Monthly Archives: May 2019

The Utah homestead exemption just jumped from $30,000 to $42,000 on May 14, 2019.

Since I’ve been practicing bankruptcy law, the Utah homestead exemption was $30,000. This means that $30,000 of equity in your home was safe from creditors. Now it’s $42,000. Woot!

On March 26, 2019, Utah Governor Gary Herbert signed an upgrade to the Utah Homestead Act, increasing the exemption from $30,000 to $42,000 (which you can double for married couples up to $84,000 in equity). The law finally took effect on May 14. See: Utah Governor Signs Law on Property Tax Exemptions.

Here’s what it means in practice: let’s say you have a home worth $100,000, and you owe $100,000. There is no equity, and your home is safe from creditors (and bankruptcy trustees wanting to sell it off).

But, try these numbers:

  1. home fmv $100,000 with a loan of $70,000 = $30,000 of equity. The homestead exemption protects that $30,000 of equity from creditors and the trustee.
  2. home fmv $100,000 with a loan of $50,000 = $50,000 of equity. The homestead protects $42,000 of that $50,000 of equity, so you have $8,000 of unprotected equity in your home.

Here is the text of the Utah Exemptions Act: Homestead Exemption, Utah Code 78B-5-502:

Effective 5/14/2019
78B-5-503.  Homestead exemption — Definitions — Excepted obligations — Water rights and interests — Conveyance — Sale and disposition — Property right for federal tax purposes.

(1)For purposes of this section:(a)”Household” means a group of persons related by blood or marriage living together in the same dwelling as an economic unit, sharing furnishings, facilities, accommodations, and expenses.(b)”Mobile home” means the same as that term is defined in Section 57-16-3.(c)”Primary personal residence” means a dwelling or mobile home, and the land surrounding it, not exceeding one acre, as is reasonably necessary for the use of the dwelling or mobile home, in which the individual and the individual’s household reside.(d)”Property” means:(i)a primary personal residence;(ii)real property; or(iii)an equitable interest in real property awarded to a person in a divorce decree by a court.
(2)(a)An individual is entitled to a homestead exemption consisting of property in this state in an amount not exceeding:(i)$5,000 in value if the property consists in whole or in part of property that is not the primary personal residence of the individual; or(ii)$42,000 in value if the property claimed is the primary personal residence of the individual.(b)If the property claimed as exempt is jointly owned, each joint owner is entitled to a homestead exemption, except that:(i)for property exempt under Subsection (2)(a)(i), the maximum exemption may not exceed $10,000 per household; or(ii)for property exempt under Subsection (2)(a)(ii), the maximum exemption may not exceed $84,000 per household.(c)A person may claim a homestead exemption in either or both of the following:(i)one or more parcels of real property together with appurtenances and improvements; or(ii)a mobile home in which the claimant resides.(d)A person may not claim a homestead exemption for property that the person acquired as a result of criminal activity.(e)(i)As used in this Subsection (2)(e):(A)”Average index number” means the average of the 12 most recent Consumer Price Index numbers that are available in December in the year previous to the calendar year that is calculated in Subsection (2)(e)(iii).(B)”Consumer Price Index number” means a monthly number for the unadjusted Consumer Price Index for All Urban Consumers for all items as published each month by the Bureau of Labor Statistics of the United States Department of Labor.(ii)The dollar amounts in Subsections (2)(a) and (b) are for May 14, 2019, through December 31, 2019.(iii)For the calendar year 2020 and a calendar year after the calendar year 2020, the state auditor shall:
(A)calculate new dollar amounts for each dollar amount in Subsection (2)(a) and (b) by multiplying the dollar amount in Subsections (2)(a) and (b) by the average index number, dividing the result by 251, and rounding to the nearest 100 dollars; and(B)publish on the Office of the State Auditor website the new dollar amounts calculated under Subsection (2)(e)(iii) no later than January 1 of the applicable calendar year.
(3)A homestead is exempt from judicial lien and from levy, execution, or forced sale except for:(a)statutory liens for property taxes and assessments on the property;(b)security interests in the property and judicial liens for debts created for the purchase price of the property;(c)judicial liens obtained on debts created by failure to provide support or maintenance for dependent children; and(d)consensual liens obtained on debts created by mutual contract.
(4)(a)Except as provided in Subsection (4)(b), water rights and interests, either in the form of corporate stock or otherwise, owned by the homestead claimant are exempt from execution to the extent that those rights and interests are necessarily employed in supplying water to the homestead for domestic and irrigating purposes.(b)Those water rights and interests are not exempt from calls or assessments and sale by the corporations issuing the stock.
(5)(a)When a homestead is conveyed by the owner of the property, the conveyance may not subject the property to any lien to which the property would not be subject in the hands of the owner.(b)The proceeds of any sale, to the amount of the exemption existing at the time of sale, is exempt from levy, execution, or other process for one year after the receipt of the proceeds by the person entitled to the exemption.
(6)The sale and disposition of one homestead does not prevent the selection or purchase of another.
(7)For purposes of any claim or action for taxes brought by the United States Internal Revenue Service, a homestead exemption claimed on real property in this state is considered to be a property right.

I just took out a payday loan last week. Can I file bankruptcy right away?

You can, but it’s probably a bad idea.

If you take out a loan before going bankrupt, there is a chance that the creditors will sue you to make that debt non-dischargeable. This means that you will have to pay them back. It doesn’t throw out your whole case, but it’s still scary.

Here are the magic numbers to remember: $750 in 70 days from a cash advance and 90 days for luxury item charges of more than $500. (see below).

Today I was meeting with a client who took out a payday loan last week for $2,500 from one lender and $1,000 from another lender. She wanted to file bankruptcy right away before the creditors started calling her. Unfortunately, the money was already gone (I know, $3,500 in one week???) and she had no ability to repay them.

I told her that we could file a bankruptcy and list those debts, but that there was a pretty good chance that she would be sued by those creditors after filing bankruptcy. Each creditor would have a strong argument that she took of the money in bad faith with the intent to defraud them. And, they would win.

That being said, out of 2,516 cases of mine here in Utah in the past 13 years or so, 4 clients have been sued on that issue. Not a very high percentage, but in each case, they lost and had to pay the monies back.

I wrote about this a while back here: Can I charge up my credit cards before I go bankruptcy?

Here are the legal standards to consider:

Here are some of those code sections (bolded):

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt