Monthly Archives: April 2017

What happens if I don’t give the bankruptcy trustee my tax refund (revisited)?

I covered this back in 2014 here:

Just remember that you don’t have to turn over your refund if you receive and spend it all BEFORE you file bankruptcy, but what happens if you are ordered to turn it over and you don’t?   

Short answer: you unleash a hellstorm of court proceedings.
Long answer: If you don’t turn over your tax refund monies after the trustee demands them, then various bad things can happen to you. In a chapter 13, you are required to turn over your refunds for the next three years. If you fail to do so, the trustee will dismiss your case. Sometimes, the trustee will dismiss your case and request that the court bar you from filing a new case for 180 days. This means that you can’t go bankrupt, can’t stop garnishment, and can’t avoid creditors for 6 months from the date that it is dismissed.

In a Chapter 7, it’s even worse. If you don’t turn over your tax refund, the trustee can and will file a Motion for Turnover (requiring you to turn over the refund). If you still don’t comply, then the trustee will file a Motion to Revoke Discharge, and your chapter 7 bankruptcy gets thrown out, you still owe the trustee the tax refund money plus his/her legal fees, and you can never get a discharge of those debts in a new Chapter 7.

It’s bad.

This is why I warn my clients about losing their tax refunds and remind them that it’s worth it in the short term to get rid of a lot of debt.

It is infrequent, but I sometimes have clients who refuse to turn over their tax refund monies.  I had one client who refused to turn over an $8,500 refund, refused to get on a repayment plan with the trustee, and eventually lost his discharge of over $60,000 of debt.  He chose to keep $60,000 of debt instead of lose that one year’s worth of tax refund monies.  It happens.

What are the median income figures for bankruptcy in Utah (April 2017)?

I posted this a couple of years back and realized that we need some updated numbers.  Here is the original blog post:  What are the median income figures for bankruptcy in Utah (February 2015)?

Basically, if you are over, then you are a chapter 13. If you are under, then you are a chapter 7. median income.  These are GROSS numbers (that means your income before we take out taxes, health insurance, or anything else).

Now remember that these numbers can be adjusted by child support payments (received or made), larger mortgages, huge tax debt, etc. So, it is a gross overgeneralization to say that if you are over that figure then you MUST be a chapter 13, but this is the baseline we start with. That being said, here are the current figures for Salt Lake County that we use on our Form 122A Current Monthly Income and Means Test for Chapter 7 (6 month average of current monthly income and disposable income):

Single: $56,638

Married: $62,903

Married with 1 child: $71,047

Married with 2 children: $79,710

Married with 3 children: $88,110

Married with 4 children: $96,510

Married with 5 children: $104,910

Married with 6 children: $113,310

Married with 7 children: $121,710

Married with 8 children: $130,110

Married with 9 children: $138,510

Married with 10 children: $146,910

Married with 11 children:  $155,310  (I have 11 children, and this is where I fit on the table).

When I file bankruptcy, can they sue an authorized user on my credit card?

No (generally).  

Generally, when you file bankruptcy as the signatory party on a credit card (the owner of the debt), it wipes out your liability for that debt.  So if you owe American Express $10,000 and go bankrupt, then it wipes out that $10,000 liability.  However, what happens if your son was also on the card as an authorized user (they issued him a card so that he could make charges on your account)?  He is NOT liable.

I get asked this question over and over, and although I am confident in the answer, I turned to Google just to make sure I’m getting it right.  Here is a very clear Question and Answer article from written by Steve Bucci entitled, “Others not liable for card owner’s debt,”

[A]uthorized users of credit card accounts are not financially responsible for payment of the accounts. But that won’t stop some collectors from asking you to pay. Some reasons they may give is to keep the memory of the person clear or that he would have wanted it that way. The next time you get a call, explain to them that you know your rights and that you are not legally responsible.

Ask them to send you a copy of the original agreement for the credit card account. They just might respond with, “We can’t send information regarding this account to you because you are not the owner of the account.” This would allow you to respond, “I rest my case.” Keep all your documentation with the lender in case you need it for a collector down the road.

They may try to argue that your authorized user is liable, and absent some particular fraudulent situations, they are wrong.  Additionally, if they report that bad debt on your authorized user’s credit report, he can file a simple credit dispute to get it taken off.

There are also some situations where your spouse could still be liable for the debt if you were the owner of the account and she was the authorized user.  In that kind of situation, it may be safest to file bankruptcy together.  That’s a bit more complicated, and I’ll save it for a different post.