JON H. ROGERS, ATTORNEY AT LAW

 

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Consumer Bankruptcy Introduction


This Office is a Debt Relief Agency. We Help People File for Relief Under Title 11 of the Federal Bankruptcy Code. Answers to Common Bankruptcy Questions.

A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. This brochure can not explain every aspect of the bankruptcy process. If you still have questions after reading it, you should speak with an attorney familiar with bankruptcy or a paralegal working for an attorney.

On the left are common questions and answers about bankruptcy.

On the right is a list of documents needed for filing bankruptcy; below it is a list of what property you can keep if you file bankruptcy.



COMMON QUESTION AND ANSWERS

What Is Bankruptcy?

Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

What Can Bankruptcy Do for Me?

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.

• Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)

• Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

• Restore or prevent termination of utility service.

• Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What Different Types of Bankruptcy Cases Should I Consider?

What Bankruptcy Can Not Do

Bankruptcy can not, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually NOT possible to:

• Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally can not keep the collateral unless you continue to pay the debt.

• Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.

• Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

• Discharge debts that arise after bankruptcy has been filed.

There are four types of bankruptcy cases provided under the law:

• CHAPTER 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors.

• CHAPTER 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very large.

• CHAPTER 12 is reserved for family farmers and fishermen.

• CHAPTER 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

If your income is above the median income for a family the size of your household in your state, you may have to file a chapter 13 case (the national median family income for a family of 4 in 2004 was approximately $63,012 – for Utah in 2014 it is approximately $
71,204). A higher-income consumer must fill out “means test” forms requiring detailed information about income and expenses. If, under standards in the law, the consumer is found to have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that the consumer can not file a chapter 7 case, unless there are special extenuating circumstances.

Chapter 7 (Straight Bankruptcy)

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Chapter 13 (Reorganization)


In a chapter 13 case you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property--especially your home and car--which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.

You should consider filing a chapter 13 plan if you

(1) own your home and are in danger of losing it because of money problems;
(2) are behind on debt payments, but can catch up if given some time;
(3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time.

You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.

What Does It Cost to File for Bankruptcy?

It now costs $335 to file for bankruptcy under chapter 7 and $310 to file for bankruptcy under chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you can not pay all at once. If you are unable to pay the filing fee in installments, you may request that the court waive the filing fee. If you hire an attorney you will also have to pay the attorney’s fees you agree to.

What Must I Do Before Filing Bankruptcy?

You must receive budget and credit counseling from an approved credit counseling agency within 180 days before your bankruptcy case is filed. The agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in-person, by telephone, or over the Internet. If you decide to file bankruptcy, you will need to file with the bankruptcy forms in your case a certificate from the agency stating that you received the counseling.

If you decide to go ahead with bankruptcy, you should be very careful in choosing an agency for the required counseling. It is extremely difficult to sort out the good counseling agencies from the bad ones. Many agencies are legitimate, but many are simply rip-offs. And being an “approved” agency for bankruptcy counseling is no guarantee that the agency is good. It is also important to understand that even good agencies won’t be able to help you much if you’re already too deep in financial trouble.

Some of the approved agencies offer debt management plans (also called DMPs). This is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors. Debt management plans can be helpful for some consumers. For others, they are a terrible idea. The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not. It is important to keep in mind these important points:

• Bankruptcy is not necessarily to be avoided at all costs. In many cases, bankruptcy may actually be the best choice for you.

• If you sign up for a debt management plan that you can’t afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).

• There are approved agencies for bankruptcy counseling that do not offer debt management plans.

It is usually a good idea for you to meet with an attorney before you receive the required credit counseling. Unlike a credit counselor, who can not give legal advice, an attorney can provide counseling on whether bankruptcy is the best option. If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions. The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust.

Can I Own Anything After Bankruptcy?

Yes! Many people believe they can not own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions. Bankruptcy will not normally wipe out:

(1) money owed for child support or alimony, fines, and some taxes;
(2) debts not listed on your bankruptcy petition;
(3) loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
(4) debts resulting from “willful and malicious” harm;
(5) most student loans, except if the court decides that payment would be an undue hardship;
(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

Will I Have to Go to Court?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

What Else Must I Do to Complete My Case?

After your case is filed, you must complete an approved course in personal finances. This course will take approximately two hours to complete. Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust. In a chapter 7 case, you should sign up for the course soon after your case is filed. If you file a chapter 13 case, you should ask your attorney when you should take the course.

Will Bankruptcy Affect My Credit?

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you’ve filed a bankruptcy can appear on your credit record for ten years. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

What Else Should I Know?

Utility services--Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Discrimination--An employer or government agency can not discriminate against you because you have filed for bankruptcy.

Driver’s license--If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers--If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt. If you file a chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

How Do I Find a Bankruptcy Attorney?

As with any area of the law, it is important to carefully select an attorney who will respond to your personal situation. The attorney should not be too busy to meet you individually and to answer questions as necessary.

The best way to find a trustworthy bankruptcy attorney is to seek recommendations from family, friends or other members of the community, especially any attorney you know and respect. You should carefully read retainers and other documents the attorney asks you to sign. You should not hire an attorney unless he or she agrees to represent you throughout the case.

In bankruptcy, as in all areas of life, remember that the person advertising the cheapest rate is not necessarily the best. Many of the best bankruptcy lawyers do not advertise at all.

