Author Archives: robertspaynelaw

A debt collector just told me that they are starting garnishment proceedings. When are they going to start garnishing me?

Never, if you file bankruptcy first.

That being said, it’s usually a lie on the part of the debt collector.  Garnishment is the tail end of a series of legal actions, and unless you’ve already been served, had a judgment entered against you, and given them your employer info to send the garnishment paperwork, then they are bluffing.  Basically, if they filed a lawsuit today, it will usually be about 45 days before you see the first garnishment from your wages.  

If they do already have a judgment, they will serve the papers on the payroll office of your employer.  Even then, payroll will normally inform you and give you a fair heads-up kind of warning.

It sounds scary on the phone, but collectors tend to say nasty things.  Many of those nasty things are at best, gross misrepresentations, and at worst, bald-faced lies.

I have given the timeline here:  A creditor just called and said that they are initiating the legal process for garnishment. How long do I have until they garnish me?

You can also find more information here:

A creditor just got a judgment against me. Will they start garnishing me right away?

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

How long will it take my creditors to garnish me after they get a judgment? (video)




What are the steps to purchase and finance a car in my chapter 13 bankruptcy?

You can purchase a car at any time, if you are paying cash.  Financing, on the other hand, is much more difficult.

Today I had a current client ask me about financing a newer car in the middle of her chapter 13 case.  She surrendered an upside-down vehicle in her chapter 13, and she was tired of borrowing vehicles from friends and family.  I responded to her email and gave the following steps:  

What options would I have if I need to buy a car? I surrendered mine when I filed and but now that I am moving to XXXX I’m not sure if I will be able to function out there without one. Can you let me know if this is possible?


Yes, but it’s obnoxious.

If there is any way that you can have someone else finance it in their name, and you make the payments, do so.  Otherwise, here is how you finance a car in a chapter 13:
1.  go to a dealership and tell them how much you can spend on a car and that you are in a 13,
2.  they will show you a type of car you might be able to buy,
3.  sign a purchase contract and have them draft up the finance agreement,
4.  send it to me,
5.  I file a motion with the court, and then we wait 30 days for the court to approve it,
6.  the court awards about $500 in additional fees that you have to pay out (through your chapter 13 payments),
7.  go back to the dealership and show them the signed order, and then,
8.  you can finally drive a car off the lot similar to the one you originally looked at over a month ago.
I stand firm with the adjective above, “obnoxious.”  I also didn’t tell her that the court will
usually only allow a car under about $400 a month, it has to fit your budget, and the court
frowns on luxury (Cadillac) or sports (Mustangs) vehicles.
If you can buy something with cash, always do so.  It’s much cheaper, and your insurance is
cheaper as well.  If you’re not in that kind of situation, then try to finance something as cheap as
you can stomach that will still get you from Point A to Point B.

Can I change the interest rate on my car title loan in bankruptcy?

In a chapter 7, no.

In a chapter 13, yes.

In a chapter 7 case, we can list the title loan, check a box that says that we will reaffirm or keep the loan, and you can keep the vehicle.  But, you keep the exact same payment terms:  same interest rate, balance, monthly payment amount, etc.  So in a chapter 7, no, you cannot change the interest rate.  You can always try to negotiate, but it seems hit and miss with my clients when they try to negotiate a different amount with someone who already holds the title to their vehicle.

In a chapter 13, yes, we can change the interest rate to something called the Till rate, which currently is 5.5%.**  So, in a chapter 13, you can change the interest rate on your title loan, usually about 250%, down to 5.5%.  This doesn’t change the outstanding balance, but it sure cuts down those future interest payments.  


**The Till rate is based on a Supreme Court case called TILL V. SCS CREDIT CORP. (02-1016) 541 U.S. 465 (2004).  I have linked it if you would like some light reading.  I would warn you that the Supreme Court does not generally use cute little pictures made from Microsoft Paint (unlike this blog).

What happens to my property settlement from my divorce when I file bankruptcy?

It depends.  If you have already received the settlement proceeds or items, you’re fine.  If you are still waiting on it to finalize, you’d better wait on the bankruptcy.

When we file bankruptcy, I can protect most of your property under various exemptions.  For example, I can protect $3,000 of equity in your car.  Unfortunately, I generally cannot property property settlements proceeds still coming to you.  So if your ex-husband still owes you another $5,000 from your old joint savings account, and he is sending it to you in 2 weeks, then we’d better not file until after you receive and spend it.  Otherwise, the bk trustee will step into your shoes and intercept that money for himself.  

