The Utah homestead exemption just jumped from $30,000 to $42,000 on May 14, 2019.

Since I’ve been practicing bankruptcy law, the Utah homestead exemption was $30,000. This means that $30,000 of equity in your home was safe from creditors. Now it’s $42,000. Woot!

On March 26, 2019, Utah Governor Gary Herbert signed an upgrade to the Utah Homestead Act, increasing the exemption from $30,000 to $42,000 (which you can double for married couples up to $84,000 in equity). The law finally took effect on May 14. See: Utah Governor Signs Law on Property Tax Exemptions.

Here’s what it means in practice: let’s say you have a home worth $100,000, and you owe $100,000. There is no equity, and your home is safe from creditors (and bankruptcy trustees wanting to sell it off).

But, try these numbers:

  1. home fmv $100,000 with a loan of $70,000 = $30,000 of equity. The homestead exemption protects that $30,000 of equity from creditors and the trustee.
  2. home fmv $100,000 with a loan of $50,000 = $50,000 of equity. The homestead protects $42,000 of that $50,000 of equity, so you have $8,000 of unprotected equity in your home.

Here is the text of the Utah Exemptions Act: Homestead Exemption, Utah Code 78B-5-502:

Effective 5/14/2019
78B-5-503.  Homestead exemption — Definitions — Excepted obligations — Water rights and interests — Conveyance — Sale and disposition — Property right for federal tax purposes.

(1)For purposes of this section:(a)”Household” means a group of persons related by blood or marriage living together in the same dwelling as an economic unit, sharing furnishings, facilities, accommodations, and expenses.(b)”Mobile home” means the same as that term is defined in Section 57-16-3.(c)”Primary personal residence” means a dwelling or mobile home, and the land surrounding it, not exceeding one acre, as is reasonably necessary for the use of the dwelling or mobile home, in which the individual and the individual’s household reside.(d)”Property” means:(i)a primary personal residence;(ii)real property; or(iii)an equitable interest in real property awarded to a person in a divorce decree by a court.
(2)(a)An individual is entitled to a homestead exemption consisting of property in this state in an amount not exceeding:(i)$5,000 in value if the property consists in whole or in part of property that is not the primary personal residence of the individual; or(ii)$42,000 in value if the property claimed is the primary personal residence of the individual.(b)If the property claimed as exempt is jointly owned, each joint owner is entitled to a homestead exemption, except that:(i)for property exempt under Subsection (2)(a)(i), the maximum exemption may not exceed $10,000 per household; or(ii)for property exempt under Subsection (2)(a)(ii), the maximum exemption may not exceed $84,000 per household.(c)A person may claim a homestead exemption in either or both of the following:(i)one or more parcels of real property together with appurtenances and improvements; or(ii)a mobile home in which the claimant resides.(d)A person may not claim a homestead exemption for property that the person acquired as a result of criminal activity.(e)(i)As used in this Subsection (2)(e):(A)”Average index number” means the average of the 12 most recent Consumer Price Index numbers that are available in December in the year previous to the calendar year that is calculated in Subsection (2)(e)(iii).(B)”Consumer Price Index number” means a monthly number for the unadjusted Consumer Price Index for All Urban Consumers for all items as published each month by the Bureau of Labor Statistics of the United States Department of Labor.(ii)The dollar amounts in Subsections (2)(a) and (b) are for May 14, 2019, through December 31, 2019.(iii)For the calendar year 2020 and a calendar year after the calendar year 2020, the state auditor shall:
(A)calculate new dollar amounts for each dollar amount in Subsection (2)(a) and (b) by multiplying the dollar amount in Subsections (2)(a) and (b) by the average index number, dividing the result by 251, and rounding to the nearest 100 dollars; and(B)publish on the Office of the State Auditor website the new dollar amounts calculated under Subsection (2)(e)(iii) no later than January 1 of the applicable calendar year.
(3)A homestead is exempt from judicial lien and from levy, execution, or forced sale except for:(a)statutory liens for property taxes and assessments on the property;(b)security interests in the property and judicial liens for debts created for the purchase price of the property;(c)judicial liens obtained on debts created by failure to provide support or maintenance for dependent children; and(d)consensual liens obtained on debts created by mutual contract.
(4)(a)Except as provided in Subsection (4)(b), water rights and interests, either in the form of corporate stock or otherwise, owned by the homestead claimant are exempt from execution to the extent that those rights and interests are necessarily employed in supplying water to the homestead for domestic and irrigating purposes.(b)Those water rights and interests are not exempt from calls or assessments and sale by the corporations issuing the stock.
(5)(a)When a homestead is conveyed by the owner of the property, the conveyance may not subject the property to any lien to which the property would not be subject in the hands of the owner.(b)The proceeds of any sale, to the amount of the exemption existing at the time of sale, is exempt from levy, execution, or other process for one year after the receipt of the proceeds by the person entitled to the exemption.
(6)The sale and disposition of one homestead does not prevent the selection or purchase of another.
(7)For purposes of any claim or action for taxes brought by the United States Internal Revenue Service, a homestead exemption claimed on real property in this state is considered to be a property right.

