Monthly Archives: June 2014

Will I lose the right to vote (disenfranchisement) if I file bankruptcy?

No.

We have all heard that you lose the right to vote if you have a felony conviction.  That is only partly true.  Here in Utah, you cannot vote while you are incarcerated, but the moment you go on probation, or parole, or complete your prison term, your can vote again.

Bankruptcy is not a crime.  It is definitely not a felony.  You do not lose your right to vote, to hold office, to register for a concealed weapons permit/driver’s license/food handler’s permit, etc.  Filing bankruptcy is using a portion of the U.S. Code and federal laws to reorganize, repay (if possible), and discharge your debts.

On a side note, Utah is fairly lenient with voting and incarceration.  Here is the relevant code section:    voting rights

Title 20A Chapter 2 Section 101.5   Convicted felons — Restoration of right to vote and right to hold office.
(1) As used in this section, “convicted felon” means a person convicted of a felony in any state or federal court of the United States.
(2) Each convicted felon’s right to register to vote and to vote in an election is restored when:
(a) the felon is sentenced to probation;
(b) the felon is granted parole; or
(c) the felon has successfully completed the term of incarceration to which the felon was sentenced.
(3) Except as provided by Subsection (4), a convicted felon’s right to hold elective office is restored when:
(a) all of the felon’s felony convictions have been expunged; or
(b) (i) 10 years have passed since the date of the felon’s most recent felony conviction;
(ii) the felon has paid all court-ordered restitution and fines; and
(iii) for each felony conviction that has not been expunged, the felon has:
(A) completed probation in relation to the felony;
(B) been granted parole in relation to the felony; or
(C) successfully completed the term of incarceration associated with the felony.
(4) An individual who has been convicted of a grievous sexual offense, as defined in Section 76-1-601, against a child, may not hold the office of State Board of Education member or local school board member.

What happens to my year’s supply of food and necessities when I file bankruptcy in Utah?

Nothing, it’s safe.

The Utah Code specifically protects your year’s supply. In Title 78B 5-505, it states that there is a full exemption (protection from creditors) for “provisions sufficient for 12 months actually provided for individual or family use….”

This means that when you file bankruptcy, whether a chapter 7 or chapter 13 case, your bankruptcy trustee here in Utah cannot liquidate (or sell) your year’s supply of “provisions.”  I have not found a good definition of “provisions,” but it’s a fair guess to limit it to a stock of necessary supplies including food and water.  Guns are not included as “provisions,” and neither is camping equipment nor other survival gear.  But as for the food and water stored for personal use, yes, those are protected.

This is why we advise clients to stock up on their year’s supply before going bankrupt.  No one is going to take your cans of Spaghettios or baby formula that you’ve stored up in your basement.  No creditor can take them, and neither will the bankruptcy trustee.

I just got laid off and received a severance package. Will the bankruptcy trustee let me keep that in savings so that we can live on it after we file bankruptcy?

No!

It is the chapter 7 trustee’s job to find and liquidate assets for the benefit of your creditors.  If you have an asset I cannot protect, like money in the bank, he will demand turnover of those monies so that he can use that non-exempt asset to pay back to your creditors.

It doesn’t matter if it is a tax refund, a savings, money your parents just lent you, or a severance package.  if you are in possession of that money, and if I cannot exempt it, you will lose it.  severance package

Sometimes clients will want to give a really great explanation to the trustee on why they need this money more than he does.  To be honest, each time they are right.  Unfortunately, it doesn’t matter.  The trustee has to do his job, he gets audited by the U.S. Trustee’s Office on his job performance, and he has no leeway to let you keep the savings, even if you have the greatest reason ever.

Now in a chapter 13, it’s a little different.  If you have $10,000 in a savings account, you won’t have to turn it over, but you will have to pay at least $10,000 to your creditors over a 36-60 month chapter 13 plan.

In other words, you don’t lose it immediately, but you pay for it in the long run.

So, what should you do if you receive a severance package:  you live on it.  Once it’s all spent, then you file bankruptcy.  Just remember to save enough to pay me for your case.  🙂

Will filing chapter 13 bankruptcy stop my student loans from collecting on me or demanding repayment?

