Author Archives: robertspaynelaw

Can I charge up my credit cards right before I go bankrupt?

Yes, but it’s a really bad idea.

Short Answer:  Your case could be dismissed for bad faith.  Or, that creditor may sue you for nondischargeability (meaning that you still have to pay that debt back plus attorney’s fees and interest).

Remember to avoid cash advances within 70 days of bk and charges of more than $500 in the 90 days before bk for luxury items.  

Long Answer:  It can hurt you.

I filed bankruptcy for a client last year who charged up over $10,000 in credit card charges on one card in the 2 months before we filed bankruptcy.  I didn’t know about it and had even asked him about recent purchases.  I am betting that he hoped that no one would notice.

It should have been a fairly simple case, but then I received the creditor’s lawsuit, called an adversary proceeding.  Officially, it was titled a “Complaint Seeking Exception to Discharge Pursuant to 11 USC s 532(a)(2)A) and/or 523(a)(2)(C) and/or 523 (a)(1) and/or 523 (a)(14A).”  A big, scary bankruptcy court lawsuit.  I have put in the code sections below.

Basically, my client had used his credit card to pay off about $1,500 in property taxes and spent the rest on lots of toys for his family.

I fought the lawsuit, and we settled for about $6,000, which is much, much better than it could have been.

Do NOT do the following:

Pay off taxes with your credit cards

Lie (fraud) on a credit application

Charge up more than $500 on a card within 90 days of filing bk  (this only applies to luxury items)

Take out cash advances of more than $750 within 70 days of filing bk.

Any of these items can lead a creditor to sue you in bankruptcy court.  You will most likely lose that suit and have to pay the monies back.



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
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; or
(i) for purposes of subparagraph (A)—
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph—
(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and
(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;
(3) neither listed nor scheduled under section 521(a)(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit—
(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dis­chargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request;
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
(5) for a domestic support obligation;
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty—
(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or
(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition;
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;
(9) for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance;
(10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act;
(11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union;
(12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any such commitment which would otherwise be terminated due to any act of such agency;
(13) for any payment of an order of restitution issued under title 18, United States Code;
(14) incurred to pay a tax to the United States that would be nondischargeable pursuant to paragraph (1);
(14A) incurred to pay a tax to a governmental unit, other than the United States, that would be nondischargeable under paragraph (1);

(14B) incurred to pay fines or penalties imposed under Federal election law;

(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;
(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;
(17) for a fee imposed on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under subsection (b) or (f)(2) of section 1915 of title 28 (or a similar non-Federal law), or the debtor’s status as a prisoner, as defined in section 1915(h) of title 28 (or a similar non-Federal law);
(18) owed to a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986, under—
(A) a loan permitted under section 408(b)(1) of the Employee Retirement Income Security Act of 1974, or subject to section 72(p) of the Internal Revenue Code of 1986; or
(B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5, that satisfies the requirements of section 8433(g) of such title;
but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section 414(d), or a contract or account under section 403(b), of the Internal Revenue Code of 1986 constitutes a claim or a debt under this title; or
(19) that—
(A) is for—
(i) the violation of any of the Federal securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934), any of the State securities laws, or any regulation or order issued under such Federal or State securities laws; or
(ii) common law fraud, deceit, or manipulation in connection with the purchase or sale of any security; and
(B) results, before, on, or after the date on which the petition was filed, from—
(i) any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative proceeding;
(ii) any settlement agreement entered into by the debtor; or
(iii) any court or administrative order for any damages, fine, penalty, citation, restitutionary payment, disgorgement payment, attorney fee, cost, or other payment owed by the debtor.

Here is a 4 year old blog post on the same topic:

Will bankruptcy wipe out my car loan and let me keep my car?


In bankruptcy, if you want to keep your financed vehicle, then you need to keep paying for it.  Bankruptcy will not wipe out (discharge) the loan amount and allow you to keep the vehicle free and clear.

Yesterday afternoon I received a call from a potential client who wanted to file bankruptcy on her $36,000 truck loan because the payments were over $600 a month.  I said that we could definitely do that.  She then asked when they would send her the title.  At that point, I realized that we had a problem with the concept of bankruptcy and secured debt.  

In most cases, bankruptcy (especially Chapter 7) will wipe out almost all of your debts, with the exception of certain priority debts like taxes, student loans, child support/alimony, and criminal restitution.  However, some people want to keep their secured debts.  A secured debt is a debt that you owe that is secured by a thing:  a mortgage is secured by a home, a car loan is secured by a car (plus they hold your title as a lienholder) , and your kirby vacuum is secured by a financing agreement filed with the state.

If you want to keep your thing secured by a secured debt, then you need to keep paying on that debt.  So if my potential client wants to keep her truck, then she needs to keep the $36,000 loan attached to it.  She cannot file a bk and then receive title to a $36,000 truck for free.  If she wants that title, then she needs to eventually pay off the secured loan.

