Monthly Archives: September 2014

Do I really have to list all my assets and pets in my bankruptcy? I have nothing of value.

Yes.

I was working with a new client this morning, and she was filling out her bankruptcy packet (a packet of paperwork you have to fill out before we can file the case).  We had already reviewed her case at her initial consultation, and she appeared to have no assets of any value for a bankruptcy trustee.  As she started to fill out the paperwork, she sent me the following email:

I am reading through this and it is asking me to list my assets and pets? I thought this was as no assets, not that I really have much but I am wondering if they will be taking what I do have then.

I responded to her,

In a “No Asset Case” a person has no assets with any real value for the trustee to sale. We list your basic assets like couches, beds, and clothing, but I can exempt (or protect) those items under Utah law. Assets of value are generally: cars with too much equity, a home with more than $60,000 of equity, a grand piano, a large tax refund.  grand piano

In other words, everyone has stuff, but most of the stuff can be protected.  The bankruptcy trustee is only interested in going after property and selling it off if it has real value, like a car with too much value or a house, or even the famed grand piano.  I mention this because I have had a handful of cases where the clients had grand pianos or baby grand pianos worth more than $20,000, and this created some pretty awful issues in their bankruptcy cases.

For the regular debtor though, you have nothing of real value and nothing that you will lose when you file bankruptcy.  What you do own is generally protected under state law.  We list everything in the bankruptcy (even your goldfish), so that the trustee can sort through it and see that we’re really not hiding anything.  There is nothing worth hiding.

Do you offer financial management services after the bankruptcy case is filed?

No.

The Bankruptcy Code requires that you take a Financial Management Course through a third party provider.  Before you file bankruptcy, you are required to take a one hour Credit Counseling Class.  After you file, you are required to take a two hour Financial Management Course and file a document called “Debtor’s Certification of Completion of Instructional Course Concerning Financial Management (B23).”  In fact, you cannot receive your discharge in bankruptcy until after you take the course and file the certificate.  In some cases, if you fail to take the class, you case will be closed without a discharge (and you’ll still owe all of your creditors, just like before you filed).

As far as I know, you will find no law firms that are qualified by the U.S. Trustee’s Office (U.S. Justice Department) to teach the second class about financial management.  You must use a third party provider.

If you ask me for financial management services, I can’t give you much.  I file bankruptcy and get rid of debt, but I am not a financial counselor for going forward in your life.  My simple advice is to stay out of debt and spend less money than you make.

 

I took the pre-bankruptcy class last year. Is my old credit counseling certificate still good for my new bankruptcy case?

Probably not.

You are required to take a Credit Counseling Class prior to filing bankruptcy, whether you are filing a chapter 13 or a chapter 7.  You cannot waive or talk your way out of this requirement;  the class must be completed before you file, or your bankruptcy case will be dismissed.

The class takes about an hour, and it costs anywhere from $10 to $50, depending on which website you use.  After you take the class, you must file bankruptcy within 180 days of the class certificate, or your certificate is invalid.  After 180 days, it is a stale certificate and you must take the class again.  old credit counselilng

Here in Utah, debtors tried to skirt this issue with an old certificate.  They filed a bankruptcy case using a certificate that was 182 days old (only two days over the expiration date).  The case was In Re Giles, 06-23988 (Judge Thurman), in which:

The debtors in this chapter 13 case obtained credit counseling 182 days before filing for bankruptcy relief. Section 109(h), by its terms, requires debtors to obtain credit counseling 180 days before filing. The Court held that it lacks discretion to waive a debtor’s failure to obtain the required credit counseling required by section 109(h). To that end, the Court also held that it lacked discretion to find that the debtors had complied section 109(h) by satisfying the “spirit” of the bankruptcy provision. . The Court granted the Trustee’s Motion to Dismiss, finding that it lacked jurisdiction over the case.

The Debtors put up an argument that the certificate should still be good because they had taken the class in good faith and were complying with the “spirit” of the law.  This argument failed, and their case was dismissed.  This means that they would eventually need to take the class again, file again, and pay the court filing fee again.

Simply put, you must take the class within the 180 days before you go bankruptcy, or your case will be dismissed and you will have wasted a substantial amount of time and money.

