Monthly Archives: May 2014

Will we lose our pre-paid family burial plots when we file for bankruptcy?

No, they’re yours to keep.

There are various items you own which are exempt (protected) under bankruptcy law.  Utah law provides various exemptions, most of which are found in Utah Code 78B-5-505. “Property exempt from execution.”

The specific code section here states that:  “(1) (a) An individual is entitled to exemption of the following property:  (i) a burial plot for the individual and the individual’s family….”

tombstone

This means that your pre-paid burial plot is protected when you file bankruptcy.  It doesn’t matter whether you file a chapter 7 or a chapter 13 bankruptcy.  In a chapter 7 bankruptcy, the trustee cannot take that asset and sell it for your creditors.  In a chapter 13 bankruptcy, the trustee cannot demand that you pay the value of that asset to your creditors.

It is safe.

I have ongoing health issues and medical collections, can I keep filing bankruptcy?

Yes, and no.

Assuming that your income is below median, you can get a discharge in a chapter 7 every 8 years.  However, this doesn’t help a client who gets a discharge of $240,000 of medical debts today and then racks up a $40,000 emergency room bill six months down the road.  That new $40,000 er bill wasn’t covered in the chapter 7, and they cannot list in in a new chapter 7 for 7.5 years.

However, chapter 13s are designed to handle this.

If you have ongoing health issues, then you will want to file a “base plan” chapter 13, meaning that you’re proposing to pay the chapter 13 trustee payments of about $100 a month for 3 -5 years.  This still discharges all of your unsecured, nonpriority debt (like medical bills), even though you end up paying pennies on the dollar.  If you have a new medical bill in the middle of this chapter 13, you can simply stop paying and the case will be dismissed.  Then you can file a new 13 and include the new bill and start the $100 a month payments all over again.

Theoretically, you could file a 5 year chapter 13 plan every 5 years for the rest of your life.  You would be protected from collectors and would be paying pennies on the dollar for the medical bills related to your health issues.

I know that it doesn’t sound like fun at all, but you can use a chapter 13 to cover those medical bills and to be ready for any new ones that crop up.

My ex husband/wife filed bankruptcy, and I know that they’re hiding assets from the trustee. What do I do?

If your ex husband/wife or someone you know has filed bankruptcy and is actively hiding assets, then you should probably tell the bankruptcy trustee.

Just remember to be careful, because by doing so, you are accusing them of committing a fraud on the court, of committing perjury on their federal bankruptcy court documents, and this is a pretty serious charge.  It is not something to be done lightly.  The trustee will generally keep you anonymous, but not always.  There is a good chance that the debtor will know that you turned them in.

Today, I was in court when the ex-wife of one of the debtors showed up to speak with the trustee.  Unfortunately, she was an hour late, and she missed his 341 Meeting of Creditors.  She wanted to talk to the trustee, advise him that her ex husband was behind on child support, and tell the trustee that her ex husband had two four wheelers and a 14′ trailer that he had transferred into his brother’s name right before filing bankruptcy.

I advised her to write a letter to the trustee detailing the hidden assets and stating her claim (she had been properly listed in the bk as a priority creditor).  I told her that the trustee would follow-up, and if there were fraudulent transfers of assets, he might go after those transfers, get the items back, and sell them to pay creditors of the estate.

I don’t know if she did or not, but let’s say she was telling the truth.  Then the trustee would contact her attorney and/or run a TLR search (title search) showing that the debtor did, in fact, have those 3 vehicles.  The trustee would then demand that they be turned over to an auctioneer, and he may even turn in the debtor to the U.S. Trustee’s office for a criminal investigation.  After those vehicles sold at auction, the trustee would use those funds to pay off creditors of the estate, starting with priority creditors like the child support owed to the ex-wife.

What information do you need to stop my garnishment after I file bankruptcy?

I wish my clients would ask me this one.  Most of them assume that filing bk will simply stop the garnishment, and although it technically should, there are more hoops that we need to jump through.

Moments after I file bankruptcy, I need to send a letter to your payroll office and to the creditor processing the garnishment.  The letter is aptly titled “stop garnishment letter.”  I send the letter to the creditor, and in a week or so, he will get around to sending a notice to your employer that he is releasing the garnishment (“release of garnishment”).  I also need to notify your payroll, or human resources (“HR”), or whoever processes payroll at your office.  I notify them right away so that I can stop the garnishment that day.

What I’d like to have is:

1.  email address for payroll

2.  phone number for payroll

3.  fax number for payroll

It may seem like overkill, but it’s important that we notify payroll so that your paycheck isn’t 25% smaller than it should be.

Sometimes, your payroll office will still process the garnishment in spite of my letter.  They are more afraid of the creditor suing them for treble 3x the garnishment amount if they fail to process it.  If payroll does this, we can send a letter to the creditor, and the creditor will usually write a refund check quickly.