Yes (so long as the case is open).

I had this question today from a client who could’ve been a simple chapter 7 case.  Unfortunately, she had $80,000 of student loans whose repayment schedule was going to start in three months.  Her husband had another $100,000 of student loans coming due next year.

if we filed a simple chapter 7, I could discharge their debts (except for the nasty student loans) in about three months, just in time for the student loans to start hammering her.  She would’ve wiped out a $250 month payment to a judgment creditor in exchange for $500+ a month on her student loan debt.  This didn’t count her husband’s loan debt.

She had an interesting idea though:  what if we filed a chapter 13 and stretched it out for the three year plan?  The student loans would not be discharged in the bankruptcy, but the chapter 13 would give her a three year breather in which they could not collect.  Interest would accrue, but their family would not be forced underwater with huge student loan payments.

I normally tell a client to stick with the simple chapter 7, but in her case, she was right.  This upcoming chapter 13 would control payments to student loans ($0 a month instead of $500+ a month), would stop student loan garnishment of her tax refunds, and she could convert it to a chapter 7 at any time.

She was right;  a chapter 13 will stop your student loans from collecting on you.

Who are the best bankruptcy attorneys in the state of Utah, and how much do they charge?

I really, really hate this question, and I get it asked it more than you’d think.

Honestly, almost every bankruptcy attorney in Utah is good (at least the ones I know by name).  I consider myself to be in the upper echelon of bankruptcy attorneys in the state (Robert S. Payne, Utah Bankruptcy Attorney), but I’m not “the best.”  “The best” depends on what you’re looking for.  5063217113_9f4b6f29ec_m

I recommend looking at the online reviews.  Clients are brutally honest.  And yes, I believe that some attorneys may have canned reviews out there, and there are some really, really cranky crackpots who post bad things about attorneys that are only partially true, but overall, it’s the best way you can judge attorneys unless you have a referral from a friend or family member who went through it.  If you want to see my referrals, there are a lot out there and I appreciate every client who had kind things to say.

As for how much “the best” charge:

1.  Student Loans:  There are a few attorneys who have started trying to do bankruptcy court adversary proceedings to determine whether or not student loans can be discharged.  I know that they have to charge additional fees above and beyond the bk, but they are good.  You’re just looking at another $3,500 to $5,000 retainer to pay them to try that student loan dischargeability action.

2.  Zero (0) down bankruptcies or payment plans:  There are some attorneys who offer payments plans, and if this is what you’re looking for, then I’m not even close to the best here.  You end up paying a lot more in fees than you think, but some people feel like it’s their only option to file.

3.  Chapter 11:  Some bankruptcy attorneys file complex chapter 11 cases, but I understand that the retainer on this kind of case of $10,000+.  You are paying for their expertise in this kind of case.

4.  Chapter 12:  I have no idea.  I’ve never met a family farmer or fisherman who needed to file a complicated chapter 12 in Utah, and I sure don’t do them.

5.  Chapter 7:  Every attorney files chapter 7s.  Most charge from $800 to $1800 in fees.  Some of the young guys are really good and sincere, but to find “the best,” you may want to ask the attorney how many chapter 7s he’s filed.  This will tell you a lot.

4.  Chapter 13:  Most of us file chapter 13s too.  Same as above, ask your attorney how many he’s filed.  It’s not a guarantee that he’s good at it, but numbers mean experience, and experience is a good thing.  Upfront fees range from $0 up front to the full $3,500 up front.

5.  Creditor Violations/FDCPA/FRCA/Stay Violation attorneys:  I don’t know of any bk attorneys who make this their primary focus.  Most of us are nerdy transactional attorneys, and we’re just not the best mad-dog, take-no-prisoners kind of litigators.  The ones who do it usually get paid on a contingent fee basis.

6.  Business bankruptcy attorneys:  This is kind of a misnomer.  If you are self-employed, you’re really just a chapter 7 or 13.  If you need a complex chapter 11, see above.  And if you run a family farm or fishery (fish hatchery?), see above as well.

7.  Creditor attorneys:  Almost every litigation attorney dabbles in this.  Ask a friend who has tried collecting on someone in bankruptcy, and they can give you a referral.

