Monthly Archives: January 2014

Who is going to find out that I filed bankruptcy?

spyHopefully no one you know.

However, lots of people and businesses will find out.  On the day we file bankruptcy, the bankruptcy court sends out a notice to all of your creditors that you have filed for bankruptcy.  Generally, if you don’t list a creditor in your bankruptcy, that debt doesn’t get discharged, so you want the list to be thorough.

If you are being garnished, then we send a “stop garnishment” letter to your employer’s payroll or human resources office to stop the garnishment.  This means that your employer will probably find out about the bankruptcy.

You will receive notices from the bankruptcy court in your mail, which means that anyone else who sees your mail, including your kids or nosy mother who came over to visit for the weekend may see the bankruptcy notices.  So, if anyone sees your opened mail on the kitchen counter, then they will find out about the bankruptcy.

The bankruptcy court notice is also a public document which is posted on a poorly formatted list at the court website, but very few people know about this.  It is posted here, and then you go to “Public Resources” and then “Recent Case Filings,” for a case list of cases filed that day.  See Appendix A below for a sample.

You may see someone you know at the 341 Meeting.  I have had women in the same relief society presidency meet each other in court and then awkwardly hug the other, saying, “funny meeting you here.  I had no idea.”

Any attorney who has PACER access (online court login access to federal court access) can look it up online.

Anyone who runs a credit check on you will see the bankruptcy under your “Public Filings” section of your report.

That being said, normally, no one knows that you filed for bankruptcy.  Most of my clients go on with their lives without their friends or family knowing the financial hellstorm (or crapfest, you pick the appropriate term) that they just experienced.

Only one time in my career have I had a bankruptcy disclosure become ugly:  my clients filed for bankruptcy, and the next week, their drill team daughter arrives at school, goes to the locker room, and finds a copy of her parent’s bankruptcy petition printed off and taped to the front of her locker.  She was horrified, and no one ever confessed.  This is very, very rare, and just awful.

So, to sum it up, hopefully no one will find out, but there is a good chance that the following people will know:

1.  your creditors

2.  your kids and nosy parents

3.  your employer

4.  people who check the bankruptcy case filings list on the bankruptcy court website

4.  people you recognize in court

5.  inquisitive attorneys with PACER access

6.  anyone who runs a credit check on you.

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

Appendix A:

The daily court list looks like this:

U.S. BANKRUPTCY COURT
                             DISTRICT OF UTAH
                            Case Filings Report                     Page 1
                        For Cases Filed: 01/24/2014
                      Report Date: 01/25/2014 0:10
CASE NO.    TITLE                              JDG  ATTY        TRUSTEE   CHAP NOD*
----------  ---------------------------------  ---  ----------  --------  ---- ---

BK cases:
14-20712    Gabriel Beltran                    JTM              Anders K  13   C
14-20713    Kaisa Paula Kinikini and Ana Naom  JTM              Hunt t M  7    C
14-20714    Richard Daniel Sandoval            JTM  Long S      Anders K  13   C
14-20715    Alex Nicholas Proestakis           JTM  Jones T     Anders K  13   C
14-20716    Robyn Price                        JTM  Winward E   Anders K  13   C
14-20717    Steven Ray Walker and Laurie Jo W  JTM  Weekes R    Anders K  13   C
14-20718    Carrol K. Perry                    WTT              West t D  7    C
14-20719    Jason A Penney                     JTM  x2Pearso J  Anders K  13   C
14-20720    Kody William Carling and Rachelle  JTM  Barrett D   Bird t J  7    C
14-20721    Victor Zepeda and Veronica Zepeda  JTM              Bailey S  7    C
14-20722    Jeffrey Lynn Hall and Wendy Jean   WTT  Ruesch B    West t D  7    C
14-20723    Rusty Duane Price                  JTM              Jones  P  7    C
14-20724    Deysi Quiroga                      JTM              Hunt t M  7    C
14-20725    Richard Lloyd Dewey                JTM              Anders K  13   C
14-20726    Saul Mendoza Montes                JTM              Anders K  13   C
14-20727    Andrew J Harris                    JTM              Anders K  13   C
14-20728    Joseph Burton Shandrew             JTM              Anders K  13   C
14-20729    Aaron Michael Krause and Sarah El  JTM  Jones T     Bird t J  7    C
14-20730    Mary Frances Roberts               WTT  Baxter R    Bailey S  7    C
14-20731    Gregory William Buckley and Gayle  JTM  Hagen J     Rupp t S  7    C
14-20732    Daniel Thomas Oler and Joanie Mar  JTM  Curtis A    Jones  P  7    C
14-20733    Jennifer Pyles                     JTM  Helgesen C  Bailey S  7    C
14-20734    Emma Gabito Hultquist              JTM  Harris L    Anders K  13   C
14-20735    James L. McCoy                     JTM  Berry D     Anders K  13   C
14-20736    Tom Harris                         JTM  Adams L     Anders K  13   C