I just took out a payday loan last week. Can I file bankruptcy right away?

You can, but it’s probably a bad idea.

If you take out a loan before going bankrupt, there is a chance that the creditors will sue you to make that debt non-dischargeable. This means that you will have to pay them back. It doesn’t throw out your whole case, but it’s still scary.

Here are the magic numbers to remember: $750 in 70 days from a cash advance and 90 days for luxury item charges of more than $500. (see below).

Today I was meeting with a client who took out a payday loan last week for $2,500 from one lender and $1,000 from another lender. She wanted to file bankruptcy right away before the creditors started calling her. Unfortunately, the money was already gone (I know, $3,500 in one week???) and she had no ability to repay them.

I told her that we could file a bankruptcy and list those debts, but that there was a pretty good chance that she would be sued by those creditors after filing bankruptcy. Each creditor would have a strong argument that she took of the money in bad faith with the intent to defraud them. And, they would win.

That being said, out of 2,516 cases of mine here in Utah in the past 13 years or so, 4 clients have been sued on that issue. Not a very high percentage, but in each case, they lost and had to pay the monies back.

I wrote about this a while back here: Can I charge up my credit cards before I go bankruptcy?

Here are the legal standards to consider:

Here are some of those code sections (bolded):

(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
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; or
(C)
(i) for purposes of subparagraph (A)—
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph—
(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and
(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;
(3) neither listed nor scheduled under section 521(a)(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit—
(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dis­chargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request;
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
(5) for a domestic support obligation;
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty—
(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or
(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition;
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A)
(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;
(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;
(10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act;
(11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union;
(12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any such commitment which would otherwise be terminated due to any act of such agency;
(13) for any payment of an order of restitution issued under title 18, United States Code;
(14) incurred to pay a tax to the United States that would be nondischargeable pursuant to paragraph (1);
(14A) incurred to pay a tax to a governmental unit, other than the United States, that would be nondischargeable under paragraph (1);

(14B) incurred to pay fines or penalties imposed under Federal election law;

(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;
(16) for a 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;
(17) for a fee imposed on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under subsection (b) or (f)(2) of section 1915 of title 28 (or a similar non-Federal law), or the debtor’s status as a prisoner, as defined in section 1915(h) of title 28 (or a similar non-Federal law);
(18) owed to a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986, under—
(A) a loan permitted under section 408(b)(1) of the Employee Retirement Income Security Act of 1974, or subject to section 72(p) of the Internal Revenue Code of 1986; or
(B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5, that satisfies the requirements of section 8433(g) of such title;
but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section 414(d), or a contract or account under section 403(b), of the Internal Revenue Code of 1986 constitutes a claim or a debt under this title; or
(19) that—
(A) is for—
(i) the violation of any of the Federal securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934), any of the State securities laws, or any regulation or order issued under such Federal or State securities laws; or
(ii) common law fraud, deceit, or manipulation in connection with the purchase or sale of any security; and
(B) results, before, on, or after the date on which the petition was filed, from—
(i) any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative proceeding;
(ii) any settlement agreement entered into by the debtor; or
(iii) any court or administrative order for any damages, fine, penalty, citation, restitutionary payment, disgorgement payment, attorney fee, cost, or other payment owed by the debtor.

Here is a 4 year old blog post on the same topic:  https://robertspaynelaw.com/myutahbankruptcyblog/2014/12/22/if-i-use-my-credit-card-right-before-i-file-bankruptcy-can-they-object-and-throw-it-out/

Is Robert S. Payne, Utah Bankruptcy Attorney closed? It’s not showing up on google anymore!