 

Can you exempt my motorcycle in bankruptcy, or what happens to it when I file?

Maybe.

First, here’s what happens if you own it free and clear:  $3,000 of equity in one vehicle is protected for husband, and another $3,000 for wife (either in that same vehicle or in her separate one. So long as both are on title).

But there are limits:

78B-5-506. Value of exempt property — Exemption of implements, professional books, tools, and motor vehicles

“motor vehicle” does not include any motor vehicle designed for or used primarily for recreational purposes, such as:
(i) an off-highway vehicle as defined in Section 41-22-2, except a motorcycle the individual regularly uses for daily transportation; or
(ii) a recreational vehicle as defined in Section 13-14-102, except a van the individual regularly uses for daily transportation.
(b) An individual is entitled to an exemption, not exceeding $3,000 in value, of one motor vehicle.

In other words, $3,000 of your commuter is protected.  However, if you have a dirt bike which is not street legal, then I cannot protect it.  OHV’s are very, very hard to protect unless you have done the upgrades to make them street legal.

Now what happens if I cannot protect it and/or you have too much equity?  Well, the trustee will either demand the title and sell it to pay off your creditors, or he will ask you to buy it back from him.

Second, what happens if you have a loan against it?

In a chapter 7, so long as there is no equity above and beyond the loan that I cannot protect, all you have to do in a chapter 7 case is keep making payments on it and reaffirm the debt.  This allows you to keep the bike and the loan associated with it.

In a chapter 13, if you try to keep the secured debt, the trustee will object if it is anything but a commuter.  If you try to keep a toy in a chapter 13, you’ll end up paying double for it.  See http://robertspaynelaw.com/myutahbankruptcyblog/2014/06/05/can-we-keep-our-tractorsnowmobilefour-wheeler-and-make-payments-on-it-in-a-chapter-13-bankruptcy-if-we-use-it-for-snow-removal-purposes/

If I file bankruptcy, will it stop my landlord from evicting me on an unlawful detainer action?

Maybe.

Bankruptcy will discharge your liability to the landlord for the remaining amounts owed on the lease or rental contract.  It will stop eviction proceedings if the landlord does not have an order for restitution yet.  It will not stop the eviction, if the landlord obtained a judgment for possession/order for restitution prior the bankruptcy being filed.

So, let’s say the landlord has filed eviction proceedings and now has an order for restitution, then you are out of luck.   (This does not apply to business bankruptcies or chapter 11 bankruptcies).  Eviction Notice

On the other hand, if the landlord has just barely filed the 3 day notice, or 5 day notice, or 15 day notice, the bankruptcy stops that state court proceeding briefly.  The landlord will then need to obtain relief from the automatic stay in the bankruptcy court before he can proceed with his eviction action.

Even if there is an order for restitution in place, the bankruptcy offers you some protection.  Just to clarify what that order is, according to the Utah State Courts website, the order for restitution is:

Order for restitution of the premises; Utah Code Section 78B-6-812.
The restitution order:

directs the tenant to vacate the premises, remove the tenant’s personal property, and restore possession of the premises to the landlord, or be forcibly removed by a sheriff or constable;
advises the tenant of deadline to vacate the premises, which is usually 3 calendar days following service of the order, but it might be less; and
advises the tenant of the tenant’s right to a hearing to contest the manner in which the order is enforced.

In the past, we could file a bankruptcy and at least threaten the creditor/landlord that evicting you would amount to a violation of the automatic stay in bankruptcy.  (The automatic stay stops creditors from collection actions).  However, most landlords have learned that they can still evict you from the property, so long as they don’t seize any of your property or in any other way attempt to collect on the amounts you still owe them.  So, if the landlord tried to do a lockout, we could demand access to recover your personal property.  He does not have a right to seize your personal property after we file bankruptcy.  (If the lockout and seizure occurred prior to filing bankruptcy, he may have a good argument that he can sell the seized assets).

In short, this means that bankruptcy won’t stop your eviction if the order for restitution is already in place.  At best, it will buy you two or three additional days while your landlord consults with his attorney to see if the bankruptcy actually stops the eviction or not.  If his attorney is decent, the attorney will advise him to proceed with the eviction.