Will I lose my equipment for my landscaping business if I file for bankruptcy?

Most likely no.

In Utah, we can exempt up to $5000 of “tools of the trade,” which includes things like lawnmowers, rakes, shovels, etc.  If you’re feeling technical, you can find the exemption under Utah Code Ann. s 78B-5-506(2).  We normally value your equipment at a garage sale value and not at a replacement value, so most of my clients can protect all of their equipment.

What gets more confusing is whether or not you can protect your trailer, and in most cases, yes we can.  Even better, if you owe money on the trailer, you can reaffirm the debt, or agree to pay back the secured creditor after bankruptcy.  If you owe money, there’s probably no equity for me to worry about protecting.

I can protect your truck as a tool of the trade or as a family motor vehicle, but I cannot double the exemption.  landscaping truckI can protect one vehicle total (per spouse), up to $3,000 in value as a family vehicle.  Or, I can protect up to $5,000 of total tools, equipment, and truck as a tool of your trade.

So, generally, no, so long as you are running a one man show with your landscaping business, you probably don’t have anything to lose in bankruptcy.

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

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

Maybe.

After a creditor gets a judgment against you, they still need to collect on that judgment.  Generally, when a creditor gets a judgment here in Utah, they will do three things with it:

1.  garnish your wages

2. garnish your bank account

3.  attach the judgment to your home.

The problem for most creditors is that they don’t know where you work or bank, and most people are not home owners.  If this is the case, then they can’t do much with the judgment yet.  First, they will call you and ask for your employer information:  just remember that you don’t have to play nice, and you don’t have to give that information unless they drag you into court and ask you there. Second, they will file a Supplemental Proceeding which orders you to come into court to fill our a Supp. Order Questionnaire which shows where you work, bank, and live.  You have to go to court or you’ll get a civil arrest warrant.  After you fill out this form, they can really try to collect.  Third, they will file garnishment paperwork with your employer.  This means that you’ll start having 25% of your wages taken out of your next paycheck until the judgment is paid off (unless you are already being garnished up the 25% by another creditor, ORS, or a taxing authority).  This also means that they will randomly try to hit your bank account about once a month to seize any funds in there.

So, it gets worse and worse, but it takes time.  If you get a judgment entered against you today, it will be a couple of weeks until garnishment if they know all of your personal information.  Otherwise, it may be months.

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

 

 

 

Should I move money out of my bank account if someone has a judgment against me?

Yes, definitely.

If someone has a judgment against you, they can levy or garnish your bank account at any time, and it usually seems to happen about once a month.  If you have money in that account, or in any account with your name on it, then there is a possibility that it will be garnished, and you’ll never know if/when it is coming.

Now what if you have just been served with a Supplemental Proceeding Order or a Writ of Execution from a Utah State Court that orders you to not move, transfer, or sell any assets.  Well, in this case you do not want to violate a court order.  But, there is no violation is you simply spend the money in the account in the ordinary course of your life on things like bills, groceries, utilities, etc.  Just don’t put any new money in the account.