Can you file bankruptcy on a federal holiday (when the federal court is closed)?

Yes, if you’re filing it electronically.

Today is Memorial Day.  I met with a client who needs to file today.  Unfortunately, it’s a holiday.

The court is closed today, and in fact, it is physically closed on every major federal holiday.  This means that if you drove up to the court to manually file the case, you would not be able to get in to meet with the court clerk, you could not file, you could not pay the filing fee, and you would not get a case number.

However, most bankruptcy attorneys use electronic access to the courts through a system called PACER, which is defined as:

Public Access to Court Electronic Records (PACER) is an electronic public access service that allows users to obtain case and docket information from federal appellate, district and bankruptcy courts, and the PACER Case Locator via the Internet. PACER is provided by the federal Judiciary in keeping with its commitment to providing public access to court information via a centralized service.

This means that I can file a bankruptcy case on a holiday.  I can file it on a Sunday night at 11:00.  I can (and have) rolled off the couch in my office at 2:00 a.m. and filed a case electronically after my client called me to tell me that he had finally completed his online -pre bankruptcy credit counseling.

So, yes, you can file bankruptcy on a holiday, if you’re using an attorney who has PACER access.

To be a little more technical, I am actually using the ECF portion of PACER, which allows “Electronic Case Filing.”

The court defines it as:

The Case Management/Electronic Case Files (CM/ECF) system is the Federal Judiciary’s comprehensive case management system for all bankruptcy, district and appellate courts. CM/ECF allows courts to accept filings and provide access to filed documents over the Internet.

What are the debt limits for bankruptcy?

There are none in a chapter 7.  My biggest chapter 7 I ever filed had a debtor with a little over $12,000,000 in debt from a number of bad real estate transactions.  Very bad real estate transactions.

There are debt limits in a chapter 13.  If you go over these limits, the Chapter 13 Trustee will move to dismiss your case, and he will win.  Under 11 U.S. Code § 109 – Who may be a debtor:

(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $250,000 and noncontingent, liquidated, secured debts of less than $750,000, or an individual with regular income and such individual’s spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $250,000 and noncontingent, liquidated, secured debts of less than $750,000 may be a debtor under chapter 13 of this title.

In other words, if you owe more than $250,000 of unsecured debt (things like credit cards and medical bills) and/or if you owe more than $750,000 of secured debts (like car loans or mortgages), you cannot file a chapter 13.  You have too much debt.

In this kind of situation, you’re either looking at a chapter 7 or a complicated and very expensive chapter 11.

If we file bankruptcy, will we lose our homeschooling books, computer, and software we use to teach our children?

Maybe, and I hate this answer.

I cannot protect a computer or printer or software under the Utah exemptions unless I can claim that the computer and related items are professional implements or tools of the trade you use in your business.  And no, although homeschooling feels like a full-time job, it is not employment that generates income for you, and I cannot use a “tools of the trade” exemption to protect the computer.

However, most people’s computers and software have virtually no value on the open market, and they are not items that generally interest a bankruptcy trustee because of the difficulty of resale and the massive, rapid depreciation those items suffer the moment you buy them.

So unless you have a truly wonderful, state-of-the-art computer system, you won’t lose it, because it’s not worth enough to the bankruptcy trustee.

As for the books, Utah Code Ann. 787B-5-506(1)(c)  protects up to $1,000 of books.

78B-5-506. Value of exempt property — Exemption of implements, professional books, tools, and motor vehicles.
(1) An individual is entitled to exemption of the following property up to an aggregate value of items in each subsection of $1,000:
(a) sofas, chairs, and related furnishings reasonably necessary for one household;
(b) dining and kitchen tables and chairs reasonably necessary for one household;
(c) animals, books, and musical instruments, if reasonably held for the personal use of the individual or the individual’s dependents;

It is a pretty easy argument to make that those books are “reasonably held for the personal use of … the individual’s dependents.”

What happens if I forget to list a creditor in my bankruptcy? Are they discharged under “In re Parker?”

It depends.

If your chapter 7 bankruptcy case was a “No Asset Case,” then the odds are pretty good that all non-priority creditors (creditors other than taxes, child support, student loans, and restitution) were wiped out.  This means that everyone was wiped out even if we forgot to properly list them.

This is not an excuse to not do your homework;  you need to do your best to list all of your creditors.

The safest way to be sure is to really do your homework and list every single creditor you know of when you file the case.  Keep those collection notices;  run your credit report; be diligent in adding any new creditors that pop up while your case is open.  Unfortunately, there are some creditors you don’t know about, like when the doctor’s office sells the debt off to a debt collector one week before you file.

So what is a “No Asset Case?”  This means that the trustee has met with you, reviewed your assets, and filed a report with the court that you have nothing worth selling off or taking and using to pay your creditors.  Most cases are No Asset unless you have too much equity in your home, your car, or have a huge tax refund coming.

