Monthly Archives: December 2014

What if you are too sick to go to your bankruptcy court hearing/341 Meeting of Creditors?

The court is more flexible than you think.

Today I have a hearing on a motion to dismiss for one of my clients.  If I do not attend the hearing, their case will be dismissed.  Unfortunately, I have been laid up with a nasty flu bug for about a week now, and it was all I could do to crawl across the floor and type this entry.  sick

So, I sent the following email to opposing counsel (the chapter 13 trustee):

Ryan,

I am sick as a dog.  I have an 11:00 mtd hearing for nielsen.  I will have Ryan Simpson cover and ask for a two week continuance.  I have been too sick to get with clients and get a working budget for the last week.  Debtors are current.
If I die, I’ll have my widow let you know prior to the next hearing.
Robert
cough cough
That’s it.  The bankruptcy trustees and judges understand that life happens.  If you have a good
reason for missing a hearing, they will generally let you reschedule, but it is a very good idea to

let the court and the trustee know beforehand.

(In this kind of situation, if I don’t get a response back from the trustee and/or other counsel, I

will end up appearing in court with an open bottle of Dayquil, but it won’t come to that).

As for you, if you have a hearing that you won’t be able to attend, let your counsel know right away.  He can usually file a motion to continue and/or reschedule the hearing.  Don’t simply blow off the hearing.  Let your counsel know!

Is there any way to stop being garnished besides filing bankruptcy?

Yes, but you may not like the answer.  garnishment

1.  You can quit your job or find a new job.  The garnishment only affects your current employer.  If you quit or find new employment, your judgment creditor will have to track you down and serve your new employer with the garnishment paperwork.

2.  You can get ORS to garnish your wages directly (if you’re paying child support or alimony).  ORS can take up to 55% of your income.  A judgment creditor can only take up to 25%.  If ORS is already taking at least 25%, then the judgment creditor cannot touch you.  If the judgment creditor started garnishing first, but you get ORS to step in, they will trump the judgment creditor and get paid first.

3.  Get on a repayment plan with the judgment creditor.  Then, only if the creditor is feeling really, really full of the bowels of charity will they suspend your garnishment.

4.  Pay off the judgment in full.  If the judgment is paid, there’s no legal right to garnish.

To be honest, bankruptcy is probably the cleanest and quickest way to deal with it, and it will stop that garnishment cold.

Will Utah Governor Herbert’s proposed “gap” health care coverage keep people out of bankruptcy?

Probably not.

Kristen Moulton wrote a nice piece for the Salt Lake Tribune on December 4th, “Gov. Gary Herbert unveils his plan for covering Utahns in the health care “gap”.”  To summarize:  Governor Herbert has proposed a gap health insurance coverage for people who make don’t quite qualify for Medicaid and cannot afford other health insurance.  It even quotes a 23 year old woman who was forced into bankruptcy because of health issues.

The proposed “gap” insurance would cover two groups of people:

Group 1 » Adults without children who aren’t pregnant, disabled or seniors and who make less than poverty income ($11,670), and adults (with children) whose income is more than half of the federal poverty level (roughly $9,800 for family of three) but less than poverty level, $19,790. The Utah Department of Health says there are 63,000 such Utahns; the Legislature estimates 67,000.

Group 2 » People who make from 101 percent to 138 percent of federal poverty levels, or $16,105 for an individual or $27,310 for a family of three. The health department estimates 32,000 of these.

I say “probably not” because although health insurance would theoretically protect people from medical bills that force them into bankruptcy, the truth is that people are constantly moving in and out of poverty and insurance qualification guidelines (and even moving from state to state).  Even worse, medical bills seem to hit at the most inopportune moments, like right after you lose a higher paying job and have some health insurance, but not quite enough.

It may help, but bankruptcy is still here as a relief valve for those who fall between the cracks.

Is it okay to sell my car after I file bankruptcy?

Maybe, but at least wait until after your 341 Meeting of Creditors.

In a bankruptcy case, your bankruptcy estate is created on the day you file.  That estate is comprised of everything you owned on the date of filing (furniture, home, car, dollar amounts in bank account, etc.).  Most of those things will be exempted (protected) under various state and federal statutes.  However, the bankruptcy trustee (rarely) can challenge those exemptions and claims that they are improper.

