Monthly Archives: August 2014

What happens if I can’t take the pre-bankruptcy credit counseling class before I file bankruptcy?

Then your case will be dismissed administratively in about 2 weeks.

You are required to take a pre-bankruptcy credit counseling class prior to filing bankruptcy.  The bankruptcy forms give you an option to check a box saying that you were unable to take the class because you have a really, really good reason, but I have never heard of a reason good enough to waive the class requirement.  In other words, you must take the class.

I filed a case for a friend this year who swore up and down that he had taken the online class and had his certificate.  I had given him the information, and he even told me that he had printed off his certificate but forgot to drop it off with his packet of paperwork.  We had a foreclosure sale pending, and I filed the case with his certificate date listed but without a copy of the certificate.  I checked a box that we would provide the certificate within 2 weeks.  I kept asking him for the certificate, and he dodged my calls.

If you file a case without the class certificate, the court will issue a deficiency notice that looks like this:

14-XXXXX  Ch 13) (EOD: 2014-04-08 09:19:41) XXXXXX  Chapter 13 Deficiencies (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?XXXX)
( no document )
Docket Text:
DEFICIENCY NOTICE. MISSING PAPERS REQUIRED TO BE FILED: Prefiling Certificate of Credit Counseling, Incomplete Filings due by 4/21/2014. (mkh)

This is a friendly reminder from the bankruptcy court that you have not filed the certificate of credit counseling required by the rules.

If you still don’t file the certificate, two weeks later you will see the following:

14-XXXX   (Ch 13) (EOD: 2014-04-22 10:58:35) XXXX Order to Show Cause For Failure to File Certificate(s) (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?XXXX)
( no document )
Docket Text:
Order to Show Cause For Failure to File Certificate(s). Prefiling Certificate due by 5/1/2014. (gmg).

And then you get the dreaded dismissal:

14-XXXX (Ch 13) (EOD: 2014-05-02 15:34:07) XXXX  Order Dismissing Case (Administrative) (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?XXXX)
( no document )
Docket Text:
Order Dismissing Case pursuant to 11 U.S.C. 109(h) (mmb)

The code section at issue that requires the pre-bankruptcy credit counseling certificate is 11 U.S. Code § 109 which states:

(h)
(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section other than paragraph (4) of this subsection, an individual may not be a debtor under this title unless such individual has, during the 180-day period ending on the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111 (a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

 

 

I can’t find my tax returns for the bankruptcy trustee. How do I get a copy of my state and federal returns?

When we file bankruptcy, we are required to give the bankruptcy trustee a copy of your last filed tax returns.  If you haven’t filed taxes since 2004, then we need to find copies of those 2004 taxes.

It is a fairly often occurrence where I have clients whose tax preparer has moved, or where they have lost the copies of their old filed taxes.  This is not an insurmountable problem.  It’s not even a bad problem.  It is fairly easy to get copies of your old filed tax returns.

The IRS lets you request tax transcripts online for free.  You can request a tax transcript from the IRS here.  It is online and very simple to do.  It isn’t really a tax return, but the bankruptcy trustees are pretty forgiving on this point.

You can request a copy of your Utah State Tax Return here.  They charge you $6.50, and you can only do it in person or via mail.  It takes at least 24 hours if you do it in person, and up to two weeks if you mail it in.

 

 

If you declare bankruptcy on R.C. Willey, do they take the furniture back?

Yes, yes they do.

That being said, if you agree to keep paying on the secured loan against the furniture, then they won’t take it back.

When you file bankruptcy, you list unsecured debts (like credit cards and medical bills) and secured debts (like car loans, home loans, or R.C. Willey furniture contracts).  With the secured debts, you then list whether you want to surrender the collateral or keep paying for it.  So, when we list R.C. Willey as a creditor, we have to either check a box that says you will surrender the items, or check the box that says you’ll reaffirm the debt and keep paying for them.

Sometimes, I have clients who lost the item, or sold it at a garage sale, or even had it stolen out of a storage unit.  In this kind of situation, we tell R.C. Willey that the item is gone, and the debt is wiped out in the bankruptcy.

If you decide to reaffirm the debt and keep paying, the payment terms may change in your favor.  R.C. Willey will let you reaffirm at the same balance/interest rate/payment terms, or they may sometimes drop the balance to the current fair market value of the item.  This reduces your payment terms as well.

Can I get my suspended or revoked driver’s license back after I file bankruptcy?

Yes.  (But not for multiple DUI’s or other criminal infractions).