 

Is there any way to get my co-signed parents off of my car loan in bankruptcy?

No.  Bankruptcy does nothing to help them.

You can file a personal bankruptcy and have your personal liability on that secured car loan discharged by the bk, but Mom and Dad are still liable for the full loan amount.

There are some ways to get your parents (or any other co-signer) off of the loan, but none of them are very attractive:

1.  You can pay off the loan in full.  This would get your parents off of the loan because there is no more loan.

2.  You can refinance the loan only in your name.  This is generally impossible unless you have really good credit, and odds are that if you needed your parents to co-sign for your car loan, your credit is not great.

3.  You can roll the negative equity of your car loan into a new loan on another vehicle.  For instance, you can go finance the purchase of a different vehicle and use the current one as a trade-in.  However, you are now adding the negative equity of your first bad car loan into the new car loan, and you may not even be able to swing financing on the new loan without help from a co-signer.

4.  If you have really good insurance, a car wreck, theft of vehicle, crushing meteor swarm, etc. might have a nice insurance payout of the full balance of the loan.  (Don’t count on this one).

But generally, you’ll be stuck with giving up the vehicle and having your parents sued for the deficiency balance after the creditor sells the car at auction, or you can reaffirm the car loan and keep paying on a bad debt.

Is the chapter 7 trustee going to ask me why my chapter 13 case was dismissed?

I had a client ask me this question as we were walking into our 341 Meeting of Creditors with the Chapter 7 Trustee up in the federal building in Ogden.

Short answer:  yes, but it really doesn’t matter.

Long answer:  In the old days, after you filed bankruptcy, you would have to explain to the trustee or judge why you filed bankruptcy.  Now, we only have two and sometimes three trustees in the state who ask why you filed.  When they do, your answer really doesn’t matter.  I have never heard a client say anything to the trustee in response to this question that hurt my client’s case at all.

On the other hand, all of the trustees will ask you if you have filed bankruptcy before.  If you had a 13 dismissed recently, they will ask why it was dismissed.  A safe answer is always, “I couldn’t keep up with the payments.”  There is no reason to go into detail on this one.

That being said, you are pretty safe going into detail if you need to, but it’s usually not a good idea to overexplain yourself to the trustee.  Short, simple answers are best.

What is the default rate for payday loans in Utah?

The number is probably officially around 7%, but it’s a moving target.

One of the reasons the number is hard to really quantify is because payday lenders churn their loans (allow you to take out a new loan to pay off the old one).

Having read the articles below, all I can tell for certain is that there are very high interest rates being paid out by people stuck in the death spin of payday loans, and those borrowers are paying through the nose for them.  I can also tell you that you can get a discharge of your payday loan debt in bankruptcy.

Here are some numbers from various sources:

1.  37%… 2012, Consumer Federation of America (comments);  http://www.consumerfed.org/news/512 claims that

A significant share of borrowers became late or defaulted on their payday loan, triggering more fees and placing their bank account at risk. 37 percent of borrowers experienced default in the first year of borrowing. Within the first two years, 44 percent did.

The payday lending industry claims that 95 percent of loans are paid on time,[36] but this does not mean that a debt trap does not exist.

2.  3% – 46% (depending on the metric you use)… 2009 NYU School of Business Research Paper by Aaron Gold.  http://www.stern.nyu.edu/cons/groups/content/documents/webasset/con_043130.pdf

3.  7.4% … 2013 Guardian (United Kingdom) article by Nils Pratley.    http://www.theguardian.com/business/nils-pratley-on-finance/2013/sep/04/wonga-business-model-slick-moral-qualms

4.  3%… 2013 Pew Charitable Trusts Report.  http://www.pewstates.org/uploadedFiles/PCS_Assets/2013/Pew_Choosing_Borrowing_Payday_Feb2013.pdf

5.   6%… 2011 Forbes article.   http://www.forbes.com/sites/timworstall/2011/12/20/why-payday-loans-are-so-expensive/

6.  10%… 2012 Reuters article.  http://blogs.reuters.com/felix-salmon/2012/01/08/why-low-interest-payday-loans-could-scale/