So let’s say you file a chapter 7, exempt your $1,000 car, and then sell your car for $1,500 one week after you filed.  You haven’t had your meeting with the bankruptcy trustee yet.  When she learns that you sold it for $1,500 but only exempted it for $1,000, at a minimum, she will demand that you turn over the extra $500.  Even worse, she may argue that you had no right to sell off any asset of the estate yet, and she could demand the whole $1,500.  It would be safer to wait until after your meeting with the trustee.

It’s actually a quite complicated set of variables that govern if/when you can sell off an asset while in bankruptcy.  You really should tell your attorney what you want to do, and ask if/when you can do it.

How do I file a complaint against my bank for not applying my payments to the right loan?

This is a tough one.  (That being said, there is a list of names at the end of this blog entry with websites).

I received a lengthy email question today from a client who had been making payments on three student loans, but the bank screwed up and only applied payments to two of them.  misapplied paymentsThe other was in default and going to a collection agency.  He wrote:

When we made payments, we would make a single payment online, or sometimes over the phone, and then Chase would allocate it across the three loans.

I don’t really know how it happened, and it seems a bit unusual to me, but none of the payments were going to the loan which my mother-in-law had co-signed on in the past 4 months. Instead, the money was being allocated to the other two loans. I contacted Chase yesterday and spoke with several people, and one of the representative that I spoke with didn’t have information about this third loan on her screen until I asked her about it and she did some digging and was able to find it. She acted surprised that it wasn’t showing up, but I obviously have no idea if she really was or not. I then learned that the third, co-signed loan was in default, had been charged off, and was now in transit to Chase’s Recovery Department. I got the number for the Recovery Department and spoke with an individual who said she’d be managing my loan but that she hadn’t received the file yet, and that she wouldn’t receive the file until next week.

Not surprisingly, the bank misapplied payments and then couldn’t find a record of the third loan, and couldn’t even find an account manager who knew what to do.  Now, his co-signed family member was suffering on her credit and possibly facing a lawsuit.

In this kind of situation, you need to deal with the lender directly and have solid evidence that they misapplied payments.  When they drag their feet, you can get the state of Utah (or your state) involved.

You can file a complaint with:

1.  The Utah Department of Financial Institutions here:   http://www.dfi.utah.gov/Complaints.htm

2.  The Utah Department of Commerce, Division of Real Estate here:  http://realestate.utah.gov/complaints.html

3.  The Utah Department of Commerce, Division of Consumer Protection here:  http://www.consumerprotection.utah.gov/complaints/index.html

Each agency covers something a little different, but there is overlap.

The Utah Department of Financial Institutions covers:

The Department is responsible for chartering, regulating, supervising and examining state-chartered financial institutions.  DFI also has jurisdiction over residential mortgage and consumer lending.

 

 

The Utah Department of Commerce, Division of Real Estate covers:

The Utah Division of Real Estate has regulatory jurisdiction over

  • appraisers
  • appraisal management companies
  • residential mortgage lenders and brokers
  • real estate brokers and agents
  • salespeople for subdivisions, timeshares, and camp resorts.

The Division’s jurisdiction over mortgage lenders is limited to the origination of residential, retail, first mortgages. Banks, credit unions, loan-servicing, and second mortgages are regulated by the Department of Financial Institutions.

The Division does not have jurisdiction over homeowner associations, providers of nightly lodging, landlord/tenant disputes, contract disputes, or monetary damages.

The Division uses complaints to regulate licensees and investigate unlicensed persons who are acting as licensees.  It does not mediate or resolve professional or personal disputes. If you believe you have a legal claim for monetary damages, you should consult an attorney about pursuing a civil lawsuit

The Utah Department of Commerce, Division of Consumer Protection covers everything else:

You may also use the Consumer Resource Guide to help determine the appropriate contact for a complaint.

Please contact the Department of Real Estate regarding any loan modification complaints.

Please contact the Department of Financial Institutions regarding Banking complaints.

What happens to my timeshare in bankruptcy?

It’s complicated.

Getting rid of it — If you want to cancel your timeshare and wipe out any remaining balance plus those quarterly assessments, you can list the time share and time share contract in your bankruptcy and cancel it out.  This will discharge any remaining liability you have.  In this scenario, you lose the timeshare.  timeshare

Keeping it — This is where it gets really complicated.

