Monthly Archives: November 2014

Can I pull money out of my bank account right before I file bankruptcy, or is it part of the bankruptcy estate?

No, not unless you are going to spend it right away as well.

This is definitely a strategy/planning meeting you need to have with your bankruptcy attorney.

On the day we file your bankruptcy case, the bankruptcy estate is created.  This means that at that moment, the bankruptcy trustee takes an imaginary snapshot of your assets.  So, if you file on a Thursday when your bank account is low, your bankruptcy estate has almost no cash.  If you file on that Friday when you get paid your $1,500 paycheck, then your bankruptcy estate has $1,500 cash.  There is a very good chance that the bankruptcy trustee will ask you to turn over that $1,500, all because the difference of one day.  (It is fine to file on a Thursday and then get paid on a Friday.  The snapshot was of your bank account on Thursday).  snapshot

Now when we meet with the trustee, he will ask to see your bank statement showing the balance on the date of filing, along with the transactions in the 30 days prior to filing.  So, if you had a savings of $2,500 and pulled it out two days before filing, he will ask you to account for it.  If you spent it on safe items like mortgage, car payments, attorney’s fees, etc., then you’re safe.  If you hid it in your dresser drawer, then you will receive a turnover request from the trustee for that $2,500.

I had a client ready to file this morning (Friday).  Their normal payday is Saturday.  Unfortunately, because of the Thanksgiving Thursday yesterday, payroll was deposited early, and their account is a little bloated.  Now, we will wait until their mortgage payment has cleared, and then we will file the case.

How long does it take to fill out the bankruptcy paperwork?

I get asked this question almost every time, and, to be honest, you’re probably looking at 2-4 hours of your time (if you’re organized).

Your next question will be:  how long does it take me to turn your hand-written bankruptcy packet into a real bankruptcy petition?  It depends, but I can usually have it done by the next day.  If there is a real emergency, like a foreclosure this afternoon, then I can rush, but it’s not fun.  how long does it take

After you retain my office (or any bankruptcy attorney), I will give you a blank “bankruptcy packet.”  You need to fill out this document with your name, personal information, list of personal assets, list of creditors, and income information.  It looks awful, and I often see that look of dread in my clients’ eyes when I hand over the blank packet.  However, there are some shortcuts:

1.  You can print off a free copy of your credit report from or  Now all you need to do is track down creditors that are not on this list.

2.  keep a copy of every collection notice.  If you hand these over to me, I can scan them for information more quickly than you can (I’ve done this once or twice).

3.  Ask me for help!  You have hired an attorney to help so, so ask away.  If something doesn’t make sense, send an email right away to get a straight answer.

Just remember that this is something you want done right.  This means that you may have to spend a little more time getting me the raw data so that I can make a complete bankruptcy petition.

I closed my business a few years back. Will that affect my bankruptcy?

Probably not.  (Unless you are hiding assets from your old business).

Today, I was at a 341 Meeting of Creditors in a chapter 7 case, and the bankruptcy trustee asked my client if she had ever owned a business.  Although she and I had reviewed the paperwork and met many, many times before filing (I had been working on her case for almost 2 years), she revealed for the first time that she had been on her ex-husband’s landscaping business.

In all truth, this was not a big deal.  He went bankrupt over two years ago, and his business had long been closed.

Unfortunately, the trustee decided to make this a very big deal, threatening her with perjury and telling her that she had better find out whether she was the the part-owner of a defunct business with no assets owned by a bankrupt ex-husband.

In general, if you owned a business and closed it before going bankrupt, we still need to list it in your bankruptcy schedules.  So long as it has no remaining assets, no collectible accounts receivables, and no remaining value, it does not affect your bankruptcy at all.

Can I file a bankruptcy in a different state than where I owe my creditors (jurisdiction vs. venue)?


Today, I had a potential client ask me the following question via my firm’s Facebook page, :

ive lived in Utah for almost 2yrs now. I want to move back home to Arizona to work with my mom because its tough up here. can I file for bankruptcy in Arizona if I owe it to only Utah?”

The short answer is that bankruptcy is a federal law, and when you receive your Order of Discharge from the federal bankruptcy court, it will be valid in any state of the United States of America.  The long answer is a little more complicated and shows that my potential client (who I sent to a friend in Arizona) had really, really been overthinking this one.  jurisdiction and venue

In law we often deal with jurisdiction and venue.  Venue means that place where you go to court.  If you rob a convenience store in Salt Lake City, Utah, it wouldn’t make sense for you to go to a state trial court down in St. George, Utah.  The venue (place where you have the trial) is inconvenient to everyone and is plain silly.  Your would go to a Salt Lake criminal court.

