Monthly Archives: April 2015

We took out some payday loans after filing a chapter 13. What should we do?

Short Answer:  Let your case dismiss and file a new chapter 13 with those new payday lenders as new creditors.

post bk payday

When you file a chapter 13 case, you propose to make some kind of payment to your creditors over the next 3-5 years.  You are NOT allowed to take out any loans (such as car loans, mortgages, or payday loans) without court approval.

However, it happens.

Recently, I was contacted by clients who had filed a chapter 13 last year and were consistently making their payments to the bankruptcy trustee.  Unfortunately, hours were slow over December and January, and they took out about $3,500 in new payday loans.  Even worse, they were using this money to keep up their chapter 13 payments.  Now, they are having a hard time keeping up their chapter 13 trustee payments and making those payday loan weekly payments at 500%+ interest. Yes, over 500% interest.

They had never spoken to me about the payday loans until after the damage was done.  If they had called me back in December, I would’ve told them that missing 1 or 2 chapter 13 payments was not going to be the end of the world.  Now, we are letting the case be dismissed.  Yes, dismissed on purpose.

When we file the new case, we will list those new payday lenders in the bankruptcy and wipe them out.  Yes, there is a chance that they will object and demand that we pay them back in full, but I’ve never had it happen in a chapter 13.

How do I know if I am going to be garnished before bankruptcy?

Ask your payroll office.  Really, it’s that easy.    
ask payroll

If there is a garnishment in place for your next payday, they will tell you.  If there is not, then you have at least two weeks of worry until the next payday.  Just remember that we can file a bankruptcy to stop that next garnishment.  You may feel a little shy about asking payroll or your HR Department that kind of question.  Trust me, they already know your business, and this isn’t going to reveal any secrets that they don’t have to deal with on a day-to-day basis.

For a little background, just remember that a normal creditor (not counting ORS or the IRS) cannot garnish you until they sue you.  They need to serve you with a lawsuit.  Then, they need to get a judgment.  Then, they need to find out where you work.  Finally, they need to serve a writ of garnishment on your employer.  It’s not an immediate thing.  When a creditor tells you that they are “initiating garnishment proceedings,” they are lying.  It’s a slow, drawn-out process.

That being said, yes, it is possible that a creditor sued you and got a judgment without your knowledge.  It is also possible that they somehow divined where you work.  This means that the only way you can be sure is to ask your payroll office.  They will give you a straight answer on any possible garnishment much better than I can.

 

My ex-wife just got a judgment against me. Can I list it in my bankruptcy?

Maybe.

Certain debts are non-dischargeable and survive your bankruptcy.  These priority debts are generally:  taxes, student loans, criminal restitution, and child support/alimony (called “domestic support obligations, or DSO”).

If your ex-wife’s judgment is from a divorce decree and relates to debts that you are required to pay as part of your divorce, it MAY be considered DSO, which means that it would survive bankruptcy.  You’ll need to bring in the actual decree to a more seasoned bankruptcy attorney so that he can go through the decree and give you a straight answer.

However, if she gets a judgment against you after the divorce, then it’s probably dischargeable, unless it related to a DSO.

I had a client come into my office this week who was divorced years ago.  He and the ex got back together briefly, they had some financial difficulties, and they broke up again.  She later sued him on a personal loan she had given him and received a very healthy judgment against him.

This lawsuit, loan, and debt can all be listed in the bankruptcy and be wiped out.  This is not a DSO, it’s just a run-of-the-mill debt, and she is a regular creditor.  This will give her even less reason to like you, but odds are that that ship sailed long ago.post divorce judgment

What happens to my 401(k) loan when I file bankruptcy?

Hopefully nothing.

Your 401(k) (generally) is protected in bankruptcy as an exempt piece of property.

Utah Code 78B-5-505. Property exempt from execution.

(xiv) except as provided in Subsection (1)(b), any money or other assets held for or payable to the individual as a participant or beneficiary from or an interest of the individual as a participant or beneficiary in a retirement plan or arrangement that is described in Section 401(a), 401(h), 401(k), 403(a), 403(b), 408, 408A, 409, 414(d), 414(e), or 457, Internal Revenue Code;

Your 401(k) loan is simply a loan you have taken out from the 401(k) (your own retirement money) for some immediate purpose.  Bankruptcy doesn’t discharge this debt, because it is a debt that you owe to yourself.  You simply keep making payments back to yourself (401k) after filing.

What is a motion for court approval of reaffirmation agreement?

When you reaffirm a debt, you re-assume liability for the loan.  In other words, you pull the loan out of bankruptcy and agree that it will survive bankruptcy.  This means that if you fall behind on the loan after bankruptcy, then they can sue you.  That reaffirmed debt was not discharged in your bankruptcy.

If you are represented by an attorney, there is a place where your attorney signs the documents to support your reaffirmation.  However, sometimes your attorney will not sign the agreement if the loan terms are unfair, or if you cannot afford the loan.  The attorney does not want to be liable for locking you into a bad agreement that you cannot afford.

If you are pro se (not represented by an attorney), then you will have to fill out the reaffirmation agreement on your own.

In either situation, you will have to fill out the below form called a “Motion for Court Approval of Reaffirmation Agreement.”  Below is a picture of the very basic motion.  (You don’t have to draft it;  it’s a form motion that is part of the reaffirmation agreement).motion for reaff

After this, you will have to go before a bankruptcy judge and argue why it is a good idea for you to reaffirm this debt.  If you are pro se, this may be a little difficult.  If you are represented by counsel, and your attorney thinks that this is a bad agreement, it will be very, very difficult to convince a judge that it is a good idea.