Chapter 7 — If it has value and you want to keep it, there is a good chance that you’ll have to buy it back from the chapter 7 trustee.  For example, if your timeshare currently has a fair market value of $5,000 (if you tried to sell it on the open market), then it’s worth $5,000.  This is not an asset you can protect in bankruptcy.  A trustee will want to sell it off, and the only way you can keep it is to pay him the value.  In other words, if you wanted to keep a timeshare worth $5k, then you’ll need to come up with $5k to pay off the trustee.  The trustee in a chapter 7 case usually wants this money in less than 6 months.

If is has no value and you want to keep it, then just keep making the payments.  The bankruptcy trustee won’t want it because it has no value.  You simply list the timeshare executory contract in your bankruptcy schedules and check a box that says you will “assume” the contract.  Then you are still liable for it and you still have to make the monthly payments plus the quarterly assessments.

Chapter 13 — If you want to keep it, you’ll have to pay through the nose for it.  The timeshare is a luxury item, and is doubtful that the court will let you keep it unless you are paying all of your creditors back 100% of what you owe them.

Now let’s say you are not paying your creditors back 100% of what you owe them… then you’ll have to probably pay DOUBLE the value of the timeshare to keep it.  For example, if the timeshare is worth $5,000, then you’ll have to pay your creditors at least $5,000 over a 60 month plan to keep it.   Plus, those monthly payments for the time share must also be paid into your bankruptcy plan.  So, if you’re paying $50 a month for the timeshare, you’ll have to pay an additional $50 a month to your creditors during your 60 month bankruptcy plan.

In other words, that $5,000 timeshare with payments of $50 a month will cost you a total of (5,000 + 5,000 + 50 x 60 + 50 x 60) or $16,000.  It’s not worth it.

How do I find out if my home has a foreclosure sale (trustee’s sale) date yet?

The easiest way is to call your mortgage company.  Unfortunately, you may sometimes spend half an hour or more navigating a phone tree hoping you can find someone who has a straight answer.

If you have a real foreclosure sale coming up, they will duct tape a notice of the sale date on your front door and your garage door.  It is not a subtle document.    foreclosure sale date

Unfortunately, people lose this Notice of Trustee’s Sale all of the time.  Just this morning, I received the following text on my google voice office line:

Robert, my name is XXXXXXXX.  I live in XXXXXX utah i just got back into town and was going through my mail.  it looks like the bank is going to auction my house off today is there anyway i can stop this i can file bankruptcy today

He couldn’t find the actual sale date?  Maybe today, maybe not.  When this happens, you can do the following:

1.  run a search for “trustee’s sale” and your property address on google here: https://www.google.com/ .  It will send you to a list of legal notices, including the one for your property.

2.  check the following foreclosure law firm websites for upcoming sales:

http://www.utahtrustee.com/pending-sales.php

http://lundbergfirm.com/foreclosures

http://www.scalleyreading.net/index.php/trustee/currentTrusteeSales

http://www.mathesonhowell.com/foreclosures/

3.  look for generic legal notices and search for your property here:  http://utahlegals.com/index.php

Once you have the sale date, you will know how much time you really have to file a bankruptcy.

What happens to my 529 college savings plan in bankruptcy?

It is generally safe, except for more recent contributions.

I had a client recently who had a lump sum of cash ($5,000) that he wanted to protect before he filed bankruptcy.  He wanted to invest this money into a 529 savings plan.  A 529 savings plan is a state-administered savings plan under section 529 of the Internal Revenue Code.  Here in Utah, the official 529 plan is the Utah Educational Savings Plan.  Generally, money in a 529 savings plan is exempt (protected) in bankruptcy, so long as you set it up at least 2 years ago.  If you set it up one year ago, only $5,000 is exempt, and contributions in the last year are not protected at all.

In my client’s case, a $5,000 contribution on the eve of bankruptcy would do nothing for him except result in an eventual motion from turnover from his bankruptcy trustee.  In his situation, we discussed which expenses he could spend the money on and still qualify for bankruptcy.

In general, your 529 is exempt and safe, except for those more recent contributions.

If you need a more detailed explanation, try a good article written by Justin Harelik here:  Shield money in bankruptcy with 529 plan.