Monthly Archives: July 2014

I am recently divorced. What name should I list on my bankruptcy petition?

All of them.

When you file bankruptcy, the court sends a notice to all of your creditors with your bankruptcy case number.  To identify you, we list your social security number or ITIN, which are very clear indicators of who you are.  That being said, we want all of your creditors to be sure that they know you’ve filed bankruptcy.  This means that we try to go for overkill.

So, we put your name on the bankruptcy petition, like Amanda Smith.  Form 1 of the bankruptcy petition also has a space for AKA (also known as).  So, if you’re divorced, I also put Amanda Brown.  If you’re divorced twice, Amanda Jensen.  What if your friends call you Mandy?  Then I list Mandy Smith too, just to be sure.

It doesn’t hurt to list every aka you have, and it definitely helps.

Yesterday at a 341 meeting of creditors, my client’s social security card didn’t match any of the names we’d listed on Form 1, so the chapter 7 trustee asked us to file an amendment with yet another aka.  It is better to be safe than sorry, so we try to list them all.

That being said:  if you are in the witness protection program, we’ll just use your new name and social security number the Justice Department or FBI or CIA gave you.  Old creditors from a previous life as an accountant for the mob are probably the least of your worries.

Is it okay to sell my personal property like my guns or coin collection at a garage sale before I file bankruptcy?

Yes, definitely.

This is called taking a non-exempt asset (like your coin collection worth $1,500) and converting it to an exempt asset (something I can protect) prior to filing bankruptcy.  For example, let’s say that you have a coin collection worth $1,500 and you know that a bankruptcy trustee will want to liquidate it to pay your creditors.  You could sell that collection before you file bankruptcy.  Now the problem is, what do you do with that money.

Garage Sale

You have to spend it.  If you have cash left on the day of filing your bankruptcy case, you will have to turn it over to the bankruptcy trustee.  There is a danger that a bankruptcy trustee will object and say that you are dissipating assets of the estate in bad faith, and you may want to ask your attorney before selling off and/or spending the money.  Remember to keep track of what you sell, how much, buyer’s names, and what you did with the money.

So what can you spend it on?  You can spend it on vehicle repairs, new tires, catch up on your mortgage, pay some student loans, etc.  You can definitely use it to pay your legal fees for the bankruptcy.  I have discussed this elsewhere regarding tax refunds, but it holds true to any non-exempt asset you own prior to filing bankruptcy, and here are the links:

http://robertspaynelaw.com/myutahbankruptcyblog/2014/03/13/how-do-i-spend-my-tax-refund-before-i-file-bankruptcy/

http://robertspaynelaw.com/myutahbankruptcyblog/2014/02/04/can-i-use-my-tax-refund-to-pay-my-dentist-for-dental-work/

http://robertspaynelaw.com/myutahbankruptcyblog/2014/01/08/can-i-use-my-tax-refund-to-pay-for-bankruptcy/

http://robertspaynelaw.com/myutahbankruptcyblog/2014/02/11/can-i-use-my-tax-refund-to-pay-my-parents-back/

http://robertspaynelaw.com/myutahbankruptcyblog/2014/01/27/what-can-you-buy-with-your-tax-refund/

https://www.youtube.com/watch?v=I6IbRQN05Sw

http://robertspaynelaw.com/myutahbankruptcyblog/2014/03/27/what-do-you-do-with-your-tax-refund-before-you-file-bankruptcy-how-do-you-spend-it/

Will the bankruptcy trustee care if I used a mailing address different than my home address?

No.  (At least not in Utah).

I just finished a telephone call with a client who filed the bankruptcy using his mailing address for the past 6 years.  He recently moved to a new apartment in an adjoining city but was worried that the trustee would ask why he used one address for mail and court notices but lives at a separate address.

I advised him that this is fairly normal in bankruptcy.  Some people may be facing eviction or foreclosure, and they will want to use a good mailing address where they know they can receive mail, even if they physically move in the next month or so.  Other people may simply be so organized that all of their mail goes to their office, or their parents’ home, or wherever.

The real danger lies in when a debtor or attorney may try to file in an improper venue (place).  If you have a case in the Southern District of California but file it in the Northern District of California because the attorney doesn’t want to drive as far, this is improper.  The other parties in the case, or even the court itself, can move to dismiss or transfer your case to the right district.