So let’s say you have a “No Asset Case,” you receive your discharge, and your case closes.  Six months later, a creditor contacts you and threatens to sue because they weren’t listed in the bk.  Let you attorney know, and he can send off the “In Re Parker” letter that tells creditors to go away.  The letter looks something like this;

RE: Collection of Unscheduled Debts

BK CASE NO.: xx-xxxxx

Dear Sir/Madam:

This letter is to inform you that xxxx filed a Chapter 7 bankruptcy case on May 31, 2011. The case was discharged on September 8, 2011. You may verify this by contacting the Utah Bankruptcy Court at 801.524.6687.

Mr. xxxx has advised me that you are attempting to collect a pre-petition debt from 2009, claiming that he owes you approximately $2,500. Please cease your efforts immediately; you are in violation of the court’s discharge order and the FDCPA.

Your collection efforts constitute a violation of the permanent stay which went into effect the day xxxx received his discharge [11 USC §362(a) and 11 USC §362(k)]. As you may already know, any violation of the permanent stay is punishable, and could include violations of up to $1,000.00 in fines as well as payment of costs and attorney fees.

If you have not received notice of the bankruptcy case, let this be notice. In addition, although this debt was not listed on the original bankruptcy schedules, because the Trustee over the bankruptcy case filed a “No Asset Report” on December 21, 2011, all unsecured debts are discharged. Please note:

There is no need to reopen a no asset Chapter 7 case to add omitted creditors. The debts are still discharged. Note, “In re Brewer v. Brewer, 02-2465”:

Notwithstanding the lack of scheduling in the bankruptcy papers, the debts were discharged by operation of law because Debtor’s case was a no asset case, there was no bar date set for filing proofs of claims, and the claims were not in the nature of otherwise non-dischargeable claims. Sanctions were imposed on the Defendant because he refused to cease his collection efforts, even though he had been placed on notice of the Debtor’s bankruptcy and the Tenth Circuit’s decision of In re Parker,

And “In re Parker, 264 B.R. 685”:

Furthermore, notwithstanding 11 U.S.C. § 523(a)(3)(A), the unscheduled prepetition debt was automatically discharged under 11 U.S.C. § 727(b) in the debtor’s no asset case where no claims bar date was set.

Should you proceed with continued collection efforts, we will be forced to re-open the case and seek sanctions against you.

Thank you for your assistance in this matter.

Sincerely,

Robert S. Payne

Attorney at Law

Unfortunately, this doesn’t work for all cases.  If your case is an asset case, you may have to reopen the case to list the creditor.  If the creditor was a particularly nasty one, like your sister who sued for for fraud when you administered your deceased father’s estate, she may claim that you omitted her on purpose in bad faith.  However, for most run of the mill creditors, this works.

My bank account was garnished two days ago. If I put money in there today, will they levy that money as well?

No.

The bank garnishment/levy was a one shot affair.  To garnish funds in a bank account, the creditor fills out the paperwork and mails it to the bank.  On the day the bank processes the paperwork, the bank will put a hold on any funds in your bank account and turn them over the the creditor within 21 days unless you fight that levy.  (You generally lose the fight unless you can prove that the funds were exempt like child support or SSI/SSDI or can prove that the money in the account was not yours to begin with).

That garnishment only affected that day, though.  So, if a creditor garnishes you on a Monday, when you put money in the account on Tuesday, that garnishment period is done.  The only way the creditor could garnish you account on Tuesday as well if is he sent a new garnishment that the bank then processed on Tuesday.

Normally, this won’t happen because creditors won’t garnish your account more than once a month (they could, but they generally won’t).

Does bankruptcy affect my ability to get new student loans?

Yes, and no.

Bankruptcy does not discharge your student loan obligations (except from some fairly rare cases).  This means that lenders generally understand that your current bankruptcy isn’t going to affect the requirement that you pay them back in the future.

This means that you will still be able to get Federal Stafford subsidized and unsubsidized loans.  You can still get Pell Grants.

However, some student loans require that you have healthy credit, and a bankruptcy will affect your ability to get PLUS loans (“Parent Loan for Undergraduate Students”).  A PLUS loan requires that you are creditworthy, and you will probably NOT qualify for the PLUS loan if you have an “adverse credit history,” including:  a recent foreclosure, recent bankruptcy discharge, charge-offs (especially of old student loan debt), a recent deed in lieu of foreclosure, a recent or ongoing wage garnishment, a recent repossession, and any tax lien or ORS lien (child support lien).

Additionally, although you can normally apply for and obtain private student loans, those lenders will run a credit check on you, and your bankruptcy may hurt your chance of taking out these loans.  This doesn’t really make sense since bankruptcy wouldn’t discharge those loans, but the bk is still taken into consideration before they will lend you money for school.