Author Archives: robertspaynelaw

Will bankruptcy discharge my parking tickets?

No.  

A chapter 7 will not discharge your parking tickets.

A chapter 13 will discharge your parking tickets, but only if you pay them off in full over your 3-5 year plan.

Parking tickets fall into the priority debt category of bankruptcy.  Priority creditors generally are not discharged in bankruptcy.  Under the Bankruptcy Code, 11 U.S.C. § 523(a)(7), these include:

(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…

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit,

A ticket is a fine or penalty payable to and for the benefit of a governmental unit.  The ticket pictured above is a fine/penalty which I now get to pay to the City of Salt Lake.

There are some exceptions, but as a general rule of thumb, you will have to pay those parking tickets.  Now, if you’ve lost your license because of payments issues, bk may help, but that’s a different issue:  https://robertspaynelaw.com/myutahbankruptcyblog/2014/08/12/can-i-get-my-suspended-or-revoked-drivers-license-back-after-i-file-bankruptcy/

Now that I have my bankruptcy discharge, can they still report me on ChexSystems and deny me a bank account?

No, but it’s a mess to clear it up.

Bankruptcy may discharge your debts, but it doesn’t necessarily clean up your credit.  That’s something you’ll have to watch like a hawk to clean up and improve.    

Bankruptcy can generally discharge the debt you owe on an overdraft bank account, or any bank account where you had a negative balance. The problem is that the creditor probably listed you on something called Chex Systems (or Telecheck, or SCAN), which are

Chex Systems, Inc. (ChexSystems) is a nationwide specialty consumer reporting agency under the federal Fair Credit Reporting Act (FCRA). ChexSystems’ clients regularly contribute information on closed checking and savings accounts.  See Chex Systems front page here.

Once you’re listed on that database, it is very hard to get a new bank account, anywhere. If you find that you are still listed on Chex Systems (or the others) after your bankruptcy discharge, you will need to:

  1.  Get a copy of your Chex Systems Report,
  2. Dispute anything that still shows a balance, and then
  3. Give them 30 days to clean it up and take off the negative reporting.

99% of the time, this should take care of the problem.  If it doesn’t, then you get to jump through hoops to clean up your credit report and/or Chex Systems.

As I was looking for information on how to clear up Chex Systems, I found two excellent articles that you should probably cross reference:

http://www.bankruptcylawnetwork.com/after-bankruptcy-what-should-i-now-do-with-chex-systems-inc/

and

https://www.bankruptcytruth.com/learning-center/credit-report/315-how-to-dispute-a-chexsystems-after-bankruptcy/

Can a creditor come repossess my car after I file a chapter 7 bankruptcy?

No, but sometimes they do.

When you file a chapter 7 bankruptcy, you file a statement of intention with the court letting your creditors know if you’ll be keeping your secured loans (like car loans and mortgages).  You keep making payments on these loans, eventually sign a reaffirmation agreement, and the loans survive bankruptcy.  

However, sometimes people are behind on car payments and file a bankruptcy with the intention of surrendering the car in bankruptcy and wiping out the debt. Usually, the car lender will give you 1-3 months before they repossess.  They are hoping that you’ll change your mind, reaffirm the debt, and keep making payments.

Sometimes, clients even file the case right before a repossession, hoping to stall the repossession for a few more months so that they can drive the car rent free while they look for something else.  Just this morning, a client contacted me asking if she should worry about a repossession in the middle of the night.  She is about 4 months behind on her truck, we filed a chapter 7, and she will be surrendering it back to the lender when they contact me to make pick-up arrangements.

Here is the conversation:

Client — Will they just randomly pick it up though? We have carseats etc I’m worried about lol. Or do they have to give us some sort of notice?

Me — Technically, they should file a motion for relief from stay to repossess the vehicle, but they usually won’t in a chapter 7. At the meeting of creditors, the trustee directs debtors to surrender their vehicles that they aren’t reaffirming. Relying on this, creditors will come repo even without a motion for relief.

Even worse, some really nasty lenders will come repo the day after we file bk knowing that even if I file a motion for sanctions, I would have to show that not only had we become current, but that we were making ongoing payments.

That being said, usually everyone plays nice and contact me before the repossess a vehicle.

So yes, they should file the motion, but they usually don’t (in a chapter 7).  About 90% of the the time the creditor will contact me, ask for permission to contact you, and then they’ll call to make pick-up arrangements.  Some creditors even ask us to simply drop off the vehicle with the keys at the nearest bank/credit union.  The other 10% of the time, they come in the middle of the night.  It is disconcerting, but we can still wipe out the debt, so there are no repossession fees.

Does it matter if I let my creditor get a default judgment before I file bankruptcy?