No, I’m not closed.

I am still here and I’m working on it with google. In the meantime, call or text 801-980-1313 and you will find me.

Last night I ran a quick search on my phone for “West Jordan Bankruptcy.” I do this every few days to make sure that my google places listing is still on top (and to be honest, it’s a real ego booster too). My law firm was gone.

Normally, I would show up on the top of “West Jordan” searches, and I even show up in the first few hits over all of Utah. I even received my 57th client review on google a couple of weeks back.

But when I looked last night, I was gone. Even worse, if I ran a search, google would eventually give me a single listing, with one review, but it showed that I was closed.

I logged on to my “google my business” account, and it showed that my “listing has been suspended due to quality issues.” I sent in an appeal to google that night. I then tossed and turned until morning.

In the morning, I logged on to the Google My Business Help Community Forum. I am making some headway, but as of this blog post, I am still either non-existent or closed. Keep your fingers crossed for me.

Here is the progress I’ve seen so far:

How do I turn in a scammer’s phone number so that they stop calling me after bankruptcy?

Short answer: report the scammer’s phone number to the FTC at 888-382-1222.

Long answer: it’s obnoxious and not very effective.

This morning I received a text message from a former client (yes, my clients can text me anytime, even years after their cases), and this is what she said:

So I have a question! We still have that 888 number calling hubby’s boss saying they are going to take legal action and ya da ya da! I called them today and spoke with someone. She said it’s from 2013 from hubby for a payday loan place, and that it can’t be included in that bk that was discharged because it was signed saying we weren’t planning filing bankruptcy and wouldn’t on that? It was included in that bk however! So is this a legit bill we need to take care of or was it included in that bk?

First, I reassured her that it was a scam. Unfortunately, after bankruptcy (or even outside of bankruptcy once the statute of limitations for debt collection has run), we still have shady collectors who sell off their bad debt to bad debt buyers. These companies will start calling you after a bankruptcy and saying that the debt wasn’t included, wasn’t discharged, and a police office is coming to your home in the next 10 minutes to arrest you if you don’t make a payment over the phone immediately.

Of course it’s a scam, but it’s still scary when you get the phone call.

When you get the call, don’t hesitate to contact your bankrutpcy attorney. He’ll tell you it’s a scam 99% of the time. It also gives you peace of mind.

The Federal Trade Commission FTC also has a great articles on this here: https://www.consumer.ftc.gov/articles/0076-phone-scams

On the FTC website, it recommends you also file a complaint with the Consumer Finance Protection Bureau CFPB either at
855-411-2372 orhttps://www.consumerfinance.gov/complaint/

Will bankruptcy clear an eviction off of my credit report?

Nope.

Bankruptcy will discharge the debt that you owe, but that eviction will stay on your credit report for 7 years.

When you file bankruptcy (either a 7 or a 13), you seek a discharge of your debts. When the debts are discharged, this means that the money you owe is wiped out and they cannot collect on you anymore. Unfortunately, sometimes they can still report on your credit. Creditors cannot report that there is any remaining balance (because the balance was discharged), but they can still report evictions.

This means that it will be much harder to get an apartment. On the plus side, after your bankruptcy, your credit score jumps and you no longer have any outstanding debt.

Before writing this, I read 8 different articles/blogs on how to get an eviction off of your credit report, and it boils down to two things (neither of which are helpful at all):

  1. Settle up with the landlord and pay off the debt. But even if you do this, he can still report the eviction on your credit unless you get him to agree to remove it, or
  2. Wait 7 years.

See, I told you those two things were not very helpful. In the end, the eviction stays on your credit, but at least we can wipe out the actual debt that you owe.

What happens to my Utah state assistance (cash assistance or diversion payment) when I file bankruptcy?

Nothing at all. It is protected.

Under Utah law, your public assistance is “not assignable at law or in equity.” Utah Code 35A-3-112. This means that a creditor cannot levy, execute, attach, or garnish your public assistance. This also means that a bankruptcy trustee cannot take it.

I have a client who just received $1,500 in diversion assistance. It is sitting in her bank account, and we want to file bankruptcy today. We can. I simply need to identify that money as state assistance and then exempt it (protect it). This way, the bankruptcy trustee and her creditors cannot demand that we turn it over.

The entire code section reads:

35A-3-112.  Assistance not assignable — Exemption from execution, garnishment, bankruptcy, or insolvency proceedings.

