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:  http://dworniklawaz.com/va-disability-income-bankruptcy-means-test/.  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.

50000

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.

What do I do if I don’t have enough money to pay an attorney for bankruptcy?

I hate this question, because there’s no good answer.  Going bankrupt means that your assets are completely overwhelmed by your liabilities (you have no money!).

First, what not to do:  Don’t take out a payday loan or a cash advance to pay your your bankruptcy.  That is simply wrong and opens you up to possible litigation in the bankruptcy court.

Now what you can do:

  1.  Bank of Mom and Dad:  I know, by the time you’re considering bankruptcy, you’ve tapped that well so many times that it’s hard to ask for anymore help.  However, this time, asking them to pay for it will actually stop the creditors instead of just delaying them for a bit.
  2. Tax Refund Time:  Bankruptcies peak in March – June not because of the new hope and energy of Spring, but because this is the only time of year my clients have extra money to pay for a bk (because of the tax refund).
  3. Sell off an extra asset:  You have probably sold off anything of value trying to satisfy creditors, but this may finally be the time to sell that project Mustang to pay for a bk.
  4. Trade/Barter:  Bankruptcy attorneys are sometimes a little flexible.  I have taken a car, no-money-for-bkcomputers, even guns in trade for bankruptcy.  It’s not common, but it happens.

I am sure that I have offered nothing that you  haven’t already considered yourself, but I can assure you that using an attorney for your bankruptcy is worth it.

I just got an IRS scam phone call from India. Who do I report it to?

A lot of my clients are getting these scam phone calls.  Even my 19 year-old son has gotten two on his phone this month.  irs-scam

I get asked two things:

  1.  is it real? (the answer is NO!), and
  2.  can I report them?

Yes, you can report them.  Simply put, send an email to the IRS with the phone number of the scam collector.  You can send it here:  phishing@irs.gov.

Even better, the IRS has set up a special form for I.R.S.  Impersonation Scam Reporting.  Fill it out, and hopefully they’ll be able to shut the number down.

What’s sad is that the calls continue.   Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls.  If you get one and are worried about it, give me call.  Hopefully we can go over it together and put your mind at ease.

 

Can I get charged with criminal fraud if I use my credit card before filing bankruptcy?

It’s possible, but very very unlikely.

I’ve filed over 2,000 bk cases under my name, and as far as I know, I’ve only had one client get charged with fraud for financial actions he took prior to bankruptcy.  He took $120,000 of someone’s life savings and invested it poorly.  When the investor emailed my client asking about the status of his money, my client responded via email, “I blew it on candy and a trophy bride here in Costa Rica.”  Things did not go well for my client when the investor contacted the U.S. Attorney’s office and presented them with this written accounting from my client.

However, that’s a pretty extreme example, and I didn’t know about it at the time I filed his case and honestly try to avoid cases which might get scary.   criminal-charges

Today a potential client asked me if his charges on an American Express card two months ago could result in a criminal fraud complaint against him.  I told him probably not, but his case was a little unique.  I sent him to another attorney who is better with questionable fact patterns like that one.

Normally, there is no fraud because no one wants to go bankrupt, and no one tries to plan out the perfect way to charge up credit cards before filing.  If you do, the creditor can sue you to make you pay it back in spite of the bk:  If I use my credit card right before I file bankruptcy, can they object and throw it out?

So it is possible, but in my experience, criminal charges are very unlikely unless you’ve done something truly awful and outrageous.  Charging groceries on your credit card 2 weeks before you meet with me to discuss bankruptcy isn’t going to result in jail time.

Our statement of intention in bankruptcy said that we wanted to reaffirm our car, and they repossessed it. Do we still owe the bank money?

Maybe.

If you officially reaffirmed the debt, then yes, they can still sue you after a repossession if there is some kind of deficient balance after the auction, but only if you “officially reaffirmed” it.

statement-of-intent

When you file bankruptcy, you file a document called “Official Form 108, Statement of Intention for Individuals Filing Under Chapter 7.”  In this document, you can notify your creditors regarding your intentions with leases (like cell phone contracts and apartments) and on secured collateral (like homes and cars).  You can check boxes that state that you will surrender/retain the property or assume/reject your lease.  However, this Statement of Intent doesn’t bind you.  It gives your creditors warning on what you’ll probably do, but you can change your mind.

