Category Archives: Utah Bankruptcy

Utah Bankruptcy questions.

Is the bankruptcy trustee going to go through my Venmo, CashApp, and Paypal accounts after I file?

Oh yes he is! And even worse, the bankruptcy trustee can take any money you have in hand or on deposit on the day we file.

On the day we file bankruptcy, you don’t want to have much in the way of liquid assets (like cash or money on deposit on a bank account). In theory, the trustee can take the money you had on the day you filed and use it to pay creditors. This means Venmo as well!

For instance, let’s say you file a chapter 7 bankruptcy today and have $1,500 in your bank account on the date of filing. Tomorrow, you spend that $1,500 on your monthly rent. One month later, when you meet with the bk trustee, he will ask you to turn over that $1,500 so that he can use it to split between your creditors. When you try to explain that you spent the money on rent after filing, he won’t care. You had it on the day of filing, and he wants it now.

On the day you file bankruptcy, your bankruptcy estate is created. Everything you own on that day is part of your estate. Basically, the bankruptcy paperwork takes a snapshot of your assets for that day. (If you receive your paycheck the next day, that’s okay. You didn’t have those funds on the day you filed). The trustee goes through your estate, takes things that can’t be protected (like the $1,500) and uses them to pay creditors.

On the day you filed, you had the money, and he wants it. It wasn’t your money to spend. It was (and is) his. If you cannot turn over those funds, the trustee can make your case fairly awful. In extreme circumstances, he can even throw out your case and deny you a discharge of your debts.

One month after we file, the bk trustee will ask for a copy of your bank statements going back anywhere from 1-3 months before you filed. This shows all of your transactions and payments. This shows clearly when you paid your mom back or when you transferred money to your Venmo account to hide it from the trustee.

Unfortunately, the trustee has been doing this much longer than you, and he has seen almost every trick people use to hide money. He will ask for transaction reports or statements from not only your bank accounts, but your quasi-financial accounts like Venmo, Cashapp, Paypal, and any others that you can think of. If you had money in those accounts (or strange transactions), it can cause a world of hurt for you and your case.

The safest way to handle it is to disclose everything honestly. If you have a little extra money right before filing bankruptcy (which is rare), go build up your food storage. It’s hard to punish someone for stocking up their food storage to weather a storm.

What happens if I do not reaffirm my home mortgage or my car loan? And why do they say I can make “voluntary payments” if I want to?

Short answer: you can generally keep the car or home, so long as you keep paying on the loan

Long answer: It’s complicated.

When you file bankruptcy, it generally discharges, or wipes out, almost all of your debt. However, you can pick and choose which secured debts you’d like to keep. For example, if you want to keep your home mortgage or your car loan, you check a box that says, “reaffirm.” This lets the bank know that you want to sign an agreement AFTER filing the bankruptcy, where you promise to keep making the same payments, balance, schedule, etc.

I’ve written a few blog topics on reaffirmation generally, and those links are listed below.

If you reaffirm the debt, it keeps reporting on your credit, and you have to keep paying on it. If you fall behind an face a repossession or a foreclosure after signing the reaffirmation agreement, that debt survives the bk, and they can sue you for the difference.

(Yes, you can change your mind and cancel or rescind a reaffirmation agreement, in some situations).

But what happens if you don’t reaffirm the debt? Normally, you surrender the collateral (like the home or car). In some situations, you can do a “ride through,” where you ride the car through bankruptcy and keep making payments. They won’t report it on your credit, but you can keep it so long as you stay current.

Some banks won’t let you do a ride-through, and they will still repossess if you fail to reaffirm.

As for the home, so long as you keep paying on it, it’s yours.

As for “voluntary payments,” well, they have to say that. When the debt is discharged in bankruptcy, they cannot legally collect on it. But if you call customer service and voluntarily make a payment on the loan, they are glad to accept your money. That’s why they keep saying, “voluntary.” No one is twisting your arm and trying to collect that payment.

Here are a few blog articles on reaffirmation, cars, homes, and not reaffirming:

Can the bankruptcy trustee take my spouse’s property if I’m the only one who filed bankruptcy?

Maybe.

It comes down to a lot of factors, but if you want to boil it down to a simple test, here it is: if it smells funny, then you’ve got a problem.

If the property is clearly your spouse’s, was always theirs, you never helped pay for it, and they’ve owned it for some time, then you do NOT have an ownership interest. However, if you bought it together, or if you’ve made all of the payments on it, or if you gifted it to her, then you’ve got an ownership problem.

When you file bankruptcy, your bankruptcy estate is created. This estate means all of your property, real, personal, and intangible. So if you own a home, a car, and have a right to receive a $5,000 tax refund, then all of these items go into your estate.

We try to exempt, or protect your property so that the bk trustee cannot take your estate property and sell it off to pay creditors. For example, in Utah, only $3,000 of your car’s value is protected. So if you own a car worth $10,000 free and clear, then only $3,000 is safe, and the bk trustee will take it and sell it off. He’ll give you $3,000 and use the rest to pay creditors (less his very healthy finder’s fee).

However, he can’t touch your spouse’s property. That being said, there are various degrees of ownership. If she’s owned her home for the past 10 years, and you only recently met and were married last year, then that home is hers, and the trustee won’t touch it. On the other hand, if you two bought the home 30 years ago, and you were the sole provider, then your money paid off that mortgage. You may not be on title, but you have an “equitable interest,” and there will be problems with the trustee.