If you have a judgment against you, then you should not be putting your money in any account that a creditor can garnish.  Put it in Mom and Dad’s account, or in an account in your spouse’s name (so long as they don’t have a judgment against them).  Just remember that if you have a judgment and money in your own account, it can be garnished at any time.

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

What happens to my personal injury suit or settlement when I go bankrupt?

Nothing.

At least, nothing will  happen to it if you do it right.  Under the Utah Exemptions Act, you can exempt (protect)

proceeds of insurance, a judgment, or a settlement, or other rights accruing as a result of bodily injury of the individual or of the wrongful death or bodily injury of another individual of whom the individual was or is a dependent to the extent that those proceeds are compensatory.

What this means is that if you are already receiving a personal injury settlement payment each month, or a lump sum settlement, that money is protected from creditors and from the bankruptcy trustee demanding turnover, so long as the damages you’re being paid for are compensatory in nature.  In other words, if the settlement’s terms state that it is to compensate you for pain and suffering or compensate you for something, then the money is safe.  On the other hand, if the money coming to you is a result of punitive damages, that is bad.  It is not exempt, and you will lose it.

Compensatory = good.   Punitive = bad.

Now what happens if you’re involved in a personal injury suit that hasn’t been settled yet and you have to file bankruptcy?  The trustee may allow your attorney to stay on the case but will want updates on how the settlement is going.  There is a very tiny chance that the trustee will want you to use a different attorney, and he will appoint a different attorney to your case.  This is very rare.

But, if the case eventually settles for compensatory damages, then you’re okay.

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

I haven’t filed my taxes in years. How will this affect my bankruptcy?

We can file a bankruptcy case for you even if you have years of unfiled taxes, but it creates a number of problems.

In a chapter 7, we file the case and then meet with the bankruptcy trustee one month later.  If you haven’t filed your taxes for the previous year, he will order you to file your taxes and get him a copy of those taxes within the next two weeks.  This means that if you are behind on your tax filings, you’ll have to file last year’s taxes within 45 days of filing bankruptcy.

If you are entitled to a refund, the trustee will take it.  If you haven’t filed for a number of years, the trustee may or may not order you to file the previous years’ returns.  If there are any refunds coming, he’ll take those too.

If you owe taxes from those years, it doesn’t matter to the chapter 7 trustee.  Just remember that unfiled taxes cannot be discharged in bankruptcy.

In a chapter 13, it’s worse.  You cannot get your chapter 13 plan confirmed unless you have filed all of your missing returns.  If you owe any back taxes, you will have to pay those back as part of your chapter 13 bankruptcy.  It is generally a good idea to get your back taxes filed first before you go bankrupt, but if you have something like a foreclosure sale pending,  then you file the bankruptcy first and worry about the taxes after.

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

 

Can bankruptcy wipe out back child support and alimony that I owe to my ex?

No.

When you file bankruptcy, you are seeking to discharge (or wipe out) your debts.  Most debts can be wiped out in bankruptcy.  However, there are certain debts which survive bankruptcy.  The list is fairly long, but it is easiest to describe these debts as priority debts, or more simply put, “government stuff.”

You will not get a discharge of most tax debts (unless they’re more than 3 years old, for personal income tax, etc.), you cannot discharge student loans, you cannot discharge criminal restitution, and you cannot discharge domestic support obligations (“DSO”) such as child support and alimony.  Government stuff survives bankuptcy.

What gets a little more confusing is whether you can discharge debts arising out of a divorce or separation agreement.  For example, you get divorced and agree to pay the $10,000 AmEx bill.  You can go bankrupt and wipe out your liability to AmEx.  However, when they eventually sue your ex-wife, she has a claim against you for the amount of money she pays AmEx to go away, because bankruptcy does not discharge your liability to her for that debt which arose out of the divorce or separation agreement.  In practical terms, though, if you are filing for bankruptcy, the odds are that your ex is close to filing too, and this may be a moot point.

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

If you would like a more technical answer, then according to uscourts.gov,

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor’s drunken driving).

There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.

Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523(a) applies. The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees.

Do I have to count my spouse’s income if I am filing a single bankruptcy?

Yes, you do.