Should I open a new bank account before I file bankruptcy?

Maybe.  bank account

If you already have bank accounts in good standing, then you will be able to keep those accounts open after you file bankruptcy.  However, if you have credit lines, credit cards, or secured loans with those same institutions, then the banks may close your bank accounts if you close those other credit accounts.

You want to have at least one open bank account, in good standing, without any lines of credit attached to it prior to filing bankruptcy.  Otherwise, it will be very difficult to open an account after filing bankruptcy.

If you have an account in overdraft, you may be able to keep that account if you pay the balance back up to zero after filing.  This is generally not worth it unless your overdraft is very small, like $200 or less.

If you are already have banking issues, you may want to read here instead:

How can I open a checking account or debit card with bad credit?

What happens if I list Rent-a-Center in my bankruptcy?

You can choose to surrender the collateral and wipe out the debt, or you can keep the collateral and keep paying.

In other words, if you want to keep your financed tv, you keep paying for it.  If not, give it back and we can wipe out the debt.

In bankruptcy, you can keep secured loans and reaffirm the debt, where you keep making the same payment, interest rate, and balance.  If you choose to wipe out that debt, then you must surrender the collateral and let the creditor come back and repossess it.  rentacenter

Rent-a-Center is a little different.  When you finance something through their offices, it is a rental-purchase agreement, and you do not own the collateral until the last payment.  Technically, this means that we list the contract as a lease in your bankruptcy, same as a cell phone or apartment rental agreement.  So long as we keep the lease, you keep the collateral.

According to their website:

Transaction is a rental-purchase agreement (or in NV, a lease agreement with an option to purchase; in IA, ND, NE, and SC, a consumer rental-purchase agreement; in CT and NH, a rent-to-own agreement; in AK, DC, DE, HI, ID, KS, OR, SD, VA, and WA, a lease-purchase agreement; in MA and RI, a lease; or in VT a consumer lease agreement). Not available in MN or WI. You will not own the merchandise until the total amount necessary to acquire ownership is paid in full or you exercise your early purchase option (“EPO”). Ownership is optional. MA and RI consumers: at any time after the initial payment, you may purchase the merchandise for 80% of the remaining Total Number of Payments, plus sales tax, calculated at the time. In VT, minimum 18-week rental period applies. 90 days same as cash not available in VT. Product availability and pricing may vary by store. Participating locations only.

Can I list my car accident in my bankruptcy?

Yes, and most likely, all of that debt will be discharged (wiped out).  car accident

In general, bankruptcy discharges all of your debts except for certain priority debts, such as most taxes, student loans, child support, and criminal restitution.  Other debts, such as debts based on fraud, survive as well.  In a car accident situation, non-dischargeable debts include:

11 U.S. Code § 523 – Exceptions to discharge

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
(9) for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance;

In other words, if you willfully and maliciously cause a car accident and property damage, then that debt will survive bankruptcy (if there is some kind of court finding that you were willful and malicious).

If you cause an accident while drunk driving, then those debts will survive bankruptcy too (if there is a court finding to that effect).

However, if you haven’t willfully and maliciously caused the accident, and there was no DUI, then you can list those debts and wipe them out.  You can list the following debts from your accident:

1.  any insurance claims,

2.  any court proceedings and judgments,

3.  unpaid insurance premiums,

4.  claims from your secured creditor (the bank) for damage to your car, but

5.  NOT the ticket, if you are issued a citation.

I have also written some related blog articles on this topic below:

I just totalled my car that has a title loan on it. Do I have to give them the insurance payoff check?

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

Is there free parking for my Utah bankruptcy court hearing or 341 Meeting of Creditors?

Yes, if you know where to look.  free parking

Provo

The 341 Meeting of Creditors is held at the Provo Library (Old BYU Academy).  There are two above-ground parking lots and an underground parking lot, all free.

Ogden

The 341 Meeting of Creditors is held at the Federal Building in Ogden.  There is free parking lining the street running east and west of the building.

Salt Lake City

It gets a little dicier here.  There is a lot of FEE parking.  There are 3 free one hour parking spots on West Temple just south of the Ken Garff Building.  There is a free 1 hour parking lot with about 10 spaces just east of the building along 400 South.

There are plenty of FEE parking lots, and meters.  Just remember that if you do get a ticket, the parking ticket is only $15.  It’s $15 that you don’t want to spend, but still only $15, and not the end of the world.  I have NEVER had a client get towed for failing to feed the meter.

A process server improperly served me a lawsuit by giving it to my minor child. What can I do?

You can waste a good deal of time and money fighting it, and then still get garnished in the end.

I probably get this call at least once a week.  The potential client has a lawsuit that was given to their 12 year old daughter by a process server (who does know better), and they want to  fight it.  Yes, they owe the money, but they hope that there is some kind of law that will invalidate the underlying debt and give them huge monetary sanctions against the creditor and the process server.  It doesn’t work like that.  improper service

You can hire a litigation attorney to argue improper service, and after spending about $2,000 on that defense, the creditor will simply serve you the lawsuit in the hallway of the court right after you beat him on this issue.  You still owe the money, but now you’re out another $2,000 for fighting the admittedly improper service.

So yes, you can fight it and win a moral victory, but you still owe the money, and they will eventually be able to garnish you.