Here in Utah, this is a non-issue:  there is only a single District of Utah.  No Southern or Northern districts here.

The official rule is Bankruptcy Rule 1014, RULE 1014. DISMISSAL AND CHANGE OF VENUE:

(a) Dismissal and Transfer of Cases.

(1) Cases Filed in Proper District. If a petition is filed in the proper district, the court, on the timely motion of a party in interest or on its own motion, and after hearing on notice to the petitioners, the United States trustee, and other entities as directed by the court, may transfer the case to any other district if the court determines that the transfer is in the interest of justice or for the convenience of the parties.

(2) Cases Filed in Improper District. If a petition is filed in an improper district, the court, on the timely motion of a party in interest or on its own motion, and after hearing on notice to the petitioners, the United States trustee, and other entities as directed by the court, may dismiss the case or transfer it to any other district if the court determines that transfer is in the interest of justice or for the convenience of the parties.

What happens to my Mary Kay or Avon side business when I file for bankruptcy?

When we file for bankruptcy, we list your regular income (W2 income with a paycheck from a regular job) along with any other self-employment income (such as Mary Kay).  So long as you are still below the median income for your household size, the side-job should not hurt your bankruptcy.

However, after accounting for the income, I need to account for business assets and inventory.  Under Utah law, I can protect up to $5,000 of your tools of the trade.  Utah Code, Title 78B Chapter 5 Section 506 states that

An individual is entitled to an exemption, not exceeding $5,000 in aggregate value, of implements, professional books, or tools of the individual’s trade, including motor vehicles to which no other exemption has been applied, and that are actually used by the individual in the individual’s principal business, trade, or profession.

Unfortunately, this still leaves your product inventory exposed.  I cannot protect inventory for a home business, whether it’s Mary Kay or a cleaning business.  So, if you had $2,000 worth of product in your inventory on the day of filing, there is a chance that a chapter 7 trustee would order you to liquidate that inventory and give him the sale proceeds so that he could use it to pay a portion of your creditors back (and pay himself a healthy fee for doing so).

That being said, most small home businesses don’t have a large inventory, and it is hopefully a non-issue in your case.

What happens to my employee stock purchase plan (“espp”) when I file for bankruptcy?

You will probably lose it.

When you file for bankruptcy, your bankruptcy attorney applies various exemptions (protections) to your personal property.  If you have a 401k, or most retirement plans, your attorney can exempt that asset so that a bankruptcy trustee won’t see any value in it.  ESPP’s are different.

An ESPP is simply a perk with some employers, where you are allowed to purchase stock in the company you work for.  Unfortunately, this stock is not an exempt asset in bankruptcy.  It is not a retirement plan.  It is simply a piece of paper (stock) with real value if the trustee decides to sell it off.  It is the same as a pile of cash sitting on your kitchen table.

So, if you file  a chapter 7 case, there is a good chance that the trustee will order you to sell off the stock, give the money to him, and he will pay that money to your creditors.  If there is less than $2,000 in it, he will probably leave it alone unless you have other assets, like a huge tax refund or too much equity in your cars.

If you file a chapter 13, the chapter 13 trustee will demand that you pay the value of your ESPP to your creditors.  He will not order you to sell it off.  So, if your ESPP is worth $2400, you will pay an extra $40 per month during your chapter 13 plan ($2400 /60 months = $40/month).

Is someone going to come to my house and inventory all of my personal property when I file bankruptcy?

No.  It’s possible, but no.

Before you file bankruptcy, you fill out a part of the bankruptcy petition called “Schedule B.”  This lists your personal property.  Then your attorney applies any exemptions (protections) to that property.

For instance, here in Utah, your sewing machine is protected no matter what, but if you have a fancy air ionizer, it’s not protected at all.  (The bankruptcy trustee could seize your air ionizer so that he could sit in his office and breath those oh-so-trendy ionized air particles).

Truth be told, most of what you own is crap.  If you look around your house, half of the furniture was given to you by your parents when you first got married.  There are a couple of bookshelves you picked up at a garage sale, and you may have one or two nicer pieces of furniture that you bought one year when you had a good tax refund, but that’s it.  No one really has a $60,000 grand piano sitting in the front room;  if they do, they either don’t need to go bankrupt, or they need to sell it and pay off their creditors.