Can I list my library fines in bankruptcy?

Yes.

Generally in bankruptcy, there are two kinds of debts.  Priority debts survive your bankruptcy, and everything else gets discharged.

1.  priority debts — these are government type debts like taxes, student loans, criminal restitution, and child support/alimony.

2.  everything else — this is a very broad category.  These debts are discharged unless you want to keep and reaffirm them (like a car loan or a home loan).

Library fines sound like  a priority debt, since they’re owed to the city’s public library.  They are not.  These are simple, unsecured, nonpriority debts that can be discharged in your bankruptcy.

However, be forewarned that if you list your public library in a bankruptcy, the odds of you ever having rights to check out books again are slim to none (at least from that library).

What happens to my motorized scooter or electric wheelchair when I file bankruptcy?

You keep them.

That is, you keep them unless you are behind on payments to a secured creditor for those items, then they have a right to repossess them.

Under Utah law, you can exempt, or protect “78B-5-505.   Property exempt from execution.…  (ii) health aids reasonably necessary to enable the individual or a dependent to work or sustain health;…”  Health aids are pretty broadly defined and cover items such as prosthetic limbs, hearing aids, scooters, wheelchairs, motorized lift beds, etc.

So if you file bankruptcy on $50,000 of medical debt but you own a $2,400 EZ Lite Cruiser free and clear, what happens to your wheelchair?  Nothing.  Creditors cannot take it and a bankruptcy trustee cannot sell off the wheelchair to pay your creditors.  wheelchair for sale

On the other hand, if you are financing the purchase of your health aid, you need to keep paying on it.  If you fall behind, the creditor has every right to repossess their collateral, and this exemption will not protect you.

Should I reaffirm my loan on a car my ex-husband gets in the divorce decree?

No. That is a horrible idea.

I was in court today with a client who was in the middle of her divorce.  She had a $20,000 loan on a car that her husband wanted to keep after the divorce.  She was on title and on the loan with the bank, but he wanted to keep making payments and keep the car.  She wanted to be nice and reaffirm the debt so that he could keep the car.

This is bad.  When you reaffirm a debt, you agree to re-assume liability for the loan.  It effectively takes it out of bankruptcy.  This means that if she reaffirms on the loan and he defaults on payments 6 months or even 3 years from now, the bank can repossess the car. sell it, sue her for the deficient balance, and give her some pretty bad post-bankruptcy credit reporting.    Nothing happens to him since he’s not the one who has personal liability for the loan.  So in her case, she wanted to be liable on a $20,000 loan for him just to be nice.

Divorce is financially devastating to both parties, and the chance that he would default on a loan he had no liability on is very, very high.  I told her that it was a bad idea.

There is a very, very tiny chance that the bank would let him assume the loan, but he would have to qualify, and this would hard to do while going through a financially tumultuous divorce.

How does a creditor find out where I’m working so that he can garnish my wages before bankruptcy?

Generally, you tell him.  (Don’t do that).

Creditors do not really have a massive national database where they pool their information on debtors.  Arguably, they do in the form of a credit report, but this is from information you have given out.  They really don’t pool their resources in a major conspiracy against you.  where do you work

What creditors do to gather information is ask you.  They may be friendly on the phone and say, “Hey, I need to update our records.  Where is your husband working now?”  Or, they may threaten you and lie on the phone saying, “Now that we have a judgment against you, you are required to give us your employment information, where do you work?”  Truth be told, you don’t have to play nice.  You are not required to volunteer your employment information.  You are not required to answer a direct question.  Sometimes, they may even come with the color of authority, with a constable knocking on your door to serve you the judgment and demand your employment information.  You do not have to answer him.

The only time you have to volunteer information is when you have a court order to do so.  For instance, if a creditor hauls you into court as part of a Supplemental Order Proceeding, then you are required to answer his questions, including giving out your employment information.  So, if there is a court order, or if you are standing in front of a judge, then you need to give out that information.

Other than a court order or getting you to volunteer that information over the phone, creditors can look at your credit report to see if you have listed a current employer on a recent credit application,  This means that if you have applied for any new credit in the last year or so, then they may be able to set up a garnishment fairly quickly.

 

Is it okay to give a gift to my family/children/friends before I file bankruptcy?

