These moratorium’s don’t cover every single property, but it’s pretty close.
If you want to keep your home, you’ll eventually have to catch up on those payments, either through a large cash payment, a loan modification, or a chapter 13 bankruptcy.
If you want to stay in the same rental unit, you’ll need to catch up on payments.
As for bankruptcy, yes, you can file bankruptcy to discharge the debt you owe on a rental, or even to surrender a home and discharge the mortgage debt. Of course, you should probably wait until the end of June unless you have other creditors trying to garnish or repossess. And yes, if you’re going bankruptcy on those unpaid rents or surrendering your house, you will have to move.
Some states will give you an exemption to protect your tax refund monies. Utah is not one of them. In fact, in most states, you have to use it or lose it. If you’re unsure, call a bk attorney in your state and find out.
I’ve written a few articles on this, and the links are below.
Here, I will try to give you a quick and dirty list of the do’s and don’ts of spending your tax refund monies.
pay off Mom and Dad before you file bk
buy a new toy, like a dirtbike
hide the money and claim that you spent it
buy food storage and clothing
buy boring household appliances like washer/dryer/refrigerator/freezer/stove/sewing machine
buy guns (really) (I can protect up to 3 of any value)
Utah has NO exemptions to protect your tax refund when you file bankruptcy. This means that if you go bankrupt before you receive and spend your tax refund, you will lose it. The chapter 7 trustee will take your refund and use it to pay your creditors. On the other hand, if you wait just a little bit to file and receive your refund, you can spend it all before filing bankruptcy.
Just remember to spend it on exempt items.
You can definitely use it to pay your bankruptcy attorney to prepare your case.
Don’t pay off friends or family! Call me if you have any questions on how to spend it. You can even text me on a Saturday at noon as you’re standing in an RC Willey trying to decide if you should purchase the new $800 bunk bed set for the twins (yes, you can). You can text me at 801-787-8860.
The list is below, but you’re always safe with food storage, clothing, washer, dryer, refrigerator, freezer, stove.
Here is a rehash of my post on this same issue last year (and the year before):
It’s that time of year again where I have to answer the phone and tell people that I don’t want their money until February or later because of tax refund season. It makes a lean December/January in our household, but it’s the only way to protect my clients.
(I am cutting and pasting from earlier posts, so please forgive the repeat information).
So let’s say you get your refund February 1, 2016. What do you do?
Better said, what don’t you do:
1. Don’t go buy a new toy like a dirt bike or a tv.
2. Don’t pay off any friends or family. This is a preferential transfer, to an insider no less, and it results in Mom and Dad being sued by the trustee.
So what do you do:
1. Spend it on exempt items under Utah Law. This basically means food, clothing, washer, dryer, fridge, freezer, stove.
(Did you see a computer on the list? No. Don’t ask me if that’s okay. It’s not).
2. And use the rest to pay me.
So let’s say you spend the tax refund on food storage March 1st and keep all of your receipts. When can you file? March 2nd.
(C) provisions sufficient for 12 months actually provided for individual or family use;
(D) all wearing apparel of every individual and dependent, not including jewelry or furs; and
(E) all beds and bedding for every individual or dependent;
There are other items you can spend the money on, and this is by no means comprehensive, but this should give you a good idea on how to spend it. If you have questions on what to use it for, ask your attorney; that’s what he’s there for.
You may rescind (cancel) your reaffirmation agreement at any time before the bankruptcy court enters a discharge order, or before the expiration of the 60-day period that begins on the date your reaffirmation agreement is filed with the court, whichever occurs later.
So let’s break it down. When you reaffirm a debt, you are re-assuming the debt. This means that your liability isn’t wiped out by the bk. If you stop making payments a year from now, they can repossess the car and sue you.
However, by reaffirming the debt, you get to keep the financed car and get that positive credit reporting.
Before Discharge: If you change your mind after reaffirming the debt, you can rescind (or cancel) it at any time before discharge. All you have to do is notify the creditor. That being said, I like to file a Notice of Rescission with the court as well. I am putting a text version of my Notice of Rescission below. I also mail and email a copy to the secured creditor.
After Discharge: The bk code gives you 60 days from the date your reaffirmation agreement was filed with the court. This is NOT 60 days from when you signed it. This is 60 days from when the creditor got around to filing it. Use that same Notice of Rescission.
Case Closed: A Client contacted me today and said that wants to give up her reaffirmed truck. Her discharge was entered 2 weeks ago, and her case closed out 5 days ago. Now she changes her mind! Officially, I don’t have to file that Notice of Rescission, but I’m going to do so and send a letter to the creditor.
Oral Notice????: Technically, there is no required means of giving notice to the creditor. Oral notice is actually sufficient (just telling them over the phone). That being said, I like to keep things in writing. In law school they taught us that: “If it’s not in writing, it didn’t happen.”