You’ll hate this answer:  it depends.

If you let a creditor get a default judgment against you, it is not the end of the world.  Bankruptcy will generally wipe out your liability on that default judgment.  You can usually file your bankruptcy quickly enough to stop any kind of collection even if the creditor gets a judgment.  

However, here are some bad things that can happen if you wait to file bankruptcy until after the default judgment (some of these happen immediately, some take time):

  1.  garnishment (takes about 2 weeks after the judgment) … If the creditor knows where you’re working, he will file garnishment paperwork and start hitting your paychecks for about 25% a paycheck.
  2. negative credit (immediate) … Even when the bankruptcy discharges your liability for the judgment, that judgment still sits on your credit report as a public record for the next 7 years.
  3. attachment (immediate to a few days depending on where you live)…If you own a home, the creditor can run down to the county recorder and record that judgment against your home.  Now when you file bankruptcy, you’ll have to pay extra legal fees to strip or avoid that judgment lien (if you can).
  4. writ of execution (takes around 2 weeks) … The creditor may come to your home with a sheriff and a writ of execution, which allows him to take your property (like laptops, kid’s gaming systems, and your television) and sell it at auction to pay off the debt.
  5. bank levy (can happen in less than a week)… The creditor levies (takes) the balance in your bank account on the day the levy hits.

And yes, bankruptcy can stop these.  However, it sure is nice to file bk before the storm hits.

Is there any way to get the cross-collaterized credit card loan off of my truck loan with my credit union? (updated from 2014)

Back in 2014, I posted the following article here (quoted below), and everything seems even murkier now:

Yes.  The fourth option below (chapter 13) is probably the best bet.

First:     You can pay if off (I know, this isn’t the one you were looking for).

Second:  You can refinance the truck through another lender.  Just remember that if you are behind on payments for that credit card, your current credit union may refuse to release the title unless the loan balance the the truck and the credit card are rolled into the new loan.

Third:  You can file a chapter 7 bankruptcy and surrender both the truck and the credit card.   Just remember that if you try to re-affirm the truck loan with your credit union, they will attach that credit card balance to the loan as well.

Fourth:  You can file a chapter 13 bankruptcy.  In the chapter 13 bankruptcy, you can strip off that cross-collateralized credit card loan from the truck, you can change the interest rate on the truck loan to about 5%, and you can stretch out those car payments over the next 3 – 5 years, even missing the next payment due while we get the case ready to be filed.

I’d like to update this.  

You do have another option called redemption (after filing your bankruptcy).  With redemption, you can secure an outside financing company to finance the car loan for after you file bankruptcy.  However, I have never tried it with a cross-collateralized loan.  In theory, it should work, and you can keep the vehicle.

The reason I am posting this today is because I have a client who wants to keep his truck loan, has equity in his truck, and even has a family member who will purchase the vehicle from the credit union and then sell it back to him over time (as his new, title-holding secured creditor).  However, the credit union is refusing to sell the vehicle without us paying off the cross-collateralized loan in its entirety as well.  We have offered to pay off the secured loan in full, and  they refused.  They would rather receive nothing, go through the repossession process, and take their lumps by selling it at auction (our chapter 7 bankruptcy will wipe out any remaining deficiency balance).  It doesn’t make sense.

That being said, I am giving my client the same advice that I give to almost every client with a financed vehicle:  give it up.  I don’t like car payments and I don’t like the added expense of higher comprehensive insurance which is required for that financed car.

My bankruptcy case was dismissed. How long until my creditors find out?

Generally, you do NOT want your bk dismissed, but it happens.  Sometimes clients forget to pay their filing fees to the court, or they miss a hearing, or a myriad of other problems can occur. Some people even do it intentionally.   And sometimes, unfortunately, the bk court will dismiss your case.  

When this happens, your creditors usually take about 4 days to react to this, but it varies, wildly.  Creditors will generally find out as follows:

12:07 a.m. that night —- Some of your creditors who have ECF (electronic) access to the court will receive notice at 12:07 a.m.  I know this because my phone buzzes each morning at 12:07 a.m. to give me my court notices from that previous day.

4 days later — The bk court will dismiss your case.  Then, about 2 days later, they will mail out the Order Dismissing Case to all of your creditors.  Those creditors will probably receive the notice and open it 2 days later.  So, in most cases, they receive and open the written notice from the court in about 4 days.

2 weeks later — I have found that with large creditors, it seems to take up to two weeks for their collections or bankruptcy department to process the letter from the court advising that your case is dismissed.

What this means is that if your bankruptcy is dismissed, there is a good chance that your creditors will find out right away and re-start collections.  If you were behind on your car, they could come pick it up that night.  If there was a garnishment, they could re-start it with your next paycheck.  Unfortunately, it’s a crap-shoot.  They may not do anything for weeks, or they may react that night.