No.

I had a potential client call today who received life insurance proceeds (exempt for a year after you receive them if you don’t co-mingle them or mix them with other monies) in the amount of $50,000.  He sat on the $50,000 for a year, gave the $50,000 to his adult children about two weeks ago, and wants to file bankruptcy today on about $100,000 of medical debt.  This does not work.  Pre-bankruptcy gift

You can give gifts to family, but there is a point where it becomes unreasonable and looks like you’re simply giving away an asset to protect it from your creditors and the bankruptcy trustee.  In this case, giving away $50,000 cash two week before going bankrupt definitely crossed that point.

Realistically, giving away a gift of more than $200 in value within a year of filing bankruptcy is probably bad.  Even if you are acting as a Good Samaritan and are paying your adult children’s rent, some trustees will go after that money and actually sue your children to get the rental money gift back as part of the bankruptcy estate.

On the bankruptcy paperwork, we fill out a section called “Statement of Financial Affairs” or “SOFA” which asks a series of seemingly odd questions.  One of the questions asks,

List all gifts or charitable contributions made within one year immediately preceding the commencement of this case except ordinary and usual gifts to family members aggregating less than $200 in value per individual family member and charitable contributions aggregating less than $100 per recipient. (Married debtors filing under chapter 12 or chapter 13 must include gifts or contributions by either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.)

If you have given away gifts/money/things in excess of $200 per family member, this may create an issue where a chapter 7 trustee could demand that money or item back, or where a chapter 13 trustee could demand that you pay the value of that item into your chapter 13 plan.

My parents put me on the title of their home years ago for estate-planning purposes. What happens if I file bankruptcy?

The trustee will most likely find that you have unprotected equity and an ownership interest in your parents’ property.

In a chapter 7, the bankruptcy trustee will want to liquidate (sell) the property to use your interest to pay your creditors.  In a chapter 13, the trustee will want you to pay that value into your bankruptcy plan.

That being said, you can claim a $5,000 exemption in the property if you’re not living there, and a $30,000 exemption if you are living there.  The problem arises where your interest in the home is worth more than the $5,000 or the $30,000.  You may hope, and may even have an attorney tell you, that you can explain the situation to the trustee.  Hopefully the trustee will understand that you never contributed to the home, you never paid on the mortgage, and you were only put on there for convenience.  Odds are that the trustee won’t buy this argument, and then you will have to have a long and very heart-breaking discussion with your parents.

The only thing that really saves you is if there is no money in the property.  If the home is upside down (the mortgage is greater than the value), then this is a non-issue.  But if there is value, you’d better start meeting with an attorney to decide what to do.

And DON’T just sign your interest back over to your parents:  this is a fraudulent transfer for no value, it voids any exemption you may have claimed, and the trustee can avoid this transfer within 4 years of the transfer.

I am not sure who all of my creditors are. Can my bankruptcy attorney look that up?

No.

There is no comprehensive database of creditors we can access to see which creditors have your file.  You can run a credit check.  You can gather all of your collection notices and give them to your attorney.  You can write down the names of collectors who call you on various debts.  However, your bankruptcy attorney has no special means of determining who your creditors are.  Unfortunately, that is your job.

Your bankruptcy attorney can help you sift through the mountain of collection notices you have received and organize them into your bankruptcy paperwork.  Here in Utah, most collections are done by a very small group of collection agencies, and we can list them in the paperwork for “Notice Only,” which is a nice way of saying that “we really don’t know if you’re a creditor in this case, but we’re giving you notice of it just in case.”

So do your best and list everyone you can think of.  If you miss some, the court will give you the opportunity to add new creditors while your case is open.

Here are the names of the collection agencies you should recognize here in Utah:

United Recovery Group, Bonneville Billing, Jensen & Sullivan, Mountainland Collections, Quinn Kofford, Kirk. Cullimore, Express Recovery Services, Ed. Parry, Johnson Mark, Constantino Law, Nar, Shaner Olsen, IC Systems, Guglielmo & Associates, Midland Funding, NCO Financial Systems, Portfolio Recovery, and many more.

This list is in no way comprehensive, but if you recognize more than one or two of those names, then you’re definitely in collections here in Utah.