Jurisdiction means that the court has the right to hear that kind of case.  In the aforementioned convenience store robbery, a family court commissioner would not have the jurisdiction to decide this criminal matter.  His jurisdiction deals with family court matters like divorce, custody, and adoption.  There is some overlap with other areas of law, but not much.  You need a criminal court with jurisdiction over criminal matters to hear this case.

So what my potential client was really asking was:

1.  Does an Arizona court have jurisdiction over my Utah debts?, and

2.  Do I have to go to court in Utah since my creditors are in Utah?

1.  An Arizona state court doesn’t have jurisdiction over your Utah debts, but bankruptcy is federal, and the federal bankruptcy court for the district of Arizona has federal jurisdiction over your debts anywhere in the country.

2.  No, although the new Arizona venue is inconvenient to your creditors, it doesn’t matter.  You file bankruptcy where you live, regardless of whether your creditors are local grocery stores or national credit cards with offices in Delaware.

The Utah State Tax Commission says I didn’t file my taxes years ago, what do I do?

Show them.

Honestly, it’s that simple.  In bankruptcy, we have to provide a copy of your most recently filed taxes to the bankruptcy trustee (state and federal).  About 1 in 5 cases, the Utah State Tax Commission will show up at your 341 Meeting of Creditors and say that they do not have a copy of your 2009 (or 08, 07, etc). taxes.  No threats of criminal prosecution, they just want a copy.

Filed:  If you filed them back in 2009, then we just send them a copy via fax or email.  This resolves it 99% of the time.

Never filed:  If you can’t find a copy (or maybe never actually filed them!), then they will ask you to prepare those taxes based on your federal tax return for the same year, sign it in wet ink (a real signature, not an electronic one), and mail it right to their bankruptcy specialist.  This is much, much easier than you think.  You can even get a free copy of your federal tax transcript online from the IRS at  tax monkey

If you never filed those taxes and owe them money, you will have to get on a repayment plan.  If you have a refund coming to you, you probably won’t get it since the newly filed return is outside of their refund time window.  Either way, you’ll have the tax issue resolved and the monkey off of your back.

Should I file bankruptcy now to stop the garnishment, or wait for my tax refund?

This is always a tough call.

It’s November, and if a client files bankruptcy this month, he will lose 11/12 of his tax refund next February.  If he files between December and the time he files his taxes next year, he’ll lose the whole refund.

I was on the phone with a woman yesterday who is being garnished $300 a month from her paychecks.  She wants to file bk right away to stop the garnishment.  However, she is getting at least $2,800 from the EIC next Spring when she files her taxes.  We ran through the numbers:  she can lose the $2,800 refund and file bk today, or she can suck it up and get garnished about 2.5-3 more months for $900 total.  She decided to wait.  $2,800 is bigger than $900.  garnishment or tax refund

Tax refund season is often the only time of year that people get a little extra money to do the nice things like dental work or those nagging vehicle repairs.  Sometimes you have to file bankruptcy now, but it may be worth waiting if you’re looking at a larger tax refund.

I have covered this topic over and over, and here are some links for further research:

How do I spend my tax refund before I file bankruptcy?

What do you do with your tax refund before filing bankruptcy and what can you spend it on? (video)

Can I use my tax refund to pay for bankruptcy?

Does a tax refund anticipation loan through HR Block protect my tax refund from a bankruptcy trustee?

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Can you hold public office after filing bankruptcy?

Yes, you can still hold public office.

You’re getting this confused with not being able to vote if you are a felon.  Bankruptcy is not a crime.  Far from it, actually.  Bankruptcy is simply one of our many laws regarding debt.  
public office

I was speaking with another attorney about this last week.  There was a local election where one of the candidates had two personal bankruptcies.  The fact that he had filed bankruptcy before became an issue in his election.  It was only a County Commissioner spot, but some people questioned his bankruptcies and his qualifications to serve as a public officer.  The Provo Daily Herald ran an article “Graves wins in race for Utah County Commissioner,”

Graves beat outgoing Utah County Commissioner Gary Anderson at the Utah County Republican Party convention in the spring, and ran uncontested until August, when Graves’ personal issues with bankruptcy caused some movers and shakers in Utah County to push Freeze to run.

Graves told the Daily Herald that bankruptcy is an issue for some, but he’s answered the questions regarding his two filings.

“I’m more than willing to tell them about it. You have to be willing to be open with the public,” he said.