(1)Public assistance provided under this chapter is not assignable at law or in equity.
(2)None of the money paid or payable under this chapter is subject to:(a)execution, levy, attachment, garnishment, or other legal process; or(b)the operation of bankruptcy or insolvency law.

In other words, it is safe.

Now the bigger question comes up: what exactly is public assistance? Under this code section, public assistance refers to: cash assistance under the Family Employment Program 35A-3-302 and/or a diversion payment (which is a one-time payment under 35A-3-303).

Yes, there are other kinds of public assistance, and most of those are protected under other exemptions. As usual, I must advise you to check with your attorney if you have questions.

Do I have to catch up on car payments if I want to keep my financed car in bankruptcy?

Maybe.  

In a chapter 13, no.  When you file a chapter 13 case, you can put your auto loan into your chapter 13 plan and start making payments through the chapter 13 trustee  (more below).

In a chapter 7, 99% of the time, you will have to be current on payments eventually if you want to reaffirm and keep the loan (more below).

Chapter 13

In a chapter 13 case, you file a plan with the court.  In this plan, you start making monthly payments to the chapter 13 trustee, who then makes payments to various creditors.  Your car loan will be part of this plan.  It does NOT matter if you are current on car payments.  Even better, your payments won’t start until next month.

For example, let’s say that you file a chapter 13 today.  You stop making car payments immediately (or maybe you already stopped).  Your first chapter 13 plan payment will be due on the 25th of next month.  As of this blog, today is March 8th.  If we filed a chapter 13 today, you would start making plan payments (including the car payment) beginning April 25th.

Chapter 7

In a chapter 7 case, if you want to keep a car loan, you reaffirm the debt.  You can find reaffirmation elsewhere in the blog, but basically, you sign a new agreement to pay the same balance, interest, and payments on your car.  99% of the time, the creditor will NOT let you reaffirm unless you become current on the car loan.  That doesn’t mean that you need to be current on the day you file your chapter 7, but in the next 2-3 months, you need to catch up on those missed payments.

If you are behind 2-3 months into the chapter 7, they will definitely repossess the vehicle, and you will  not be able to reaffirm.

What is a “Notice of Bankruptcy Stay,” and why did my creditor file that in state court?

The creditor filed that to protect himself.

When you file bankruptcy, the court imposes something called the “automatic stay,” automatically, which stays (stops) any creditor actions against you.  It normally stops garnishment, foreclosure, even those pesky phone calls.  

Now if a creditor has already filed a lawsuit in state court, that lawsuit cannot proceed.  It is frozen in place unless the creditor files a motion for relief from the automatic stay in the bankruptcy court.  He can do nothing in state court until or unless the federal bankruptcy court grants that motion.

Sometimes the creditor will file that “Notice of Bankruptcy Stay” to explain to the state court why he is doing nothing in the case.  The creditor doesn’t want to be accused of inaction, or even worse, of neglecting a case, so he will file that notice to explain why nothing is happening.

Usually, you get your bankruptcy discharge, and then the creditor can dismiss the state court action on their own, or if they simply do nothing for long enough, the state court will dismiss the suit.   If your bankruptcy case is thrown out for some reason, the creditor will notify the state court of the bankruptcy dismissal, and they can proceed with their state court litigation.

So the notice doesn’t really affect you;  it just protects them.

 

Can I spend my tax refund on prepaid VISA gift cards to hide the money from the bankruptcy trustee?

No, that’s fraud!

This time of year I have a large number of potential clients who are waiting on their tax refunds.   If they file bankruptcy before they receive and spend the refund, then they will lose that refund money to the bankruptcy trustee.  If they delay filing the bankruptcy for a few weeks, they can receive the refund and spend it on exempt (protected items).    

I’ve written enough blog articles on how to spend you tax refund before bankruptcy, so I won’t go over that again.

However, I need to warn you:  Do not try to trick the trustee.  The bankruptcy trustee has handled tens of thousands of bankruptcy cases.  There is nothing you can think of that he/she hasn’t already seen.

I had a client ask me if they could spend their refund on prepaid gift cards.  The answer is a resounding, “No!”  Those gift cards are the same as cash, and if you try to squirrel away cash before filing bankruptcy, that is fraud.  When the bk trustee discovers it, your case will be thrown out, your discharge revoked, and you’ll get sued.

Just play by the rules and you’ll be fine.