Monthly Archives: January 2014

My divorce decree says that I have to pay all of the credit card debts. What happens if I go bankrupt on those debts?

Bankruptcy will discharge your personal liability on those debts.

But, they’ll start calling your ex non-stop and may sue him/her.  If your divorce decree says that you’re liable for those debts, then your ex can file an order to show cause with the Utah State Courts and haul you into court to have you explain to the judge why you’re not honoring the decree.  Bankruptcy never discharges your domestic support obligations to your ex-spouse, whether it be alimony, child support, or property distributions.

However, if your ex goes bankrupt too, or already did go bankrupt, then this is a non-issue, because neither of you is liable for those debts.

So you may have to answer to your ex, but you won’t have those creditors calling you anymore.

This is not legal advice.  If you need help go to


Can bankruptcy get rid of my court fines and criminal restitution?


Bankruptcy generally discharges everything, with the exception of priority debts, which include most taxes, child support/alimony, student loans, and criminal fines and restitution.

This means that your court fines and restitution will survive bankruptcy.

Today I met with a client who embezzled $120,000 from his former employer and is paying back $1,000 a month as part of a restitution payment.  Bankruptcy won’t affect this.  He still owes the $120,000.

When the IRS found out about the $120,000, they made him amend his tax returns to include this income, and he has about $30,000 in back taxes for his personal income tax liability.  I think that we can discharge the personal income taxes, because he has filed the returns more than two years ago and the taxes are more than three years old.  The only thing that may trip him up is that he was arguably committing willful fraud and evasion when he failed to report the embezzled income originally.

So, he owes the criminal amount but may be able to discharge the taxes.

This is not legal advice.  If you need help go to

What is bankruptcy court like, and do I have to go to court?

It’s nothing like you’ve seen on tv.

bk eagle frank e moss fed courthouse

First off, you probably will never really go to the federal courthouse.  After we file bankruptcy, the court schedules a 341 Meeting of Creditors about a month later.  At this meeting, we meet with a bankruptcy trustee who reviews the paperwork and asks you a series of questions.  Odds are that you will never have to go to any meeting or court appearance after this one.

However, this isn’t really court.  It is held at the Provo Library, or in rented meeting rooms in the Ken Garff building in Salt Lake, or rented rooms in the federal buildings in Ogden and/or St. George.  We will sit on one side of a folding table, and the trustee will sit on the other side with his laptop.  There is no jury, no judge with a gavel, no witnesses, nothing else that might make you feel intimidated.  Even better, the meeting only takes 2-3 minutes.

Now sometimes, I do have to go to the federal courthouse, but is very, very rare that I will have to take clients.  Even if you do go, you’re not allowed to speak.  For instance, if you were beside me in federal court and the judge asked you what color your shirt was, you’d lean over and whisper it to me.  I would then state, “Your honor, if my client were called upon to testify today, I proffer that he would state that his shirt is blue.”  It seems a little silly, but it keeps the court moving.

So a short answer is:  bankruptcy court isn’t bad at all, and yes, you do have to go once, but only to a non-intimidating meeting room while sitting at a folding table.  Even better, I’ll be there with you, and I’ve done this once or twice.

This is not legal advice.  If you need help go to


Does bankruptcy make you lose your hair? or Does bankruptcy make you go bald?


One of my paralegals asked me that question as we were taking a new picture of me for some legal news article coming up.  Below are two pictures:  one was taken about 3 years ago on the first day of my new solo law practice, and the next one is after three years of running a solo bankruptcy law practice.  I’ll let you decide.










This is not legal advice.  It’s not even based on any kind of science.  If you need help, go to, or try Rogaine.

Can a creditor send me a 1099 for a debt discharged in bankruptcy? or Do I have to pay taxes on debts discharged in bankruptcy?


Debts discharged in bankruptcy are non-taxable.  According to the IRS website, under its Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007 section, “Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.”

This means that if you list a debt in bankruptcy, receive a discharge, and the next year the creditor sends you a 1099 for forgiveness of that debt, the creditor is wrong, and you do not have to report that 1099 as income.

What gets a little more tricky is when a creditor sends you a 1099 right before you file.  This means that the debt is not discharged in the bankruptcy, because it was already forgiven or written off.  In this situation, you can usually protect yourself by arguing insolvency at the time of the debt forgiveness.  According the the IRS,

Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

This is not legal advice.  If you need help go to

My sister and I are both on title for my house. What happens to my jointly-owned home when I file bankruptcy?

So today a woman calls in who shares the title to her home with her sister.  The home is worth $100,000, and they own it free and clear.  This means that each sister has $50,000 of equity in the home.

If I filed bankruptcy, she would have two options:  we could file a chapter 7, and she would need to come up with $20,000 to pay the trustee in the next month or so (we can protect $30,000 of your equity in a home with your Utah homestead exemption), or we could file a chapter 13 and offer to pay a pot of $20,000 to our creditors to protect the exposed equity in the home.

I then asked her how much total debt she had, and she only had $10,000 in credit card debt.  I told her that bankruptcy was a bad idea.  She could simply take out a home equity line of credit (“HELOC”) for $10,000 and pay the creditors off in full.  Even with her bad credit, someone would lend her the money with all of that equity in the home.  Or, she could get a HELOC and then try debt settlement, and maybe pay less than the full $10,000 to her creditors.

This is not legal advice.  If you need help go to

What happens to my 401(k) (“401k”) when I file for bankruptcy? What about my stock purchase plan?

