Monthly Archives: March 2015

My husband and I keep our finances separate. Can I file a bankruptcy on my separate debts?

Yes, but it doesn’t work the way you think.

You can file a separate bankruptcy on your own.  It will only list your creditors, be under your social security number, and affect your credit.

However, if you two live together, we still need to include his income in your household income calculations.  Additionally, you have a 50% equitable interest in any asset that you two have acquired since being married.  So, if he is unemployed and you’ve only been married a year, then his income/assets are not really an issue.  But, if he’s working, we need to count his income, which very well may disqualify your from a chapter 7.  If you have been married for a substantial time but have kept your assets separate, I still need to include his assets in your personal property list.

For instance, let’s say you’ve been married 20 years, and you have kept all of your familial assets in his name.  You only own a 2001 Dodge Neon in your name.  I can protect that.  On the other hand, he owns a fleet of restored muscle cars and a private Leer jet, all only in his name.  separate finances  I can’t protect those.  Putting them all in his name over the years does nothing…you both were married when they were acquired, your income and efforts helped purchase them, and you own part of them.

Now, there are exceptions for inherited items, but when you file bankruptcy, we will generally have to include his income and assets.

What happens to my car when I file bankruptcy?

It depends.  You can generally keep it if you want to keep the loan too.  You may lose it if it is worth too much.    What happens to my car

I will try to break down what happens when your car is secured/unsecured, and whether or not it has equity.

terms

secured……….Your car has a loan on it.

unsecured……Your car is free and clear (with no loan on it).

equity ………….Value of your car.

Chapter 7 Bankruptcy

Secured (your car has a car loan), but upside down on the loan.

Keep it…If your car has a loan against it, you can list the loan in bankruptcy and then check a box that says “reaffirm.”  This means that you’ll keep the car loan with the same payments/interest rate/balance/etc.

I have discussed this here:

Do I have to reaffirm my car loan to keep my car?

Is there any way to keep my car loan out of bankruptcy?

Surrender it…If your car has a loan against it and you want to surrender the car, then you return it to the bank and wipe out the remaining balance of the loan.

Secured, but your car has equity above the loan.

You can still reaffirm and keep the car, but, Utah law only lets us protect $3,000 of equity in a vehicle for each spouse, or a combined $6,000 of equity in a single vehicle if both spouses are on the title.

If you have more than $3,000 (or $6,000) of equity, the trustee may sell your car off to pay creditors.  I have covered this here:

More on car valuation and bankruptcy: will the trustee reduce the value of my car based on the repairs it needs?

Unsecured

You own your car free and clear.  If it is less than $3,000 in value, you will not lose it.  Just remember that we can protect one car for husband up to $3,000 and one for wife up to $3,000 or a single $6,000 vehicle if both spouses are on title.

Chapter 13

Same analysis, but, the chapter 13 trustee will generally object if you try to keep more than 2 vehicles for a family or try to keep a luxury vehicle.

Just remember that in a Chapter 13, we can stretch out the car loan to 60 months and change the interest rate to 5%.  We can also get a repossessed car back and catch up on missed payments.

Related articles on cars and bankruptcy:

How does the bankruptcy trustee determine what my car is worth?

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

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

What happens to the title loan on my car when I file bankruptcy?

What happens to my car in bankruptcy if I have negative equity?

What happens to my car loan interest rate in bankruptcy?

My parents are co-signed on my car loan. What happens to them if I file bankruptcy?

I am behind on car payments but don’t want to lose my car, can bankruptcy stop repossession and let me catch up?

Can I face criminal charges if I don’t turn over a vehicle that a creditor wants to repossess?

 

 

 

Can I use my tax refund to pay for bankruptcy?

Yes, oh yes!  refund pay for bk

There are a lot of things you cannot do with your tax refund.  You can find them here:  http://robertspaynelaw.com/myutahbankruptcyblog/2014/03/27/what-do-you-do-with-your-tax-refund-before-you-file-bankruptcy-how-do-you-spend-it/

However, it is perfectly safe to pay your bankruptcy attorney with your tax refund monies.  You can also pay your court filing fees (currently $335 for a chapter 7 and $310 for a chapter 13) from that same refund.

This is the reason that most bankruptcy attorneys have lean months from October through February (telling clients to wait for tax refund and not file just yet) and have wonderfully busy months between March and May (tax refunds pay for bankruptcy).

So yes, you can use your tax refund to pay for bankruptcy.

How do you feel about your bankruptcy clients?

Honestly, I love almost all of them.

Last night I was meeting with a young couple (and their two kids) at 9:00 in my office.  After filing their case, the husband told me to wait.  He then ran out to his car.  A few minutes later he came back with the crocheted or hand-knit (I really don’t know the phrase) poke ball pictured below.  poke ball

He realized that I used to play Pokemon with my kids when they were younger, still had a couple of cards on display in my office, and he decided that I needed a hand-knit crochet poke ball that his grandmother had made for Christmas.  It now sits on my bookshelf next to a couple of vases one of my Chinese law students gave me years ago.