Your driver’s license may be revoked or suspended by the state DMV when you fail to pay a civil judgment related to a car accident.  So long as there is no criminal restitution involved, a chapter 7 can get your driving privileges reinstated very quickly.  You file the case and then provide proof of it to the DMV right away to get that license reinstated.  unsuspended drivers license

This all comes from a case where the state of Arizona refused to reinstate a driver’s license even after a bankruptcy discharge.  In Perez v. Campbell, 402 U.S. 637 (1971) the U.S. Supreme Court found that a state CANNOT withhold your driver’s license for a debt discharged in your bankruptcy.  The ruling was later codified in 11 U.S.C. 525 which states that

a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

This means that if the state has suspended or revoked your license for failure to pay a civil debt, such as one related to a car accident, then you can get your license back by providing proof of the bankruptcy to the DMV (along with proof of insurance).  You will probably have a to pay a fee, but it’s worth it.  Generally, you need to be able to drive to make a decent income, at least here in Utah.

What happens to my credit score after I file for bankruptcy?

I get asked this question over and over, and I really don’t know.

I can tell you anecdotally what happened to my clients (and myself), and I can quote some other websites, but I don’t do credit repair, and this is not my speciality.

That being said, your credit will drop, and then it will go up.  ( I know, you’re hoping for a more technical formula).

Three stories, with the numbers I’ve seen:

1.  A friend of mine filed bankruptcy last year.  At the time of filing, she had a credit score of 585.  Exactly one year later, her credit score had jumped to 651.

2.  I filed a personal bankruptcy in 2007.  My credit score was a 535.  One year later, it was a 665.

3.  I had another client whose credit score was 420.  Seriously!  He was a negative black hole of credit.  When he entered a room, his mere presence sucked the credit scores out of other people.  Four months after filing bankruptcy, his credit was a 575.  It jumped, a lot, in 4 months.  credit score

Chapter 7

Basically, filing bankruptcy hurts your credit in the short term (kind of).  If you have a high credit score like a 750+, then your credit will drop to the mid 500s.  If you have a low credit score, like a 600, then your credit will drop to the mid 500s.  Either way, you’ll be in the mid 500s.

For the next three months, you are in credit limbo.  Nothing happens.  At month four of your chapter 7, you receive your discharge from the court, and your credit starts to rise.  If you try to finance a car during the 3 months the case is open, your interest rates are 25%+.  If you can wait until the discharge, they drop to around 15%.

It will be 2 years and four months until you can qualify for an FHA loan to buy a home after your bk, which gives you plenty of time to work on your score.

The bankruptcy will stay on your credit for at least 7 years, and, for the rest of your life, if a loan application ever asks you if you have filed bankruptcy, you must check that dreaded “yes” box.

Within 5 days of filing your bankruptcy, you’ll start getting 2-3 credit card applications in the mail, each week.  You’ll start getting 2+ car loan applications in the mail.  Most of these are awful, with set-up fees, secured balance plans, maintenance fees, etc.  The first card that charges no annual fee, no set-up fee, and requires no initial deposit, jump on it and start using it and paying it off each month.

As for other ways to build and repair your credit… this isn’t the post for that.  Just remember that it will initially hurt your credit, but after the initial shock, your credit score will start to rise.

Chapter 13

It’s a mystery wrapped in an enigma.  Your credit sits in limbo until you get your discharge at year 3 or year 5 of the case.

 

 

I took out a payday loan 2 weeks ago. Can I file bankruptcy on that recent loan?

Yes, but it may end badly.

If you file a chapter 7, you can discharge your non-priority debts (priority debts are taxes/student loans/child support/criminal restitution).  However, a creditor has a right to file an adversary proceeding against you for debts you incurred within 90 days of bankruptcy.  If they win that suit (and they will), you have to pay that debt back to them after the bankruptcy.

So let’s say you take out a payday loan 2 weeks ago, realize you are in awful financial straights, and you file bankruptcy today.  If they sue you in bankruptcy court, plan on paying that amount back.

If you file a chapter 13 case, you can propose to pay them back over a 5 year plan (60 months), and you can change the interest rate to 2%.  This is much better than the 500%+ interest rate they’re currently charging you.

Payday loans are awful to begin with, and you’re generally taking them out because you’re desperate.  People don’t take them out to defraud the creditor; they just feel that they have no other option to survive and cover the rent payment this month.

Just remember that it looks bad to take out a loan and then go bk a couple of weeks later, but so long as you’re not doing it intentionally to defraud the payday lender, it’s not the end of the world.  And whatever you do, do NOT take out a payday loan to pay your bankruptcy attorney.  recent paydayThat’s worse than you can imagine.

 

We are separated but not officially divorced. Can I file a single bankruptcy petition, or do I still count as married?

You can file a single bankruptcy petition and NOT include her income if you are really separated.