If you really want to reaffirm a debt, then you have to sign a reaffirmation agreement, have your attorney sign it, have the secured party (bank) sign it, and then the bank will file it with the court.  If you don’t do these steps, then the debt is not reaffirmed.

Checking the box on your original Statement of Intent does not count.

I had a client call me yesterday who had been reviewing her bk paperwork from a year ago (yes, she’s very thorough).  She had checked the “reaffirm” box on her original Statement of Intent, but never reaffirmed the debt and had surrendered the car.  She was now worried that she had somehow reaffirmed the debt and was facing an imminent lawsuit.  I reviewed the paperwork and the docket, and she did not officially reaffirm.  I was happy to tell her that no lawsuit was coming; she was safe.

 

 

Why didn’t my bankruptcy attorney call me and text me and send a letter and an email (twice)?

Today I spoke with an angry client whose case was dismissed because he ignored our conversation when we filed the case, ignored my follow-up email, ignored a letter from the court, and ignored my letter forwarding that court letter.

He was frustrated because I didn’t go through the reminder process again right before his case was dismissed.

I understand his frustration.  The number one complaint that people have about their attorneys is “lack of communication.”   communication

In my practice, my clients have my personal email, my cell number, and I respond to text messages virtually any time.  That being said, after I tell them what I need or what the trustee is asking for, I expect them to respond.  We are all adults, and I figure that if someone gets a “to do list” from me, that they’re going to follow through or ask me for clarification.  I know that my clients call the next morning if I don’t respond to their email.

So my advice to other potential clients of me or anyone else is simple:  respond to your attorney’s letters/email/voicemail/texts.  If something doesn’t make sense, ask for an explanation.

Sometimes I screw up, and when I do, I’ll own it and even eat the legal fees.  And I guarantee that I’ll tell the client what is going on.

How will my bankruptcy attorney know if I filed bankruptcy before (or can I lie to him)?

We look it up, and we will know.

Today I had a potential client with a foreclosure sale on his home later this afternoon.  I don’t like to take this kind of case, but he had cash, and I was willing to listen.

I asked if he had filed bankruptcy before and explained that if you file bankruptcy more than twice in a year, that number 3 is not going to stop the foreclosure sale.  (Yes, here are some exceptions, but the bankruptcy laws generally discourage frequent filers).  So, I asked if he had filed bk before, and he said no.

I called up the Utah Bankruptcy Court and gave them his social security number to verify if/how many times he had filed before.  I also looked him up on PACER.  I found this:

dont lie

Not only had he filed before, but he had been BARRED from refiling for abuse of the bankruptcy system!  Apparently this had slipped his mind, even though it only happened 3 months ago.

I said that I would not take the case.

Most things show up on a PACER search or a credit report, so it all comes out in the wash at the end.  It is also a good idea to be honest with your attorney, since neither of you want to face fraud/perjury on your federal court documents.

Do I need to wait to file my bankruptcy until after I have received all of my medical/hospital bills?

No.  We can file today so long as we make sure to list everyone who will send you a bill.

I had a client get out of the hospital last week and meet with me this week.  She needs to file bankruptcy on about $40,000 of medical debt, but the hospital hasn’t sent her all of her bills yet.  She asked me this question because she is worried that we will go bankrupt today, receive a $10,000 bill tomorrow, and be stuck with it.  future bill

However, so long as we list the hospital now, that will cover all future bills she receives for services that occurred prior to the bk.  For example, if we go bankrupt today and later receive a $5,000 bill for last week’s ambulance ride, that bill would be covered (so long as we remembered to list the ambulance company).  On the other hand, if we go bankrupt today, and she rides an ambulance tomorrow, that new ambulance ride won’t be covered because it happened after we filed bk.

So no, you don’t need to wait until all of the bills have come in, but you should list each potential creditor with a fair guess as to the amount you probably owe them.  This way, you won’t have to add them as creditors later.