Even worse, let’s say that you have a Ming vase that you inherited from your Aunt Mildred. It’s worth $80,000. Two weeks before filing bankruptcy, you “give” it to your wife. That doesn’t count! It’s a fraudulent transfer. The bk trustee will avoid the transfer, sell the vase, and pay your creditors. The shade of Aunt Mildred will be very displeased with you.

It’s all complicated and is usually figured out on a case by case basis. That’s why you want to meet with a bk attorney. Tell him everything. That way he can give you honest advice on how to protect your property (if you can).

I just wrecked my car (and someone else’s). Will bankruptcy take care of that?

Yes, unless you were doing something really, really bad.

When you file bankruptcy, most debts can be discharged (wiped out). Some debts have a priority status, like most taxes, student loans, child support/alimony, and criminal restitution. Those debts are NOT discharged by the bankruptcy.

So let’s say that you’re in a car accident and your financed car is wrecked. Hopefully, your insurance will cover it and pay the lender. But, sometimes insurance lapses, or doesn’t cover the whole loan balance. In that kind of situation, you can file bankruptcy and list the car loan balance in the bankruptcy. If there is a deficient balance that is not covered by your insurance, or your deductible, or lack of insurance, that balance will be wiped out by the bk.

As for the other car, if it’s your fault, hopefully your insurance will cover it. Unfortunately, there are times when you are not carrying insurance. (Shame on you)! In that kind of situation, the other driver might even sue you for the damages you caused. This debt can be listed in your bankruptcy.

But here’s the caveat: sometimes the damage to the other driver may NOT be discharged by the bk. This only happens if you were doing something really, really bad. If you did it willfully, or maliciously, or while intoxicated, you be NOT protected by the bankruptcy.

Under 11 U.S.C 523, these kinds of debts are not dischargeble:

(6)for willful and malicious injury by the debtor to another entity or to the property of another entity;

(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;

See 11. U.S.C. 523

What happens to my 2021 tax refund if I file bankruptcy in 2022?

You lose it, unless you spend it first. But you won’t lose those pandemic relief tax monies (see below).

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.

When you file bankruptcy, it is the bk trustee’s job to discover assets that you have. Specifically, he wants to find assets that can be sold off and used to pay your creditors. Normally, the trustee will look at equity in your home, money in your bank account, the value of you car, and any tax refund monies that you have NOT received yet.

This means that you have to receive and spend your tax refund before you file bankruptcy, or there is a good chance that the bk trustee will intercept it and use it to pay your creditors.

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.

Don’t:

  1. pay off Mom and Dad before you file bk
  2. buy a new toy, like a dirtbike
  3. hide the money and claim that you spent it
  4. buy jewelry
  5. prepay rent

Do:

  1. buy food storage and clothing
  2. buy boring household appliances like washer/dryer/refrigerator/freezer/stove/sewing machine
  3. buy guns (really) (I can protect up to 3 of any value)
  4. pay for vehicle repairs and tires
  5. pay your attorney for your bankruptcy

Pandemic stimulus tax payments and tax credits.

If you haven’t received these yet, don’t worry. These are exempt from creditors, including the bankruptcy trustee.

Here are the old blog articles:

How can I protect my 2019 tax refund if I file bankruptcy in 2020?

Spend it before you go bankrupt!

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):

What happens to my 2018 tax refund if I file bankruptcy in 2019?

What happens to my 2017 tax refund if I file bankruptcy in 2018?

What happens to my 2016 tax refund when I file bankruptcy?

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.

Here is a relevant portion of the

Utah Exemptions Act, Utah Code Title 78B Chapter 5, Section 505https://le.utah.gov/xcode/Title78B/Chapter5/78B-5-S505.html

An individual is entitlted to an exemption in …

(viii) (A) one:

(I) clothes washer and dryer;

(II) refrigerator;

(III) freezer;

(IV) stove;

(V) microwave oven; and

(VI) sewing machine;

(B) all carpets in use;

(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.

Can I discharge unemployment overpayments in bankruptcy (state unemployment and pandemic PUA)?

Maybe.

Short answer: You can discharge unemployment overpayments in both a chapter 7 and a chapter 13, but only if they don’t fight you over it for fraud. If they fight you, you’ll lose.

Long answer: Most debts are dischargeable in bankruptcy (they can be wiped out). There is a pretty limited list of debts that are non-dischargeable. Under 11 U.S.C. 523, the following debts are non-dischargeable (see list at bottom of page, with bold added).

Unemployment overpayments are not specifically listed in the group of debts that cannot be discharged. In other words, they normally can and are discharged. However, if the state has alleged fraud with those overpayments, it opens a whole new can of worms.

If the state has alleged that you committed fraud in receiving those benefits, you can still list them in your bk. After you file, the state has 3 months to file a bankruptcy lawsuit to show that those overpayments were received by fraud. If they file that lawsuit, called an “adversary proceeding,” you are probably going to lose. You will still owe those overpayments. If the state gets a bankruptcy court judgment that those debts are based on fraud, they win, and you’ll still need to pay them back, eventually.

Now I know that you are thinking that you didn’t mean to commit fraud, and you’ll fight them in bankruptcy court to prove that you are right. “Fraud” is such a harsh term, and it was more of a simple accounting misunderstanding. However, it’s expensive to fight them (this is not part of your normal bankruptcy), and they are almost always right. If you really think you can beat their fraud lawsuit, be prepared to pay at least another $5,000 to yet another attorney to fight their adversary proceeding.

And yes, this applies to state unemployment benefits, and those federal Pandemic Unemployment Assistance (PUA) payments as well.

Here is that list of debts that cannot be discharged:

(note that there are many exceptions to the tax ones).
(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 [2] 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 2 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.
For purposes of this subsection, the term “return” means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.