So there is a chance that the trustee will come to your home to inventory property, but I’ve never seen it happen.  It’s not worth his time in 99% of the cases.  inventory

On the other hand, the trustee will run a vehicle title search.  He will discover whether you have a boat or two four-wheelers that you conveniently forgot to list.  Creditors with secured claims against your $3,500 flat screen tv will show up in court and ask what your intentions are with that loan.  Angry ex-spouses may tell the trustee about your hidden collection of gold doubloons.

Generally though, the trustee knows that you have no personal property of real value beyond your vehicles, and it’s not worth his time to come to your home with a video camera.

What should I do if my attorney advises me to take out a loan to pay him to file bankruptcy?

Run away.

Bankruptcy attorneys are technically “Debt Relief Agencies.”  11 U.S. Code § 101 – Definitions defines Debt Relief Agencies as:

(12A) The term “debt relief agency” means any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer under section 110, but does not include—

This is why every bankruptcy lawfirm has a notice that goes something along the lines of “We are a federally designated Debt Relief Agency, blah blah blah.”  It looks like an exciting, accredited federal appointment, but it is actually just a law that gives us all this official-sounding title, whether or not we’re qualified or even good at what we do.

Debt Relief Agencies have some restrictions (things they are NOT allowed to do) under the bankruptcy code.  One of them is a requirement that we NEVER advise a potential client to take out more debt in order to pay us to file bankruptcy.  bankruptcy loan shark

So if the attorney you are meeting with recommends that you throw the bk on a credit card that you’ll then list in the bankruptcy, or recommends that you take out a payday loan to finance the bk, or anything of the like, then he/she is an attorney who is not interested in following federal law.  This is a bad thing.

Borrowing money from your parents or grandparents isn’t prohibited, but run from the attorney who tells you to go out and borrow money to pay him.  Selling your car or your grand piano to pay for the bankruptcy is not bad, but taking out a title loan on either of them is.

The actual bankruptcy code provision is listed below:

11 U.S. Code § 526 – Restrictions on debt relief agencies

(a) A debt relief agency shall not—
(1) fail to perform any service that such agency informed an assisted person or prospective assisted person it would provide in connection with a case or proceeding under this title;
(2) make any statement, or counsel or advise any assisted person or prospective assisted person to make a statement in a document filed in a case or proceeding under this title, that is untrue or misleading, or that upon the exercise of reasonable care, should have been known by such agency to be untrue or misleading;
(3) misrepresent to any assisted person or prospective assisted person, directly or indirectly, affirmatively or by material omission, with respect to—
(A) the services that such agency will provide to such person; or
(B) the benefits and risks that may result if such person becomes a debtor in a case under this title; or
(4) advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.
(b) Any waiver by any assisted person of any protection or right provided under this section shall not be enforceable against the debtor by any Federal or State court or any other person, but may be enforced against a debt relief agency.
(c)
(1) Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of this section, section 527, orsection 528 shall be void and may not be enforced by any Federal or State court or by any other person, other than such assisted person.
(2) Any debt relief agency shall be liable to an assisted person in the amount of any fees or charges in connection with providing bankruptcy assistance to such person that such debt relief agency has received, for actual damages, and for reasonable attorneys’ fees and costs if such agency is found, after notice and a hearing, to have—
(A) intentionally or negligently failed to comply with any provision of this section, section 527, orsection 528 with respect to a case or proceeding under this title for such assisted person;
(B) provided bankruptcy assistance to an assisted person in a case or proceeding under this title that is dismissed or converted to a case under another chapter of this title because of such agency’s intentional or negligent failure to file any required document including those specified in section 521; or
(C) intentionally or negligently disregarded the material requirements of this title or the Federal Rules of Bankruptcy Procedure applicable to such agency.
(3) In addition to such other remedies as are provided under State law, whenever the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this section, the State—
(A) may bring an action to enjoin such violation;
(B) may bring an action on behalf of its residents to recover the actual damages of assisted persons arising from such violation, including any liability under paragraph (2); and
(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorneys’ fees as determined by the court.
(4) The district courts of the United States for districts located in the State shall have concurrent jurisdiction of any action under subparagraph (A) or (B) of paragraph (3).
(5) Notwithstanding any other provision of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on the motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may—
(A) enjoin the violation of such section; or
(B) impose an appropriate civil penalty against such person.
(d) No provision of this section, section 527, orsection 528 shall—
(1) annul, alter, affect, or exempt any person subject to such sections from complying with any law of any State except to the extent that such law is inconsistent with those sections, and then only to the extent of the inconsistency; or
(2) be deemed to limit or curtail the authority or ability—
(A) of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice of law under the laws of that State; or
(B) of a Federal court to determine and enforce the qualifications for the practice of law before that court.