To be clear, bankruptcy can wipe out your personal liability on those debts, but the secured debts are still attached to the stuff (collateral) you financed.  You cannot wipe out a secured debt and just walk away with a clean car title or even get rid of your entire mortgage.

What happens to my GreenSky/Mac Credit/Mac Tools account when I file bankruptcy?

It depends on what you want to happen.

If you want to keep the financed tools, then you keep them and keep paying on them.  If you want to surrender the tools and wipe out the debt, then you can give them back to Mac Tools.

When you file bankruptcy, there are certain debts that are secured, which means that they are attached to things.  A mortgage is secured by a house, a car loan is secured by your car, and if you are a high-end mechanic, then there’s a good chance that your giant rolling red tool box and vast assortment of tools hand-forged by Vulcan himself are secured by a loan through GreenSky (or Mac Credit).  

In a chapter 7, you file a statement of intention saying that you want to keep the tools.  Then you can reaffirm the debt by signing a reaffirmation agreement with GreenSky.  However, GreenSky is one of those creditors who really doesn’t care about the reaff.  They just want you to keep paying.  If you keep paying, you keep the tools.  If you stop paying, they’ll gladly pick them up.

In a chapter 13, we roll the financed tools into your chapter 13 plan payments over a 5 year plan.

So nothing will happen to your tools, so long as you keep paying GreenSky each month.

And in case you’re wondering, I’ve found them very pleasant to speak with on the phone (unlike the picture above).  Here is their contact information if you’re keeping your tools and making a payment:

How do I start my own IRA or 401k? Or how do I start saving money for retirement if I am self-employed or if my employer doesn’t have a 401k? (Acorns)

It’s tough.

First off, let me put this out there:  I am a bankruptcy attorney, not a financial advisor.  This is not legal advice, investment advice, and may not even be good advice.

Short answer:  there’s a new company called Acorns that lets you invest tiny amounts of money (like $1 increments) and even lets you start putting money into your own IRA.  Here is my link to join:

Long Answer:  A majority of my clients do not have any kind of retirement savings.  Some are self-employed with no large employer to cover them under a big institutional 401k, some are under-employed (which means that they have low-paying jobs that don’t offer much in the way of benefits), and some have been between jobs to the point that they drained out whatever retirement monies they had just to make ends meet.  

I am in the self-employed category.  Technically, I could hire an accountant, incorporate, and make some kind of complicated SEP 401k (self-employed 401k), but that’s really not my kind of law.  In other words, I don’t know how to do a 401k on my own.

Last month, one of my brighter children (I have 11, and they run the gamut from being brilliant to not-quite-so-brilliant) suggested that I look at something called Acorns at  Acorns lets you invest anywhere from $1 a month (and up).  Even better, you can set up something called “round-ups.” With round-ups, each time I buy a soda at the gas station, it will round up my gas station soda purchase to the nearest dollar and stick that into my investment account.

It is fairly simplistic, but it lets you start a retirement account today with less than 5 minutes of total hassle.

Apparently it’s the real deal and I haven’t been aware of it because I’m old and not very hip.  Here is a 2015 CNN article talking about it.

Now because of my son, I have an IRA.  It’s embarrassingly tiny, but it’s a beginning, and it was easy.

I don’t care if you use my link to join or do it on your own, but you really should consider setting up an account.  It’s a start.

Here’s my link for joining:



Do people ever read your bankruptcy blog? (100,000 views!!!)

I ask myself this question more than I actually hear it from clients, so I think it’s more of a crazy- person-talking-to-himself-internal-monologue kind of question.

So to answer that internal voice of debt, “Yes, apparently people do read this blog.”

The attached picture is not a good one, but it is a cell phone capture of my home computer. Last night I was wondering if the view count had hit 100,000.  Unfortunately, when I accessed the blog, I was visitor 100,001, so I missed that fantastic 100,000th reader.  I took this picture, sent it to my friends and family, and then walked around feeling pretty awesome for the rest of the evening.  To be honest, it’s a feeling of validation, knowing that people actually read the blog.

I posted my first entry in December 2013.  I’ll admit that I did it just to improve my rankings on google with raw organic content.  However, I soon found that if I wrote more detailed articles on more specific questions, then I could use them again and again.   For example, I get asked questions on mortgage reaffirmations every week, and now I can simply cut and paste a couple of links from my blog that hopefully make sense to my clients.

It’s also really fun to put the questions together.  I try to answer them in my speaking voice.  There are still spelling and grammatical errors, and I’m sorry.  Apparently my speaking voice throws those in as well.

As for the “artwork,” I love making the pictures for each topic.  I know that the pictures are not high quality;  I’ll even admit that I have no artistic training.  In my defense, I’m using Microsoft Paint, but even if I had a better program, the artwork would be the same.  Hopefully you can get the gist of the action in the scene.

So for everyone whose accessed this blog, thank you.  Every time someone searches for an answer on my blog and actually reads it, I feel great.

What are the median income figures for bankruptcy in Utah (April 2018)?

Basically, if you are over, then you are a chapter 13.  If you are under, then you are a chapter 7.    