Just remember that if you do rescind your reaffirmation agreement, they will want the car back soon. They can even repossess it that night. However, they’ll probably contact you to arrange a time to pick it up.
Here is a copy of my poorly drafted official “Notice of Rescission.”
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
Bankruptcy No. XX-XXXXX
Chapter 7 Hon. WTT
NOTICE OF RESCISSION OF REAFFIRMATION AGREEMENT WITH RC WILLEY FINANCIAL SERVICES
Debtor gives notice that she is rescinding the Reaffirmation Agreement (Docket 10) recently filed between her and RC Willey Financial Services. Dated this 30th day of July, 2019.
/s/ Robert S. Payne Attorney for Debtor
Certificate of Service
I certify that I mailed a copy of the foregoing to RC Willey Financial Services at POB 65320, Salt Lake City, UT 84165-0320
Short answer: You can either file a chapter 13 bankruptcy within 10 days of the repossession or pay off the loan balance in full. Either one gets you the car back.
Since you’re probably not sitting on a wad of cash, you can file a chapter 13 and restructure the car payments over a 60 month plan at roughly 6% interest. Your chapter 13 plan payments will start on the 25th of next month.
The long answer is a bit more complicated.
Under the Utah Code, a creditor cannot sell the car for 10 days from the date of repossession. repo
70A-9a-612. Timeliness of notification before disposition of collateral. (1) Except as otherwise provided in Subsection (2), whether a notification is sent within a reasonable time is a question of fact. (2) In a transaction other than a consumer transaction, a notification of disposition sent after default and 10 days or more before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition.
During that 10 day period, you have a right to redeem the repossessed car. This means that you have the right to pay off the loan balance plus any collection fees, and then you can get the car back.
70A-9a-623. Right to redeem collateral. (1) A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral. (2) To redeem collateral, a person shall tender: (a) fulfillment of all obligations secured by the collateral; and (b) the reasonable expenses and attorney’s fees described in Subsection 70A-9a-615(1)(a). (3) A redemption may occur at any time before a secured party: (a) has collected collateral under Section 70A-9a-607; (b) has disposed of collateral or entered into a contract for its disposition under Section 70A-9a-610; or (c) has accepted collateral in full or partial satisfaction of the obligation it secures under Section 70A-9a-622.
This means that if you suddenly come into some healthy cash, you could basically buy the car, paying off the balance in full. This is not the case for most people.
Or, you can file a chapter 13 bankruptcy. A chapter 13 bankruptcy triggers the redemption section of the Utah law, letting us propose a chapter 13 plan that will pay off the loan in full. Right after you file the chapter 13 case, your attorney can demand that the lender allow you to pick up the car from the repo yard.
Even better, chapter 13 lets you change the interest rate and stretch out the loan repayment to 60 months.
You can also file a chapter 7, but it is 100% up to the lender as to whether or not they’ll let you get the car back and resume payments.
On the day you file bankruptcy, all of your property becomes part of the bankruptcy estate. This means that if you want to sell or refinance your home, you need court approval. You also need trustee approval, because the trustee is watching over your estate for the benefit of your creditors.
So if you want to sell your home, just remember that it’s a process.
Let your attorney know before you list it. Otherwise, you might be making a huge mistake. (see below).
Have your realtor speak with your attorney. (Which they’ll do anyways, because realtors are commission-based, and they are a wee bit pushy. No, really!). The realtor will need to send your attorney the listing agreement.
Let the buyers know that it will probably take 30-45 days AFTER the offer before you receive court approval to sell.
When you accept an offer, send it to your attorney immediately. He’ll also need a current mortgage payoff, and any related closing documents.
Your attorney files a Motion to Approve Sale of Real Property, Application to Employ Realtor, and Request for fees. (see below).
25 days-ish after filing the Motion, the court approves your motion. Now you can sell.
Now let’s get into the nitty gritty.
Let your attorney know first. You had better run the numbers with your lawyer to see if it is a good idea. Remember that you probably low-balled the price of your home in your original bankruptcy filings, and then you used your state exemptions to protect any exposed equity. In most states, that equity is all you get. So let’s say you exempted $50,000 of equity in your home 2 years ago when you filed the 13. Now you want to sell, and after realtor’s fees and closing costs, there will be $100,000 of equity coming to you. Maybe not. Some trustees will very successfully argue that any equity above your exemption goes to pay your creditors a little extra.
You may not get all of that equity. If you sell in an open 13, there’s a very strong chance that your creditors will see more of that money that you’d like.
It’s also nice to let your attorney know right away so that he can start billing you for his time. Yes, you’ll have to pay extra fees. Selling the home is not a normal part of your chapter 13 fee agreement, and most lawyers don’t work for free.