It’s easy to love your clients in this kind of work, because they are in distress and are very open and honest.  You get an immediate connection.  Then you can work with them to give them some relief and effectuate a huge change in their lives.  I see clients from years ago at the grocery store, and we still stop and chat.

So, yes, I love most of my clients.

And yes, there are some really, really annoying ones.  I’ll save that for another topic, but I’ll give a hint:  if you call and ask me the same question 3 times in a row because you don’t like my answer, you are annoying.  You can rephrase the question as many ways as you want, but I can’t change the law.

 

Can I buy plane tickets before I file bankruptcy?

Yes, but you just might lose them.

In bankruptcy, we can protect certain assets, like up to $30,000 of equity in your home, all of your 401(k), or the entire value of your shoe collection.  There are other assets that we cannot protect, like savings accounts or stock accounts.

If those plane tickets have a cash value and/or a refund value, then the bankruptcy trustee could demand that you turn them over so that he could sell them and use the money for the benefit of your creditors.  Even worse, let’s say you travel with them between filing your bankruptcy and meeting with the trustee at the 341 Meeting of Creditors.  In that situation, you have now taken an asset of the estate and dissipated it before the trustee could officially abandon it or sell it.  The trustee could move that you turnover the tickets or the value of the tickets.

So, no, the plane tickets are not safe, and you should not use pre-bankruptcy money to buy plane tickets unless you are going to fly out and back before filing your case.

Why does my attorney want my spouse’s paystubs? I am the only one filing bankruptcy.

When we prepare a bankruptcy petition, we look at total household income.  If you are married and living together, then we need paystubs from both husband and wife.  Even if only one spouse is filing bankruptcy, we need to use the total household income to run the means test, compare you with the median income figures for your family size, and figure out if you are a chapter 7 or a chapter 13.

This does not mean that the bk is going to affect your spouse, but if you’re married and living together, then his/her income matters.

That being said, we can take into account separate house/car/credit card/student loan payments that your spouse has that will not be discharged in your bankruptcy.

On the other hand, if you are still married but living separated, then we don’t need the other spouse’s paystubs.

And no, it doesn’t work to keep living together but claim that you’re separated.  That still requires total household income.

I financed a shed for my backyard. What happens when I file bankruptcy?

It depends on what you want to happen.  financed shed

If you want to keep the shed, then you list the secured debt in your bankruptcy, check the box that you will “reaffirm” the debt, and keep making payments on it.

If you want to give up the shed and stop making payments, then you list the secured debt in your bankruptcy and stop making payments.

Here is where it gets interesting:  the secured creditor has every right to come pick up the collateral if you are not paying on it.  So, yes, they could come dismantle and remove the shed.  However, I have never actually had a shed company come pick up the shed.  Most likely, they will simply leave it on your property.  This doesn’t mean that they don’t have the right to come dismantle it at any time, but it’s not worth their time and effort.

If you do not reaffirm the debt, then it is discharged in bankruptcy.

 

How does a reaffirmed debt report on my credit after bankruptcy?

I was going through a credit report of a new client of mine today.  He had a car loan back in 2009 and filed bankruptcy in 2010.  He reaffirmed his car loan as part of his bankruptcy, and his credit report tells the rest of the story.

Most of the creditors from his bankruptcy are simply reporting a 0.00 balance with a notation such as “discharged in chapter 7 bankruptcy, closed.”  But the reaffirmed debt shows that it was reaffirmed, payments were made for the next 4 years, and it was satisfactorily paid off in 2014.

In other words, reaffirming his debt gave him positive credit reporting and (I assume) helped his credit score jump.  I still don’t like reaffirming debts generally, but this is what it looks like if you do so.  reaffirmation on credit report

 

If I file bankruptcy, can it stop my student loans (UHEAA) from garnishing my wages?

Yes, but only for a little while.

If you file a chapter 13 case, your student loans cannot garnish you while the case is open (anywhere from 3-5 years).

If you file a chapter 7 case, you’re only getting a window of about 4 months from file date to discharge/closure.  After that, they can start garnishing your wages again.

However, I have found that student loan servicers are generally easy to work with after filing bk. Admittedly, I am not the one facing garnishment after the case closes.  But really, my clients report that they are easy to work with) so long as you can offer some reasonable payment).  You can generally get someone in their bankruptcy department who will work with you and get you on a repayment plan.  Hopefully, this plan will have a much lower payment than a wage garnishment.

So bankruptcy will stop a student loan garnishment, but only for a limited amount of time.  Since most student loans survive bankruptcy, you will still have to deal with them at the other end of the case.

What happens to my snake collection when I file bankruptcy?

Most likely nothing at all.  20150309_183702 (2)

When you file bankruptcy in Utah, I can exempt (protect) up to $1,000 of animals.  This can cause problems for people with horses, because horses are large, expensive animals.  Their meat value alone can push them over the $1,000 value.  Snakes are not.

(No, I haven’t eaten horse meat in years.  And snakes really do taste like chicken.  Weird, bony dark chicken).

We list the snakes as part of your personal property on Schedule B of your bankruptcy paperwork.  We then claim an exemption under Utah Code 78B-5-506 as follows:

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;