deal with their predicament. Generally, people file bankruptcy to prevent their wages from being garnished, to stop the foreclosure of a home, or repossession of a vehicle.

          Garnishment is generally not an issue for a person who has retired on a fixed income. Social Security benefits are protected from garnishment.[1] Likewise military disability benefits are exempt from garnishment.[2] Most pension income is protected by Arizona law.[3] Such pensions are generally referred to as "ERISA" qualified pensions. Annuity income, from a policy owned continuously for two (2) years by a person, is protected from garnishment under Arizona law.[4] Income from an employer's disability or accident policy are also protected from garnishment under Arizona law.[5] The assets within an IRA are protected from collection in Arizona[6] and in a bankruptcy proceeding.[7]

          Arizona protects $150,000 of equity in a home in which a person resides from collection by creditors other than mortgage, homeowners associations, tax claims, and support claims.[8] Arizona also protects $6,000.00 of equity in a person's vehicle and $12,000.00 in a vehicle for a person with a physical disability.[9]

          There are more laws that protect other property from collection by a person's judgment creditors. However, since most of a retired person's income and largest assets are protected from collection by judgment creditors, the question then becomes why would such a person need to file bankruptcy? The answer would be to stop the collection calls and letters.

          Also if sued, and a creditor obtains a judgment against a person, the judgment creditor can obtain a court order from the court issuing the judgment for the judgment debtor to appear and produce detailed financial records to help the creditor determine if it can collect on its judgment. Filing bankruptcy can stop the necessity of appearing in a court and producing very detailed financial records for a judgment creditor. However, filing bankruptcy requires completion of schedules and statements that do require detailed reporting of various financial information for two (2) years previously and some financial questions seek information from a debtor beyond that time period.   

          Understanding, that most of what a retired person owns and their income are protected from collection by law, should keep the inability to pay on their credit debt in perspective. Within that perspective filing bankruptcy is an option but not a necessity for the financial wellbeing of a retired person. Allegrucci Law Office, PLLC has assisted many retired persons who have chosen bankruptcy as the final option to deal with the inability to pay their credit debts.

          We are a debt relief agency that assists people to file bankruptcy. 

[1] 42 U.S.C. §407(a)
[2] 38 U.S.C. §5301(a)
[3] A.R.S. §33-1126(B)
[4] A.R.S. §33-1126(A)(7)
[5] A.R.S. §33-1126(A)(4)
[6] A.R.S. §33-1126(B)
[7] 11 U.S.C. §522(a)(3) and(a)( 4)(C)
[8] A.R.S.§33-1101
[9] A.R.S. §33-1125(8)

[August   7, 2018]

Can My Homeowners Association (HOA) Foreclose On My Home?

          The answer is yes, if you have been delinquent in payment of your HOA assessments for one (1) year, or the amount of unpaid assessments is at least $1,200.00, whichever occurs first.[i] If your HOA chooses to foreclose upon your home it must file a civil action in the superior court of the county where the property is located. Because a foreclosure action requires the filing of a court action, you have the right to defend in that action, if you believe the HOA is incorrect for any reason it is pursuing the foreclosure of your home.
          If your HOA does file a foreclosure action against your home, it can be awarded its court fees, costs, and reasonable attorney fees incurred in that litigation. The fees, costs, and attorney fees of a foreclosure action will likely exceed the amount of the unpaid assessments due the HOA and being foreclosed against your property. Once a foreclosure action has been instituted by your HOA, you can still try and arrange a settlement of its claims by making repayment arrangements with the HOA. You also have a right to pay the unpaid assessments in full plus the fees, costs, and attorney fees incurred by your HOA in the foreclosure action.
            If you still want to keep your property, and have been unable to resolve your issues with the HOA, you can file a Chapter 13 bankruptcy reorganization to stop the foreclosure of your property.
          A Chapter 13 bankruptcy reorganization stops the filed civil action for foreclosure from going through, gives you up to five (5) years to catch-up the missed HOA assessments, fees and costs, and allows you to resume monthly/quarterly assessment payments to your HOA during that period. You do have to have a regular monthly income, sufficient to allow curing the missed assessments, fees and costs over time, for this to work.
          David Allegrucci has represented clients in filing Chapter 13 bankruptcy proceedings since 1987. As such we are a debt relief agency assisting people in filing for bankruptcy.  

[i] A.R.S. §33-1807(A)