It is possible that you can re-open your case or file a new one, but that’s complicated enough that I won’t cover it here.  Good luck.

What is a release of garnishment, and how does it affect me?

It releases your garnishment!  

When a creditor sues you, they eventually get a judgment in court.  With this judgment, they can send a letter to your employer so that they can garnish your wages.

Here is a good blog entry on garnishment and timing:  https://robertspaynelaw.com/myutahbankruptcyblog/2017/03/29/a-debt-collector-just-told-me-that-they-are-starting-garnishment-proceedings-when-are-they-going-to-start-garnishing-me/

But let’s say that you are currently being garnished, and they are hitting you for 25% of your paycheck.  A release of garnishment would stop any future garnishments.  However, I would not hold your breath on actually receiving a release of garnishment.

If you look at the picture, you will notice that I didn’t bother removing my breakfast orange.  It’s because the document really doesn’t say much.  It says that the creditor releases the garnishment (for now).  This means that payroll “does not need to withhold or remit funds at this time….”  The Release of Garnishment even cites Utah Rule of Civil Procedure 64(f)(2), but they really mean 64D.

The problem is that you’ll only see a release of garnishment if you file bankruptcy or pay off the judgment.  It’s a great court document to receive, but it’s pretty rare.

My car has too much equity and the chapter 7 trustee is selling it at auction. How long until I get my money from my car exemption?

Forever.  (Probably 3-4 months)

So my client had a truck that we knew had too much equity when we filed the case.  (Under Utah law, I can protect $3,000 of equity in one vehicle if your name is on title).  We decided to file the case, and we’d see how much excess equity the auctioneer would find.  If there was a tiny bit of equity, we could make payments to the trustee to keep it.  If there was too much equity, then we would give up the truck and pocket the $3,000 from the exemption.  

However, it took forever.  We turned over the vehicle in the first part of June, it won’t be sold until the August 25th auction, and my client should receive his $3,000 in September.  That means he goes almost 4 months without a vehicle waiting for that $3,000 to buy another one.

Here is the chain of email (with some helpful redactions) to show you the progression:

****

April 18, Trustee …

Robert, My search of NADA and KBB suggests the 2007 4×4 F150 has a $6,000 value. This suggests a $2,400 non-exempt equity after deducting 10% for costs and expenses of auction sale and $3,000 exemption. Can you show me valuation for $3,750? Perhaps Mr. X should take the truck to Erkelens and Olson for value? (801-355-6655)

April 18, BK Attorney (me) …

His truck is in fairly poor condition and the four-wheel drive is one of the systems that is not working. I’ll have him contact Erklens.

May 17, Trustee…

Robert,

Thanks to Mr. X for taking the truck into E&O for value.

E&O values the truck at $7,500. After 10% for costs and expenses of sale, and the $3000 exemption, there is $3,750 of non-exempt equity. Does Mr. X want to buy this equity from the estate or deliver the truck to E&O for auction sale?

May 29, Bk Attorney…

Mr. X is prepared to turn over his truck to E&O for auction. He has asked me to see about the possibility of delaying turning it over until the last minute so that he can keep using it for work. Please let me know when he needs to turn it over and I will relay the message.

May 29, Trustee…
to me
Since he has decided not to keep it, he needs to turn it and the title over as soon as possible. In fact, he should be paying the estate for his use of the truck since petition. Depending on how this shakes out, I may argue that he is consuming his $3,000 exemption.

June 8, Trustee …

Can you confirm that Mr. X has delivered the truck to E&O?  If not, can you have him deliver the truck and then let us know when it is delivered.  We have a 727 deadline on June 18, so it would be nice to get that issue resolved before then.

June 8, Bk Attorney…

He advised me that he delivered it earlier this week.

July 17, BK Attorney…

Did his truck ever sale?  Debtor is asking when he’ll see his $3,000.

July 17, Trustee…

There was not enough time to get the truck in E&O’s June bankruptcy auction after it was delivered.  E&O’s next bankruptcy auction in October.  The trustee is trying to get it into an earlier auction.  I will keep you posted. 

July 17, Trustee …

E&O is going to auction the truck on August 25.  You should see the motion for approval to sell in the next day or two. Hopefully this help.

July 17, BK Attorney…

If it auctions on the 25th, how soon until he’ll see his $3,000 exempt proceeds?

July 17, Trustee…

Usually about two weeks or so.

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
(C)
(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—
(A)
(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:  https://robertspaynelaw.com/myutahbankruptcyblog/2014/12/22/if-i-use-my-credit-card-right-before-i-file-bankruptcy-can-they-object-and-throw-it-out/