Have your realtor speak with your attorney. Lawyers don’t like this. I’m assuming that realtors hate talking to lawyers. But it has to happen. This way your attorney can dash the realtor’s hopes on timing and maybe any special arrangement you were talking about. It’s also important to note that your attorney will have to file an Affidavit of Disinterestedness on behalf of your realtor. This Affidavit states that your realtor is not a family member (an insider). If they are, the court probably won’t approve their fees/commissions. This tends to make realtors very unhappy. Especially the realtor is your sister you were throwing a bone to.
Let the buyers know that it will probably take 30-45 days AFTER the offer before you receive court approval to sell. There are motions, notices, and timing issues to get court approval. Your realtor will tell stories of anecdotes they heard at a realtor conference in Michigan 3 years ago about getting court approval more quickly with an emergency motion. I have also heard of this happening, but it is rare, it probably doesn’t apply to you, and it will cost you a lot more in attorney’s fees.
When you accept an offer, send it to your attorney immediately. The more papers you provide, the better. At a minimum, your attorney will need the signed/accepted offer, the listing agreement, your mortgage payoff information, any other closing documents, and anything else you think might be relevant.
Your attorney files a Motion to Approve Sale of Real Property, Application to Employ Realtor, and Request for fees. Attorneys generate a lot of paper. I assume that the faithful attorneys of the Sierra Club cry every time they file a new memorandum and wipe out a small forest. Bankruptcy is no different. You need court approval to sell the home. You need trustee approval. All of the creditors receive notice of the terms of the sale, and each and every one of them has the opportunity to object. Your realtor needs to be approved, and more importantly for them, their fees/commissions need to be approved. The closing costs need to be approved.
Most important of all! (at least to your bankruptcy attorney) is that your attorney needs to get paid. This is a lot of work, and your attorney will bill for his work. Expect to pay at least $750+ for a simple motion. Normally, you’ll pay these costs from the closing costs, or even as part of your ongoing monthly chapter 13 payments. But it is complicated and obnoxious work, and your attorney will be submitting a bill to the court.
25 days-ish after filing the Motion, the court approves your motion. These things are complicated and they take time. If no one objects, you could get court approval in 25 days. But, the trustee and/or creditors may object. You may have to have one or more hearings. The judge may take a week to sign the order after the hearing. Be patient. It takes time.
That being said, if you can sell your home, pay your creditors off in full, and close out your chapter 13 bankruptcy, it’s hard for anyone to object.
So this morning I received two phone calls in a row, from a local number, with a recording advising me that:
“This call is from the Department of Social Security Administration. The reason you have received this phone call from our department is to inform you that we just suspended your Social Security number because we found some suspicious activity.”
It’s a scam. I know it’s a scam because it sound ridiculous on the phone, and because I get a couple of calls a week from clients who are suddenly frightened because the timing of the call is suspiciously close to some kind of event in their bankruptcy case. But don’t worry, it’s a scam.
The real SSA will never call to threaten your benefits or tell you to wire money, send cash, or put money on gift cards. You can’t believe the numbers on your caller ID. Scammers can easily fake those.
The only suspicious activity I’ve done in the past week is taking a nap between two alligators. And to be honest, I’m not sure they were even real!
Nothing. It’s yours to keep. Use it to pay your bankruptcy attorney.
I had to edit this post today (January 8, 2021). A friend of mine who happens to be a very academically gifted bankruptcy practitioner, read the new bill carefully. The new stimulus payments are NOT property of the bankruptcy estate. This means that a bankruptcy trustee cannot take them from you.
Originally, Congress forgot to exempt (or protect) the stimulus money from the bankruptcy trustee. When funds are exempt, they are protected from collection by the trustee. For example, if you receive social security benefits each month, these funds are exempt. The trustee cannot take your bank balance of social security benefits and use them to pay creditors. Your stimulus money is not exempt.
None of the chapter 7 or chapter 13 trustees are going to require you to turn over your stimulus money to the bankruptcy estate. This means that you can file bankruptcy today, receive your stimulus tomorrow, and the trustee will not take it from you.
Down, so far down! (Utah is down 32% from last year).
You would think that with so many people out of work (or underemployed), that bankruptcies would be going through the roof. However, everyone is waiting and holding their breath right now. In fact, they’ve been holding their breath since about March of this year. We are at a 14 year low!
According to one our bankruptcy judges here in Utah, the reason we’ve seen bankruptcies decline is because potential debtors haven’t been pushed into filing yet. People don’t file bk until they need to. And most people won’t need to until they suffer some kind of critical life event, like a foreclosure/eviction, a garnishment, or a repossession.
This means that we’re still waiting. Once those moratoriums end, we’re going to have a flood of bankruptcies. Until then, I’ll keep staring at the phone trying to make it ring.