If you’ve received it and spent it, you’re good.

If you are waiting on the settlement proceeds, do NOT file bankruptcy yet.

And don’t think that you can hide this from the bk trustee.  The moment trustee realizes that you are divorced, he will ask you if you still have any property settlement coming to you.  He’ll also want a copy of the divorce decree.  It’s not worth potential perjury charges and a loss of your bk discharge to keep the settlement secret.



I surrendered my condo in bankruptcy, but now the HOA is suing me for post petition fees?

Yes they can.  

It’s not very common, but at least twice a year I have clients face this issue:  they surrendered their home in a chapter 7 bankruptcy, and then the HOA sues them for HOA fees which came due after the bankruptcy was filed.

Bankruptcy wipes out your personal liability for those fees which arose prior to the bankruptcy file date.  If you’re keeping the home, you’ll still have to pay them back, but if you’re surrendering the home, you do NOT have to pay them back.

The problem is that new HOA fees keep coming due until your name is off the title of the home. (Your names comes off title when they sell or foreclose the property).  Your chapter 7 case does not affect these new post-petition fees.  The Bankruptcy Code Section 523(a)(16) exempts from discharge any:

(16)  fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;

In other words, even though you’re giving up the home, the HOA can still come after you for new fees.  All you can do is wait until the bank forecloses or the trustee sales the property.  Once that happens, your name is off title, and the new title holder will have to pay those fees for you.

I’d like to give credit where credit’s due.  I used the following two articles for inspiration here:

HOA dues still due after bankruptcy filing? by Justin Harelik, and

Post-Petition HOA Fees in Bankruptcy, by the Wilson-Goodman Law Group.


When am I going to get my 2016 federal tax refund from the IRS?

Never, if you file bk first, so be patient and file your taxes first.  

This year, the IRS has been holding on to tax refunds that are receiving the Earned Income Tax Credit (EITC or EIC) and the Additional Child Tax Credit (ACTC).  In other words, if you are claiming kids on your taxes and getting a refund, then the IRS won’t be sending out your refund right away.  That being said, they were only holding them until February 15, 2017, so at this point they should be sending them out.

According to the IRS (from their FAQ website):

I claimed the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) on my tax return. When can I expect my refund?
• By law, the IRS is required to hold EITC and ACTC refunds until February 15. However, taxpayers may not see those refunds until the week of February 27 – if there are no processing issues with the tax return and the taxpayer chose direct deposit.
• Where’s My Refund? will be updated on February 18 for the vast majority of early filers who claimed the Earned Income Tax Credit or the Additional Child Tax Credit. Before February 18, some taxpayers may see a projected deposit date or an intermittent message that the IRS is processing their return.

So at this point, they should be mailing them out, and then you can hopefully use some of that tax refund to file bankruptcy.

You can also check with their handy “Where’s My Refund” website.

What happens to my social security disability lump sum award if I file bankruptcy?

Nothing at all.  It’s safe!  (But there are some hoops you may have to jump through).

Your social security benefits are protected under 42 U.S. Code § 407 which states that:

(a) In general
The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
(b) Amendment of section
No other provision of law, enacted before, on, or after April 20, 1983, may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.

In other words, your social security benefits are safe.  No one, including a bankruptcy trustee, may execute, levy, attach, garnish, or do anything else to your social security.

I have known this for my entire career, but recently put it to the test filing a bankruptcy case for a client who had just received $38,000 in a lump sum award.  I warned her to open a new bank account and put that $38k in the account with NO OTHER MONEY.  I did not want a bk trustee arguing that we had somehow changed the exempt (protected) nature of the funds by commingling them with non-exempt monies.  I then listed the bank account and exempted it (listed the code section above to protect it).

We went to our 341 Meeting of Creditors, and the trustee looked at our bank statement and raised his voice, saying “Counsel.  Why is there $38,000 in this bank account?”

I handed him her “Social Security Administration Retirement, Survivors and Disability Insurance Notice of Award” letter.  He glanced at it, looked at the bank statement, and said (on the record), that those monies were exempt and he was considering this a “No Asset” case.

That was it.  I worried for a month about it, and all he did was glance at the letter and send us off with his blessing.

Do my VA benefits count as income on the bankruptcy means test (form 22 or 122A)?

Yes they do (most of the time).