You keep the 401k and you lose the stock.

When we file bankruptcy, we can exempt (protect) certain assets for you.  One of these assets is your 401k retirement plan.  In truth, most retirement plans are protected in bankruptcy.  We can also generally protect your recent 401k contributions unless they were excessive (if you are wondering what “excessive” means, it doesn’t apply to you unless you just tried to hide a $50,000 inheritance by depositing it into your 401k a week ago).

Some retirements plans are definitely not protected.  This is generally because they’re not really qualified plans under the IRS.  The best example I can think of is a stock purchase plan, such as one at Wal-Mart.  People call it a retirement plan, but it’s really just a stock purchase/matching purchase plan, meaning that you are simply buying stock that I cannot protect when we file for bankruptcy.

So, let’s say that you have $100,000 in your 401k and $2,500 in a Wal-Mart stock purchase account.  On the day we file bankruptcy, we list both.  I exempt the 401k.  Unfortunately, a month later when we meet with the trustee, he’ll order you to sell the stock and give him the proceeds.  He will ignore the 401k.

If this is your situation, then sell the stock before going bankrupt.  Spend the money on exempt items, and use some of it to pay me.

This is not legal advice.  If you need help go to


What can you buy with your tax refund?

Now I’m meeting with clients who have a large tax refund coming to them next year (in 4-6 months from now).  If we file a chapter 7 now, before they receive it, the chapter 7 trustee will take it, all of it.

So what do you do?  Spend it.

If we can wait to file bankruptcy until after you receive your refund, you won’t lose it.

So let’s say you get your refund March 1, 2014.  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;

This is not legal advice.  If you need legal help go to


My parents are co-signed on my car loan. What happens to them if I file bankruptcy?

You already know the answer to this:   You get off Scott free and they get sued by the bank.

Let’s say you file a chapter 7 bankruptcy and give up your car, telling the bank to come and repossess it.  You get a discharge of the debt and the bank cannot sue you for any deficiency that results in the loan amount after they auction the car off and apply the sale proceeds to the loan.  However, if you have a co-signer, then the bank can still sue them for the deficient balance.  This means that Mom and Dad get sued and they take a bad credit hit.

You can reaffirm the car loan in your bankruptcy, but if you’ve fallen behind, then your co-signers will still face bad credit issues because of your late payments.

On the other hand, so long as you’re current and reaffirm the debt, then it should not hurt Mom and Dad’s credit, and no one gets sued by the bank.

This is not legal advice.  If you need help, go to

Can I get arrested for check fraud or bad check writing if I list a payday lender in my bankruptcy?

Yes, but it’s a really, really tiny chance.

In theory, a payday lender could turn you over to the county attorney and argue that the post-dated check loan you took out was actual a criminal act where you took out the loan never meaning to pay it back.  But I’ve never seen it.  In practice, a lot of payday lenders will call and threaten clients, even after filing bankruptcy.

There is one awful collections company that calls clients and says that there is a constable coming to your house in half an hour to arrest you for check fraud unless you get set up on an automatic repayment plan, all we need is your bank account information.  I actually had one client give them her info and authorize a $200 withdrawal.  Don’t do this.

The payday lenders will generally call and call and call and then be discharged by the bankruptcy.  The only client I remember getting sued by Check City was a joker who went to four Check Citys on the same day, took out four $600 loans, and then filed bankruptcy that afternoon.  If I had known that he was doing that, I wouldn’t have filed for him.  He was sued, and we settled with Check City for him to pay back the loans.

There is another collector who is sending a fraudulent email attached to the end of this post as Appendix A.  Do not respond to these.  This is a violation of the bankruptcy stay and the FDCPA.  It is also incorrect and doesn’t even use proper grammar.  Give it to your attorney and let him deal with it.

This is not legal advice.  If you need help, go to

Name of Debtor: XXXXXXXXX


Employer reference: XXXXXX


This is in reference to your Account number XXXXX-XX with XXXXXXXX Inc. in order to notify you that after making calls to you on your phone number, we were not able to get hold of you. So the accounts department of XXXXXX has decided to mark this case as a flat refusal and press legal charges against you. Apart from getting laid off by your current employer after we send them the legal notice you will be blacklisted from getting any job.  Through an IRS (Internal Revenue Service) your social security number will be put on hold causing severe damage to your credit history or credit report and your income paychecks will be put on hold.  Any child support, disability, unemployment or retirement benefits will be either place on hold or will be stopped until the outcome of the case. 

Our primary job was to notify you about the case before we send you legal document in the mail because once this case gets registered then we won’t be able to help you out of court.
Do revert back if you want to get rid of these legal consequences and make a payment arrangement or else we would be proceeding legally against you.

And this also will be notified to your employer about the case. The opportunity to take care of this voluntary is quickly coming to an end. We would hate for you to lose the option of resolving this before it goes to the next step which is a Lawsuit against you, but to do so you must take immediate action.

You can Email back to get the payment mode too.
We will be forced to proceed legally against you and once it is processed the creditor has entire rights to inform your employer and our references regarding this issue  and the law suit will be the next step which will be amounting to $4226.24 and will be totally levied upon you and that would be excluding your attorney charges.
If you take care of this out of court then we will release the clearance certificate from the court and we will make sure that no one will contact you in future.

Please let us know what your intention is by today itself so we can hold the case or else we will meet you in court house.

Thanks for being our customer.