Author Archives: robertspaynelaw

What do I need to bring to my initial consultation with a bankruptcy attorney?

Honestly, nothing.  Most of my clients don’t bring any documents to their first consultation, but it wouldn’t hurt to be a little prepared.

Here’s what you don’t need:  money.  I hate taking money at the first meeting, because I want you to go home and really, really think about it.  Yes, I know that you’ve been thinking about it for at least 6 months or more before you call me, but one more night won’t hurt.  You also don’t need money to pay for the initial consultation.  It’s free.

 

Here’s what you could bring to speed things along:

  1.  paystubs — Sometimes, the main factor determining whether you can file a Chapter 7 or a Chapter 13 is your income.  If you make too much, you might be looking at a repayment plan.  If you bring your paystubs, we can calculate your 6 month averages to see where you fall.
  2.  collection notices — This will give the attorney a good idea of where you are in the collection process.  If you’re still getting nasty letters saying that they will send you to their legal department, there is not a real rush for time.  If you have garnishment paperwork from your employer, then we need to file this case by Wednesday so that I can notify payroll to stop that Friday garnishment.  If you have a foreclosure notice for next Tuesday, then we’d better do something by Monday to save the home.
  3. credit report — Maybe.  If you have set up an account at www.creditkarma.com, you do NOT need to print it out, but make sure to log in to your account at the office so that the attorney can save a .pdf copy of your report.
  4. taxes — not really necessary, but I’d love to see how large your tax refund was last year. You’ll eventually need them before you file, but they don’t make a huge difference for the first consultation.
  5. online class (Credit Counseling) — no.  You don’t need to do this before you meet with your attorney.
  6.  secured loan documents — Yes please.  Mortgage statements and car loan balances will make a huge difference on determining the value of your assets.

So if you want to be extra-prepared, then bring paystubs, collection notices, your creditkarma login info, and secured loan documents, and you’re good to go.

 

What happens to my bitcoins when I file bankruptcy?

You lose them.

In bankruptcy, we list all of your assets and then exempt (protect) them.  Most assets, like $3,000 of equity in your car, or 100% of your 401k, or all of your clothing on your back are protected under state or federal bankruptcy exemptions. However, some assets are not protected.  

For example, here in Utah, you can protect 3 firearms.  So if your have 4 shotguns, then one of them is not protected, and there is a chance that the bankruptcy trustee will want to liquidate it (sell it) and use the proceeds to pay your creditors.

Bitcoins are a kind of investment, but not one protected under our exemptions.  So let’s say that you bought 3 bitcoins a couple of years back for $1,000.  Now they’re just sitting in your bitcoin wallet somewhere in the internet ether.  When we list your assets prior to filing bankruptcy, we will have to list those at their current fair market value.  As of today, it looks like bitcoins are selling for about $7,000 u.s.d.  (See https://www.coindesk.com/price/ ).  In other words, your internet bitcoins could sell today for 3 x 7,000 = $21,000.

When we file bankruptcy, the bk trustee will most likely ask you to liquidate those, give him the proceeds, and he’ll use them to pay off your creditors.  Now that’s in a chapter 7.  If you file a chapter 13, the bk trustee won’t make you sell them, but he’ll demand that you pay at least $21,000 back to your unsecured creditors over a 5 year chapter 13 plan.

Either way, you lost the value of those bitcoins to your creditors.

You might think that there is no way for the bk trustee to track your bitcoin ownership, and you may be right.  However, the truth has a funny way of coming out.   Angry exes will always pop up at the wrong time.  The bk trustee may be looking at your bank statements and ask you what that $100 transaction was at www.coinbase.com last month when you decided to dabble in ethereum and litecoins.  There is always an electronic or paper trail.  Besides, you really should be honest because it’s just not worth the fraud charges and denial of your bk discharge.

So in essence, if your bitcoins have any value on the date of filing your bankruptcy, then you will probably lose them.

Can I settle a debt with my judgment creditor without going bankrupt? (satisfaction of judgment)

Yes.  And although I hate saying it, if there is a way you can settle your debts and stay out of bankruptcy, then you should take it.  Your credit will be better in the long run.

I had a potential client who had $1,500 cash in hand ready to file a chapter 7 case.  I was more than ready to take his money.  Then he had an idea:  he would call his largest creditor and see if that creditor would take that same $1,500 to settle out a much large judgment claim.  

Fortunately for the client, the creditor accepted the offer.  Because of this settlement, my potential client didn’t need to file bankruptcy.

Now the creditor had sued my client and already had a judgment.  Not only was this hurting my client’s credit, but he was worried that this creditor would take the settlement money and then still proceed to garnishment.  In order to protect my client, he drafted up a Judgment Settlement Agreement (copied from a web search), and brought it to my office along with a cashier’s check to settle the debt.

Because there was a judgment entered, my client also needed a Satisfaction of Small Claims Judgment (found here: https://www.utcourts.gov/howto/judgment/satisfaction/ ).

Both parties signed the agreement, the plaintiff signed the Satisfaction of Judgment, everything was notarized, and we filed the Satisfaction with the court.

At that point, the judgment was satisfied, the creditor could no longer collect, and my client avoided bankruptcy.

Can I get rid of criminal restitution in bankruptcy?

Nope.  (And to be honest, you probably expected this answer).  

I get asked this question at least a month, and the answer is always a resounding “No.”

If you don’t know what criminal restitution, be grateful.  Let’s say that you have a very bad day and burn down the storage unit where you and your ex-husband used to keep all of your Christmas decorations.  This is arson.  After you are criminally charged and sentenced, the court will order you to pay various fines and even pay to restore the storage unit.  In this scenario, the amount is $20,000 in total.  Then you’ll have $20,000 in criminal restitution.  You’ll have to get on a payment plan with the state to pay that back.

When you file bankruptcy, it does NOT affect your restitution.  In some jurisdictions, you can organize those payments in a Chapter 13 bankruptcy, but here in Utah, the Chapter 13 Trustee does not want to be in charge of collecting and paying those each month.

If you are looking for the official bankruptcy code sections, you can go here:

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

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit,

If you need case law, it is clear as well.  The U.S. Supreme Court found in Kelly v. Robinson, 479 U.S. 36 (1986) that criminal restitution payments cannot be discharged in bankruptcy.

You will want to get on a payment plan with the state and stick to it.  This doesn’t mean that we cannot go bk and discharge your other debts like medical and credit collections.