I get asked this question all of the time.  IF you are living with someone, whether married or not, I am required to count their income towards your total household income.  Clients will often argue that these debts are only one spouse’s debts, so only his income should be figured in, but this is not how it works.

That being said, if the non-filing spouse has sufficient expenses, their income may not hurt you as much as you think.  So long as your combined income is below the median income for Utah, you’ll still qualify for a chapter 7 bankruptcy.  If your debts are primarily business debts, you’ll still qualify for a chapter 7.  If their expenses can be justified on Form 22 (the six month calculation of income), then you will still fit into a chapter 7.

I then get asked if it would be okay for the married debtors to claim that they are separated so that one of them can file for an individual bankruptcy and slip under the median income.  NO!  This is fraud.  The U.S. Trustee’s office investigates bankruptcy fraud, and if there is a question, they will ask us to verify that debtors are living separately, with lease agreements, utility bills, or some other evidence of physical separation.  Committing fraud as a way of squeaking into a simpler bankruptcy case is not a good idea.

So, generally, yes, you’ll need to count your nonfiling spouse’s income as part of your overall household income if you file for bankruptcy.

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

2017 revisit

I have now had chapter 7 and chapter 13 trustees argue that you should count your live-in girlfriend/boyfriend’s income as part of your overall income as well.  I have not had a case where it made a difference yet, so I have not had to push much on this issue.  That being said, chapter 7 trustees in particular are asking if you live with the father/mother of your children, and if so, then the trustee starts to do some digging.

In other words, the above discussion may apply to more than legally married couples.

 

I am filing a chapter 7. What happens to the home I am renting out?

It depends on a lot.

In a chapter 13, if we have a rental property, we can list that mortgage amount, show the rental income, and propose keeping the property so long as the rental income is pretty close to covering the mortgage payment each month.

In a chapter 7, the bankruptcy trustee may decide that the rental income is property of the estate, and then he will start intercepting that income.  He should use it to pay the mortgage on the rental, but he may not.  This means that you may keep collecting rent, but instead of paying off the mortgage, it goes to the trustee until the mortgage company gets fed up and decides to foreclose their interest.

The Utah bankruptcy lawyer’s forum recently dealt with this issue, and to be honest, it’s still up in the air.  One attorney nicely put that:

There are standard form Trust Deeds which contain a specific paragraph 8 Assignment of Rents which is used by Key Bank. There are other standard forms used by most of the credit unions which has a paragraph immediately following the address legal description portion of a Trust Deed with language of “Together with all improvements now or hereafter erected on the property, and all easements, rights, appurtenances and rents (subject however to the rights and authorities given herein to Lender to collect and apply such rents), all of which shall be deemed to be and remain a part of the property secured by this Deed of Trust.

Which means that sometimes, the trustee will use it to pay the mortgage and sometimes not.

So an honest answer is that I don’t know, but there is a good chance that you’ll lose the rental.

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

I didn’t go to court and now I have a warrant out for my arrest, can I include that in bankruptcy?

No, and yes.

(This ONLY pertains to debt collection and bankruptcy).  In Utah debt collection a creditor will sue you, and then get a judgment.  If they don’t know where you work or where you bank, then they will file an order for you to appear at a “Supplemental Hearing” or a “Supplemental Proceeding” so that they can ask you questions about your assets and “supplement” their file.  If you ignore the court order requiring you to appear for the “supp. order hearing” then the court will issue a bench warrant or a civil arrest warrant with a fine of about $250.

Now let’s say a creditor sues you and gets a judgement for $10,000.  He then notices up a supp. order hearing, and you skip it and get a civil arrest warrant and a fine for $250.  Then you go bankrupt.  Bankruptcy can discharge the $10,000 judgment, but you still owe the court fine.  You are going to have to contact the court, pay the fine, and may have to go into court and explain to the judge why you ignored a court order.

So bankruptcy wipes out the debt, but not the court fine.

Bankruptcy also doesn’t stay or stop enforcement of the arrest warrant, so it’s a good idea to contact the constable who served it on you.

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