When you file bankruptcy, we run your income on a “current monthly income and means test” form called Form 122A (in the old days just “Form 22”).  If you make too much money, you cannot file a simple chapter 7, and you are stuck in a chapter 13 on a repayment plan to your creditors.  

When we run the calculations, we count W2 income, alimony, pension, and a host of other types of income.  However, we don’t count some government benefits, like SSA.  Just today, I had another bankruptcy attorney call me today and ask if he had to count his client’s VA benefits on the analysis, and the answer is a resounding, “YES!”

That being said, we don’t count VA Disability Income if you are

a disabled veteran as defined in 38 U.S.C. § 3741(1)) whose indebtedness occurred primarily during a period in which I was on active duty (as defined in 10 U.S.C. § 101(d)(1)) or while I was performing a homeland defense activity (as defined in 32 U.S.C. §901(1)).

See “Statement of Exemption from Presumption of Abuse.”  So, if you incurred the debts while on active duty and are now disabled, then we don’t have to count the VA Disability Income.

I need to give credit where credit is due.  I did a little research, and out of 5 articles I read, this one gave me the best starting point:  My thanks to Richard M. Dwornik at Dwornik law.

What happens to my 2016 tax refund when I file bankruptcy?

You lose it unless you’ve already spent it.

Simply put:  If you file bankruptcy before you receive and spend your tax refund, you will lose the entire thing to the bankruptcy trustee.  

It’s that time of year again where I have to answer the phone and tell people that I don’t want their money until February or later because of tax refund season.  It makes a lean December/January in our household, but it’s the only way to protect my clients.

(I am cutting and pasting from earlier posts, so please forgive the repeat information).

So let’s say you get your refund February 1, 2016.   What do you do?

Better said, what don’t you do:

1.  Don’t go buy a new toy like a dirt bike or a tv.

2.  Don’t pay off any friends or family.  This is a preferential transfer, to an insider no less, and it results in Mom and Dad being sued by the trustee.

So what do you do:

1.  Spend it on exempt items under Utah Law.  This basically means food, clothing, washer, dryer, fridge, freezer, stove.

(Did you see a computer on the list?  No.   Don’t ask me if that’s okay.  It’s not).

2.  And use the rest to pay me.  :)

So let’s say you spend the tax refund on food storage March 1st and keep all of your receipts.  When can you file?  March 2nd.

Here is a relevant portion of the

Utah Exemptions Act, Utah Code Title 78B Chapter 5, Section 505

An individual is entitlted to an exemption in …

(viii) (A) one:

(I) clothes washer and dryer;

(II) refrigerator;

(III) freezer;

(IV) stove;

(V) microwave oven; and

(VI) sewing machine;

(B) all carpets in use;

(C) provisions sufficient for 12 months actually provided for individual or family use;

(D) all wearing apparel of every individual and dependent, not including jewelry or furs; and

(E) all beds and bedding for every individual or dependent;

There are other items you can spend the money on, and this is by no means comprehensive, but this should give you a good idea on how to spend it.  If you have questions on what to use it for, ask your attorney;  that’s what he’s there for.

Here are some helpful prior posts:

How do I spend my 2015 tax refund before filing bankruptcy?

Can I use my tax refund to pay for bankruptcy?

Is there a chance that a creditor will garnish/levy my tax refund?


Should I file bankruptcy now to stop the garnishment, or wait for my tax refund?


Is there a chance that a creditor will garnish/levy my tax refund?

Do people still read your bankruptcy blog (because you’re not even updating it daily)?

Apparently yes.

The blog just hit 50,000 views according to one stat counter (some others give wildly higher numbers, but this is the only widget that I could figure out how to install).  This bankruptcy blog has 488 separate blog posts on various bankruptcy topics, and although I haven’t covered them all, I hope that I’ve at least hit the basics.


I have a friend who is a good bankruptcy attorney and a world-class cake decorator.  Two years ago she showed me how her cake blog had over 20,000 views, and I became a little envious, even jealous.  The day after she showed me, I installed my little stat counter and checked it feverishly.  Now that it has hit over 50k, I feel that I can brag a little.

Another friend (also a bankruptcy attorney), pointed out that I am lying on my blog:  it is no longer updated daily.  He’s right, and I’ve had to change the language at the top to reflect that.  I do still post updates, and if you have a bankruptcy question, please send it to me so that i can answer it and have some more entries.