Now remember that these numbers can be adjusted by child support payments (received or made), larger mortgages, huge tax debt, etc.  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 22C* (6 month average of current monthly income and disposable income):

Single:      $59,002

Married:    $64,832

Married with 1 child:   $76,066

Married with 2 children:  $83,537

Married with 3 children:  $91,937

Married with 4 children:  $100,337

(If you can’t see the pattern yet, each child we add bumps up your median income figure by $8,400).

As I said above, being over doesn’t necessary mean that you’ll be in a repayment plan (like a chapter 13), but this gives us a nice baseline.

*  (Notice that I called it “Form 22C” .  That is because I’m old.  The current form is called Form 122A Current Monthly Income and Means Test for Chapter 7 or Form 122B or 122C).

What happens if you are in a car accident before repossession (or have a damaged car that is repossessed)?

Generally, you wipe out the debt.

Every week or so I look at the “insights” on my blog to see what searches people run.  Here is today’s entry:  


If you look at the searches, you can see that somebody was on my blog today who apparently had a financed vehicle, damaged  in an accident, that was going to be or already was repossessed.  I’m assuming that they’re worried about being sued by the bank.  If they don’t file bankruptcy, that’s a real possibility.  If they do file bankruptcy, then they should be fine.

Basically, you can discharge that debt and turn over the vehicle, no matter what the condition.  Now you should have had it fully insured, and if you receive an insurance settlement, you may have to turn over those monies to the bank who financed your car.

However, if you let your insurance lapse, then there’s no insurance settlement coming.  In theory, the bank could sue you for the damage to the car, but that gets wiped out by the bankruptcy as well.

I wrote about this 3.5 years back.  It’s still relevant:

What happens after a repossession if my car is in bad shape with body damage?

How do I file my Utah State Individual Income Tax Return for previous years or past due returns (like 2008 when I never filed)?

I am not an accountant and I don’t do taxes!  So take this with a grain of salt.  This is just what one of my clients did recently with the Utah State Tax Commission (“USTC”).    

We are sitting in court at our 341 Meeting of Creditors, and the USTC representative says that they’ve never received a copy of my client’s 2008 TC-40, Utah Individual Income Tax Return.  My client is sure that she’s filed it, but the USTC wants a copy.

At this point, we can try to find the copy of the 9 year old tax return, or recreate it.  She can’t find it, so she’s stuck recreating it.  She can’t find her federal returns either, so it’s off to the internet.

Here are the basic steps:

  1.  First, she gets her federal transcript from the IRS.
  2. She gets a blank Utah tax return for previous years.
  3. She uses that transcript to fill out her 2008 Utah TC-40.
  4. She signs it in blue ink (just because blue is prettier), and
  5. I forward it to the USTC representative.  (If you don’t have an attorney, you can mail it to them).

And she’s done (and filed).

Here are the same steps substantially fleshed out.

  1.  How to get your transcript from the IRS.

There are two kinds of transcripts, a tax return transcript and/or a tax account transcript.

Here’s the difference, as defined by the IRS:

  • Tax Return Transcript – shows most line items including your adjusted gross income (AGI) from your original tax return (Form 1040, 1040A or 1040EZ) as filed, along with any forms and schedules. It doesn’t show changes made after you filed your original return. This transcript is only available for the current tax year and returns processed during the prior three years. A tax return transcript usually meets the needs of lending institutions offering mortgages and student loans. Note: the secondary spouse on a joint return must use Get Transcript Online or Form 4506-T to request this transcript type. When using Get Transcript by Mail or phone, the primary taxpayer on the return must make the request.
  • Tax Account Transcript – shows basic data such as return type, marital status, adjusted gross income, taxable income and all payment types. It also shows changes made after you filed your original return. This transcript is available for the current tax year and up to 10 prior years using Get Transcript Online or Form 4506-T. When using Get Transcript by Mail or phone, you’re limited to the current tax year and returns processed during the prior three years. Note: If you made estimated tax payments and/or applied an overpayment from a prior year return, you can request this transcript type a few weeks after the beginning of the calendar year to confirm your payments prior to filing your tax return.

Now that you know the difference, here is where you go to get the transcript emailed to you from the IRS.

2. How to get a blank Utah tax return for previous years.

You go here:  

You click the drop down menu for what kind of return (individual), type in the year on the next drop down menu, and the form appears in .pdf, blank and ready for you to fill out.

The form we needed was located here:

3.  How to fill out our your blank TC-40.

Use your federal tax transcript.  It should show all of the numbers you need to plug in to the state form.  If it doesn’t, I’m at a loss, because I am not an accountant and I don’t do taxes.  (But don’t worry, it really does).

4.  Sign it in blue ink.

No, it doesn’t really matter.  But I love blue ink because it shows that this really is an original document.

5.  Send it to the tax commission.

If you are in bankruptcy, you can give it to your attorney, and he’ll email a scanned copy to the USTC.  Then it is magically filed.

If you are not in bankruptcy yet, then you’ll need to send it to the USTC directly.  You can do so here:

Call them just to double-check.