 

I have a title loan on my truck but want to keep it, what happens to it in bankruptcy?

You have to pay it back.

In a chapter 7, you have to pay the title loan at the same interest rate, balance, payment, and terms as before you filed the case.  The bankruptcy does nothing to your title loan.  If you are behind, you must catch up on the payments or they will repossess the auto.

In a chapter 13, you can stretch out the payments on the title loan over the next 5 years (60 months) and change the interest rate to about 5%.  This is much better.  If you are behind on payments, you will simply have to catch up on them over the next 60 months.

There is a chance that the title loan lender will object to your bankruptcy plan arguing that you recently took out the loan and should have to pay it back quickly under their terms.  There is a chance, but I’ve never actually seen it happen.

Do you have to be married to file a joint bankruptcy petition?

Yes.

11 U.S. Code § 302 – Joint cases states that

(a) A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual’s spouse. The commencement of a joint case under a chapter of this title constitutes an order for relief under such chapter.
(b) After the commencement of a joint case, the court shall determine the extent, if any, to which the debtors’ estates shall be consolidated.

Simply put, there must be a debtor plus a debtor’s spouse to file a joint bankruptcy petition.

However, the word “spouse” is nowhere defined in the Bankruptcy Code.

We can assume that it means lawfully married, but whether this means man and wife, a civil union, a domestic partnership, or a common-law spouse is up for interpretation.

I recently had a couple who had been in a common-law marriage for the past 28 years.  They had the same last names, both were on title for the home and on the hook for the mortgage, and they had the same assets and debts.  I advised them to file a joint bankruptcy petition.  If the trustee objected to the “joint” nature, I was prepared to argue that for all intents and purposes, they were “spouses” under bankruptcy law.  If I was wrong, we would probably have to bifurcate (split) the case, pay an additional filing fee of $335 to the court, and then they would both have separate but identical cases.

This may be problematic here in Utah, since Utah adds a requirement to common law marriage that many states do not have:  you must have it recognized by a court as a lawful marriage.  Nonetheless, I was prepared to make the argument in good faith, if necessary.

What happens if I have an emergency and my bankruptcy attorney is on vacation?

It depends on your attorney.

WIth my clients, they all have my personal email address, and the office line at 801-980-1313 is one of those fancy Google Voice numbers that sends me a text message whenever you leave a voicemail and also allows you to send me text messages, any time, night or day.

This weekend I went to Bear Lake, Utah/Idaho to spend a day building sand castles, jumping off piers, and trying not to get sunburned.  We even planned (and did) finish the trip with famous raspberry milkshakes from Merlins.

However, I also did some work.  Friday evening about 6:30 I received a frantic email from a client who had signed her bankruptcy paperwork, paid in full, and was just waiting to file.  A constable had come to her door, and she was ready to file, that night.  Bankruptcy filings are done electronically, so I called her to confirm, and then I filed the case from a cabin at Bear Lake off of my laptop, and she had a bankruptcy case number a few minutes later.

That same night (seriously), another client contacted me and advised me that his foreclosure was actually scheduled for this Monday (3 days away at 9:00 a.m.) instead of next Friday.  I prepped his paperwork while the family ate tacos and brushed off sand from the beach.  We emailed back and forth, and after he scanned his signatures and sent them back to me for the bankruptcy paperwork.  I filed his case too.  Foreclosure stopped!

This was supposed to be a quiet family vacation, and it was except for two very immediate emergencies for my clients.

You don’t have to chose me as your attorney, but you ought to have an attorney who will respond to you when you need him/her, even if he is wearing bermuda shorts and digging a sand castle on the shore of Bear Lake with his kids.