Monthly Archives: June 2015

What does a tax refund offset letter look like?

Here’s a copy of an offset letter for one of my clients.  tax refund offset letter

Basically, your tax refund gets offset (garnished/levied/taken) by a government entity authorized to do so.  In the case above, she had an unpaid traffic fine which had escalated to the point that the state of Utah took part of her tax refund.  Here in Utah, the state can offset state tax refunds to pay for various things (like judgments).  See 59-10-529. Overpayment of tax — Credits — Refunds.

A federal offset looks a little different, but it’s really the same concept.

As to how this relates to bankruptcy, well sometimes you have to show this letter to the bankruptcy trustee to show that you never received your refund.  So don’t lose the letter.

Unfortunately, once the money is gone, it’s gone.  You cannot file bankruptcy and hope to get the offset funds back.  On a positive note:  at least the offset refund went to a debt she would have had to eventually pay back.

What happens if I close my bankruptcy class before I can complete it?

Just log back in.  bk class not working

Before you file bankruptcy, you are required to take a pre-bankruptcy class and receive a certificate of completion for your credit counseling.

After you file bankruptcy, you are required to take a financial management course and receive a certificate before the bankruptcy court will issue your discharge.

I usually tell my clients to take the online class at a website called  They charge $9.95 for a joint class and email the certificate to both you and your attorney (me).  At $10, they’re pretty cheap.

So today, I had a client call me with a problem:  her deadline to file the second class certificate was coming up, but she was stuck on a single page of the online class, and it wouldn’t let her advance to the next screen.  I told her to simply close the page, log off, and log back in.  Usually (hopefully), it saves your progress and you can just start up where you left off.

She closed the web page at 76%, logged back in, and thankfully, she was still at 76% complete.  She then sent me this email:  “Mr Payne we just finished the 2nd class online and the little problem was fixed by signing out and signing back in it worked.”

This means that she didn’t have to take the two hour class again.  Yes, the second class is two hours long, and I am very, very sorry.


Does my wife have to go to court too? (bankruptcy hearing or 341 Meeting of Creditors)


If you both filed bankruptcy, then you both have to go to your 341 Meeting of Creditors.

When you file bankruptcy, you can file a a single petition (for one person) or a joint petition (for a married couple).  If your wife (or husband) files bankruptcy with you, then they are required to go to that first 341 Meeting of Creditors.  This means that if both of your names are on the bankruptcy court’s 341 Notice, then both of you need to go.  If one of you misses the 341 Meeting, then the trustee will file a motion to dismiss for non-appearance, and that spouse will need to file a new bankruptcy case after her half of this case gets dismissed.  who goes to 341

For other hearings, it depends.  Sometimes in a chapter 13, you are required to go to a confirmation hearing where the court hears arguments on whether or not to confirm your chapter 13 plan.  For this hearing, I will sometimes only have one of the parties (husband or wife) go to hearing, if I even need one of you present.

But for 341s, if both of you filed, then both of you go.


How much does it cost to file bankruptcy in Utah?


Different bankruptcy attorneys may charge different amounts of attorney’s fees up front.  As for me, I will file a chapter 13 for $500 in attorney’s fees up front.

That means that if you have a foreclosure tomorrow, or a garnishment this Friday, or something else awful coming up, you can pay $500 and stop it.

(P.S.  the picture to your left looks like a stack of $100s.  It’s not.  I’m a bankruptcy attorney, and we don’t have stacks of $100s.  It’s a $100 wrapped around a bunch of $1s and $20s).bankruptcy cost

However, it’s a little more complicated than that.  Don’t forget that you’ll still have to take the online bankruptcy class, fill out your paperwork, give your attorney time to complete it, and sign everything to get it filed.  You cannot just drop off $500 and expect to get a bankruptcy case number!

After you pay that $500 in attorney’s fees and file your case, you will still have to pay the court your filing fee.  The filing fee for a chapter 13 is $310.  You can pay in in installments every two weeks after you file.  So let’s say that you filed today, you would pay the court:

$100 in 2 weeks

$100 in 4 weeks

$100 in 8 weeks.

In a chapter 13, you make monthly payments to the chapter 13 trustee, payments which go towards your car, your mortgage arrears, back tax debt, etc.  You also end up paying the trustee a handling fee as well.  If your case gets confirmed by the court, your attorney will end up getting paid additional attorney’s fees out of your payments, making anywhere from $3,000 to $3,500 depending on what kind of case you are.

However, to summarize this very lengthy answer:  you can file a bankruptcy with me for $500 up front.

What happens to my annuity in bankruptcy?

It’s complicated.

First off, an annuity is defined by Merriam Webster as:

a fixed amount of money that is paid to someone each year

: an insurance policy or an investment that pays someone a fixed amount of money each year

In other words, it is a very broad term that covers any number of financial planning tools.annuity

I had a potential client contact me yesterday who had an annuity worth about $30,000.  She wanted to know what would happen to it in bankruptcy.  I had her scan/email me the account statement, and her “annuity” was comprised of her ex-husband’s IRA account transferred into a different IRA Accumulator account with her local credit union.  It even said “Annuity” in the title of the document, but reading it more closely showed that it was a nice, simple, and very safe IRA.

Under Utah exemptions, retirement plans like IRA’s are generally protected.  Utah Code 78B-5-505 exempts (or protects):

(xiv) except as provided in Subsection (1)(b), any money or other assets held for or payable to the individual as a participant or beneficiary from or an interest of the individual as a participant or beneficiary in a retirement plan or arrangement that is described in Section 401(a), 401(h), 401(k), 403(a), 403(b), 408, 408A, 409, 414(d), 414(e), or 457, Internal Revenue Code;

So in this situation, her “annuity” would be safe in bankruptcy.  However, it is a complicated case-by-case analysis, and this is one that you’ll need to run by your attorney.

Basically:  if it’s a retirement account like a 401k or an IRA, you should be safe.

If it’s something else, you may have a serious problem in bankruptcy.

On a side note, I spent about an hour speaking with her and researching her annuity, only to discover that she had another asset which I couldn’t protect, and which meant that she couldn’t file bankruptcy.  Dang it.

Can I strip an unsecured second mortgage from my home in a chapter 7 bankruptcy?

No.  In fact, the U.S. Supreme Court has emphatically said, “No!” just today.

bk strip mortgage

In Bank of America v. Caulkett, the Supreme Court held that

A debtor in a chapter 7 proceeding may not void a junior mortgage lien under 506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor’s claim is both secured by a lien and allowed under 502 of the Bankruptcy Code.

In a chapter 13 case, it IS possible to strip a second mortgage if it is wholly unsecured.  This Calukett decision just clarified a line of cases led by Dewsnup v. Timm, 502 U.S. 410 (1992) which also held that you cannnot strip  second mortgage under 506(d).

Basically, there had been a hope that since you can strip a second mortgage in a chapter 13, some attorneys thought that it should be possible to strip that same mortgage from your property in a chapter 7.  This is not possible.

It works like this:  your home is worth $200,000, you owe $201,000 on your first mortgage and $15,000 on your second mortgage.  SInce you owe more than the value of the home with that first mortgage, you can remove the second mortgage from the property in a chapter 13 and treat it as an unsecured claim, same as a credit card or medical bill.  However, you cannot remove the lien from your home in a chapter 7.  It stays secured against your home.