No, you don’t need legal separation papers drawn up.  You don’t even need to have a divorce date set, but you need to be maintaining separate residences.  If you decide to “separate” only to trick the system so that your household income is suddenly low enough to qualify for a chapter 7 bankruptcy, you’re committing fraud and perjuring yourself on the documents we file with the bankruptcy court.  If I find out you’re doing it, I won’t represent you.  If the trustee finds out that you’re doing it, you will be looking at (at a minimum) an adversary proceeding to revoke your discharge along with possible criminal sanctions.  separated

That being said, if you’re separated, you’re separated.  We do not need to provide documentation to the trustee that you’re officially separated.  It is simply a box that we check on the forms.

This means that your bankruptcy will only include your debts, and not your spouse’s debts.  You will not include her income in your income calculations for purposes of the bankruptcy means test.  This also means that any creditors of joint debts will start coming after her even more.

if you thought your relationship with your estranged spouse was bad before, just wait until the creditors are only calling her because you’re protected in bankruptcy!

How do you become one of the ten best bankruptcy attorneys in Utah?

Apparently, it takes skill, experience, good customer and peer reviews, and $275.  top 10 bankruptcy attorney

I was feeling pretty good about myself when I received a 2014 Client Satisfaction Award letter from the American Institute of Bankruptcy Attorneys as one of the 10 Best Bankruptcy Attorneys in the State of Utah.

The letter stated that I had been chosen based on peer and client reviews, and that really didn’t surprise me much since I do get along with the other bankruptcy attorneys in the state, and I seem to have fairly happy clients.

As I read on, I noticed that I would have to pay a $275 processing fee to process my award.  Even worse, if I didn’t pay the fee, the nomination would go on to someone else.  If he didn’t pay the fee, I presume that it would keep going down the chain until someone finally paid the fee.

Then I realized that I may already be the last attorney in the chain!  This letter could have gone to 100 attorneys here in Utah before me, none of them paid the fee, and it finally worked its way to me here in the bottom of the barrel.  I could be the very last one on the list.  This deflated my ego a bit.

So to answer the question on how you become one of the ten best bankruptcy attorneys in Utah:  it apparently takes a $275 fee, and I am not part of that elite, fee-paying group.

 

 

My car was repossessed last night. How quickly can you get it back in bankruptcy?

Almost immediately with a chapter 13.

(In a chapter 7, I can do nothing to get it back, so you’ll either need to come up with a lot of cash to pay it off, or you can just walk away from it).

In a chapter 13, I can file a skeletal case with you, get a case number, and print off a letter for you to hand-deliver to the repo yard when you walk in later today to make them return the vehicle.  repo return

I received a call last night from a woman who returned from YW Girl’s Camp (LDS summer girl’s camp) exhausted and wet after a fun but tiring week camping in the rainy mountains around Salt Lake City.  After she unloaded her car, she went inside to make some dinner.  She went back out to see if there was anything left to unpack, and there was a tow truck taking her car away.

She wanted to know how quickly we could get it back if we filed a chapter 13.  I told her that she could get it back within an hour of filing a case the next morning.

If you are looking for the standards for repossession and redemption of that vehicle, see this blog post:  http://robertspaynelaw.com/myutahbankruptcyblog/2014/03/19/my-car-just-got-repossessed-can-i-get-it-back/

What are the factors to determine if a bankruptcy case has been proposed in good faith?

Here in Utah, we use the Flygare test.    flygare

In 1983 our now-retired Judge Boulden was a chapter 13 trustee.  Trustee GIllman was her attorney.  She objected to a chapter 13 plan submitted by the Flygares on the basis that it had been proposed in bad faith.  In Flygare v. Boulden, 709 F.2d 1344 (10th Ct. App. 1983), the 10th Circuit Court of Appeals reviewed the bankruptcy court’s decision and gave the following factors to determine if a case had been proposed in good faith:

We adopt the factors the Eighth Circuit listed as relevant to a determination of good faith. We reproduce them here for guidance on remand:

“(1) the amount of the proposed payments and the amount of the debtor’s surplus;

(2) the debtor’s employment history, ability to earn and likelihood of future increases in income;

(3) the probable or expected duration of the plan;

(4) the accuracy of the plan’s statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court;

(5) the extent of preferential treatment between classes of creditors;

(6) the extent to which secured claims are modified;

(7) the type of debt sought to be discharged and whether any such debt is non-dischargeable in Chapter 7;(8) the existence of special circumstances such as inordinate medical expenses;

(9) the frequency with which the debtor has sought relief under the Bankruptcy Reform Act;

(10) the motivation and sincerity of the debtor in seeking Chapter 13 relief; and

(11) the burden which the plan’s administration would place upon the trustee.”

Id. at 317. This list is not exhaustive, and the weight given each factor will necessarily vary with the facts and circumstances of each case.