Monthly Archives: September 2015

Can my utility (water/power/sewer) charge me a new deposit after I file bankruptcy as an “adequate assurance of payment?”

assurance of paymentYes.  They’ll usually just tack it on to your next bill.

Here is a copy of a standard letter here in Utah, adding a deposit of $156, which will be refunded in a year.

 

So I had a client call me two days ago.  We had filed a chapter 7 for them 3 months ago, and a small municipality here in Utah shut off their water, in spite of having notice of the bk, and in spite of both myself and my client speaking with the manager of their city utilities.  The client started calling me at 7:45 a.m., and I started calling the city at 8 a.m.

We knew that the utilities manager was in the office, because she had spoken with my client at 7:44 a.m., but she kept sending my calls to voicemail.  I had to threaten a bankruptcy lawsuit for sanctions in a tersely worded email to the city attorney, the assistant city attorney, and even their paralegal.  An hour later, the water was back on.  Seven hours later, I received an email from the city attorney stating:

Mr. Payne,

As you may know, the utility service was turned back on today for your clients. Please be advised that the City of XXXXXXX will insist that an assurance of payment be provided once an order is granted per 11 U.S.C. §366. We also request that you notify us when that occurs and provide us with a copy of the signed order. In the meantime, please email us a copy of the bankruptcy petition filed in June for our records.

Now here’s where it gets interesting.  11 U.S.C. §366 requires that :

(a) Except as provided in subsections (b) and (c) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.
(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
(c)
(1)
(A) For purposes of this subsection, the term “assurance of payment” means—
(i) a cash deposit;
(ii) a letter of credit;
(iii) a certificate of deposit;
(iv) a surety bond;
(v) a prepayment of utility consumption; or
(vi) another form of security that is mutually agreed on between the utility and the debtor or the trustee.

Simply put, you may be required to pay an additional deposit to continue using services.  Yes, they can require this.  Yes, you can fight it, but only if it’s unreasonable, and I’ve seen the new deposit for residential services go as high as $500.

And yes, they can shut off your utilities if you don’t pay the deposit.

Can I re-open my bankruptcy case to add a personal injury claim and then exempt it?

Yes.  (The attached picture is actually me pretending to be dead in a Smith’s Grocery Store after our shopping trip took longer than I anticipated).  personal injury claim

Every morning I receive ECF (“electronic case filing”) notices from the court in my email.  About a month back I received a notice for a 2011 case (it’s September 2015 right now).  Over the course of the next month, the ECF Notices went like this:

Motion to Reopen Case (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
10 (Document: https://ecf.utb.uscourts.gov/doc1/182021741953?pdf_header=&magic_num=5614671&de_seq_num=45&caseid=326325)
Docket Text:
Motion to Reopen Case for Purpose of Amending Schedules and Exemptions. Fee paid with motion Filed by XXXXX

Pending Order (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
12 (Document: https://ecf.utb.uscourts.gov/doc1/182021839898?pdf_header=&magic_num=85279762&de_seq_num=57&caseid=326325)
Docket Text:
Pending Order (Hrg Scheduled/Reserved) related documents(s):[10] Motion to Reopen Case Filed by: XXXXX

Order on Motion to Reopen Case (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
13 (Document: https://ecf.utb.uscourts.gov/doc1/182021852170?pdf_header=&magic_num=44150364&de_seq_num=63&caseid=326325)
Docket Text:
Order Granting Motion To Reopen Case To Amend Schedules and Follow Proper Abandonment Procedures on the Potential Estate Property. (Related Doc [10]) (clo)

Request for Abandonment (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
15 (Document: https://ecf.utb.uscourts.gov/doc1/182021861668?pdf_header=&magic_num=61527524&de_seq_num=69&caseid=326325)
Docket Text:
Request for Abandonment Description of Property:Potential Personal Injury Settlement Filed by XXXX
(Ch 7) (EOD: 2015-08-24 16:08:22) Lesa Ann Groesbeck Trustee/USTR’s Notice of Endorsement (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
( no document )
Docket Text:
Trustee/USTR’s Notice of Endorsement filed by Trustee/USTR. (related document(s):[15] Request for Abandonment Description of Property:Potential Personal Injury Settlement Filed by XXXXX. Endorsed with no objection (XXXXX)

Notice of Proposed Abandonment and Opportunity to Object (Docket: https://ecf.utb.uscourts.gov/cgi-bin/DktRpt.pl?326325)
16 (Document: https://ecf.utb.uscourts.gov/doc1/182021886811?pdf_header=&magic_num=29834466&de_seq_num=74&caseid=326325)
Docket Text:
Notice of Proposed Abandonment and Opportunity to Object (related document(s):[15] Request for Abandonment) Filed byXXXXX

And there you go!  To add and them exempt the personal injury claim, the attorney had to move to re-open the case, then amend the schedules and exempt the claim, and then go through the official abandonment procedures with the trustee.

Honestly, it would be easier to simply list any potential personal injury claims in your initial paperwork.

Is there a way to consolidate my payday and check loans (and maybe lower the interest rate)?

Yes, but you may not like it.

10% interest….. If you have a home with tons of equity and good credit, you could always get a HELOC (home equity line of credit) and pay them off all at once.  (I don’t know how high the actual interest rate is, but it’s better than what your’re paying now).

2% interest….. If a HELOC isn’t an option, you can file a chapter 13 bankruptcy.  consolidate payday

On the day you file your chapter 13, it freezes the balance on each of your payday loans.  You then can pay them back once a month over a 60 month (5 year) plan.  You will pay an interest rate of anywhere from 0.00% up to 2%.

So, let’s say you have $10,000 in payday loans, and you are making the minimum payment each month.  Your minimum monthly payment on those will be about $800 a month.  The average annual  interest rate on those is about 500%.  By the end of the year, you’ll owe a lot more than $10,000!  (You can do the math if you want to, but it will make you feel sad inside).

Or you can file a chapter 13.  Your payment on those loans will be about $167 a month over a 5 year plan.  Yes, it stinks that you had to file bankruptcy, but your bk repayment plan is a lot better financial planning than limping along paying those minimum payments.

Does the bankruptcy trustee look at gross income or net, and will they take into account all of my expenses?

Short Answer:  Gross and yes.

Long Answer:  It’s complicated.  This is why you need an attorney to sit down and review your paystubs, expenses, types of debt, etc.

However, it’s been my experience that when a client asks the “gross vs. net” question, that they already know that they make too much money to be a simple case.  Additionally, although the trustee will take into account most expenses, like mortgage, car payment, health insurance, child support/alminony, etc., there is a point that if you make too much money, you will have to file a chapter 13 repayment.  This means that you may still end up paying all of your creditors back over 60 months at 2% interest.gross or net

That being said, even if your income is too high for a chapter 7, it will probably still be much cheaper for you to make one monthly payment to all of your creditors at 2% interest instead of 30 different payments at 30% interest.

I have written about this elsewhere in the blog, and here is a little extra light reading for you:

Can bankruptcy control the interest rate I’m paying out to my creditors?

If I file a single, separate bankruptcy, will the court count my non-filing spouse’s income for purposes of the means test?

What are the median income figures for bankruptcy in Utah (February 2015)?

What happens in bankruptcy if your social security income pushes you above the median income threshold?

Why is my chapter 13 payment higher than my neighbor’s?