He also said his past has taught him to do better, and the county’s spending cannot stay at its current level.

Graves’ unclean history

I’d have to disagree with the “unclean history” characterization.  Bankruptcy stinks, but it’s not “unclean.”  Most bankruptcies I deal with are caused by market changes, loss of business, loss of jobs, and, of course, medical debts.  A bankruptcy doesn’t mean that one candidate is “unclean,” it just means that he has taken some hits and is still standing.

Are foreclosures up or down in Utah?

From my personal experience, they are definitely up this month, but it’s a moving target.

According to some real, hard numbers from RealtyTrac, they are up in Utah for the month of October 2014.

RealtyTrac will give you a “UTAH REAL ESTATE STATISTICS & FORECLOSURE TRENDS SUMMARY,” which breaks down the real estate market by various categories.  According to their site, “In October, the number of properties that received a foreclosure filing in UT was 60% higher than the previous month and 27% lower than the same time last year.”  So it’s good and bad.  We have less foreclosures this year than last year, but they suddenly jumped in October.  foreclosures october 2014

What I love about RealtyTrac is that it will break it down in charts that actually make sense to me.  For instance, you can get a county by county breakdown like this:

1 in every 957

Top 5 Counties
Piute       1 in every 428
Tooele    1 in every 500
Box Elder  1 in every 644
Wasatch  1 in every 664
Sevier  1 in every 701

Or even a graph showing the number of foreclosures by month like this:

What happens to my self-employed hair stylist/cosmetologist business when I file bankruptcy?

Probably nothing at all.

Whether you file a chapter 7 or a chapter 13 case, we are required to submit profit/loss statements for your business.  We also list all of your equipment, inventory, and accounts receivable.  Each of these is treated a little differently in bankruptcy.

1.  Equipment:  Up to $5,000 of your equipment is protected.  I filed a case this morning listing the following equipment for a home-based businesses:  capes, aprons, blades, shears, texturizers, shear sharpeners, hand dryer, combs, brushes, hot tools, chair, clippers, cap dryer, sink.  (This was the first time I ever listed a “cape” in bankruptcy).  All of it was exempt (protected).  cosmetologist

Under Utah law, I can protect up to $5,000 of your tools of the trade.  Utah Code, Title 78B Chapter 5 Section 506 states that

An individual is entitled to an exemption, not exceeding $5,000 in aggregate value, of implements, professional books, or tools of the individual’s trade, including motor vehicles to which no other exemption has been applied, and that are actually used by the individual in the individual’s principal business, trade, or profession.

2.  Inventory:  I can protect NONE of this.  Hair dyes, shampoos, styling products, etc. all count as revolving inventory.  Thankfully, it is not worth much, and you generally rotate through it quickly.

3.  Accounts Receivable:  These are not protected, so if you have $10,000 of outstanding a/r, then you may lose it.  However, realistically, your a/r probably has no real value since you have not been able to collect on it, so you are not losing much of anything.

We value the business in the bankruptcy, but since the business is only you, it has no real value outside of your efforts and hard work.

Do you need special training to prepare the bankruptcy paperwork, or can I do it myself?

You need special training.  Really.  I am not saying this to convince you to hire me over doing it yourself.  You just do.

Below is a picture I took of myself (yes, a “selfie”) which I just sent to my wife.  I am literally pounding my head against my desk trying to balance out the budget and 6 month Form 22 analysis of my clients’ income.  They have two jobs, a strange and complicated benefits package, and a lot of deductions.

pounding headSometimes, preparing bankruptcy paperwork is so easy that it feels like you could fill out the forms with a crayon.  Other times, it is awfully complicated, and when you make a mistake, it is a costly mistake that causes you to lose your car or even your home.  Every bankruptcy attorney I know has spent countless hours research the minutiae of various bankruptcy laws.  So yes, we all have special training, although most of it is self-taught.

I have had additional bankruptcy-specific training in law school (back in 1996 before most people carried cell phones), including courses on bankruptcy, secured transactions, real property law, etc.  Bankruptcy was my LOWEST grade in law school ever, and it did nothing to help me prepare for the real world.  As an attorney, I even attended a week-long seminar in 2007 called “Max Gardner’s Bankruptcy Bootcamp.”  I learned bankruptcy tips and techniques from a master of bankruptcy law who is much, much smarter than I am.  That training helped, but it’s still a learning process every day.

So yes, you really do need special training.  You may be fine if you proceed without it, but if you make a mistake, it’s usually a doozy!