Document preparation services also known as “typing services” or “paralegal services” involve non-lawyers who offer to prepare bankruptcy forms for a fee. Problems with these services often arise because non-lawyers can not offer advice on difficult bankruptcy cases and they offer no services once a bankruptcy case has begun. There are also many shady operators in this field, who give bad advice and defraud consumers.

When first meeting a bankruptcy attorney, you should be prepared to answer the following questions:

• What types of debt are causing you the most trouble?

• What are your significant assets?

• How did your debts arise and are they secured?

• Is any action about to occur to foreclose or repossess property or to shut off utility service?

• What are your goals in filing the case?

DOCUMENTS NEEDED TO FILE BANKRUPTCY

This Office is a Debt Relief Agency. We Help People File for Relief Under Title 11 of the Federal Bankruptcy Code.

If you want to save money on your bankruptcy filing, you must complete an Intake Questionnaire approved by this office. It is critical that you answer completely each question in order to save the most money possible. Each question which has an incomplete or inaccurate answer may add to the cost of your bankruptcy since it will require additional attorney time to complete (rather than to just review with you for accuracy). Approved intake forms may be obtained from this office or can be e-mailed to you. To save the most money in connection with your intake information (so it does not need to be transcribed from an approved Intake Questionnaire to the bankruptcy software used to prepare the bankruptcy filings), you are encouraged to complete the Online Questionnaire HERE. Once you get to the website, you will sign in using the account name "jhrogers" along with your social security number. The responses to this Questionnaire can be directly imported into the office bankruptcy software used to help you file for bankruptcy.

When represented by this office, we will request you to sign an authorization for permission to pull your credit report in most cases (so we can ensure that all of your creditors are properly listed).

You will also need to make arrangements with this office to pay the appropriate court filing fee ($335 to file for Chapter 7 and $310 to file for Chapter 13) together with the agreed-upon attorney fee for representation. § 521(a)(1)(B) -

Copies of all payment advices or other evidence of payment received by you from any employer within sixty (60) days before the filing of the petition.

A statement disclosing any reasonably anticipated increase in income or expenditures over the 12 -month period following the date of the filing of the petition.

§§ 521(e)(2)(A)/521(f)(1)-(3) -

Copies of your federal income tax returns or transcripts of the returns (your option) and any amendments thereto for the three year period preceding the bankruptcy as well as any returns filed during the pending period of the bankruptcy.
[Because this office needs to be able to certify the bankruptcy filing is in good faith, this office can obtain this information after being retained and obtaining your written permission and the charge for doing so is included in the total price of your Chapter 7 bankruptcy or set as a fixed price as part of the representation in a Chapter 13 bankruptcy].

§ 342(c) -

All creditor billings for the ninety (90) day period (180 days preferred) preceding the filing of the anticipated bankruptcy. These documents are critical for being able to provide notice to your creditors at the proper address with the correct account number.

§§ 109(h)/111 -

You must receive “individual or group briefing” from an approved non-profit budget and credit counseling agency which may take place by internet or telephone.

You must provide to this office for filing the certificate from the approved credit counseling agency describing the services provided, as well as any debt repayment plan developed with the approved agency.

You may find a list of approved non-profit budget and credit counseling agencies for Utah on the internet at US Trustee Website or obtain such a list from the clerk of court.
§§ 727(a)(11)/1328(g) -

While not required to file bankruptcy, before you can obtain a discharge in a Chapter 7 or Chapter 13 bankruptcy, you will be required to complete “an instructional course concerning personal financial management.” You may find a list of approved providers for Utah on the internet at US Trustee Website or obtain such a list from the clerk of court.



Property You Are Allowed To Keep

In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors. Utah, unlike many other states will not let you elect the federal exemptions, which in many cases are better. Thus, where the exemptions applicable to you arise under Utah law, you will be limited to the Utah exemptions.

Some of the Utah State exemptions include:

A Homestead Exemption in real property, a mobile home, or water rights up to $30,000 (couples may combine the exemption to double the amount) where the exemption has been filed with the county recorder’s office prior to the sale or transfer of the property.

1 motor vehicle up to $3,000.
1 Refrigerator, 1 freezer, 1 microwave, 1 stove, and 1 sewing machine.
1 Washing Machine and 1 Dryer.
Bed, bedding, and carpets.
Clothing (but not jewelry or furs).
Sofas, chairs, and related household furnishings up to $1,000. 
Dining and kitchen tables and chairs up to $1,000.
$250 individual/$500 household firearms/ammunition.
Animals, books and musical instruments up to $1,000.
Heirlooms/Sentimental items up to $1,000.
Artwork done by or depicting a family member.
3 months worth of food.
Necessary health aids.
Burial plot.
Proceeds for damaged, exempt property.

Trade implements, tools, and books up to $5,000.
Property of Business Partnership.
National Guard Member military property.

Personal injury proceeds for self or other to whom you are dependent.
Wrongful death proceeds for person to whom you are dependent.

Insurance-disability, illness, medical, & hospital ins. benefits.
Insurance-life insurance policy cash surrender value to $1,500.
Insurance-life insurance proceeds if needed for support and beneficiary is insured’s spouse or dependent.
Insurance-Fraternal society benefits.

Alimony needed for support.
Child support.
Wages - Seventy-Five Percent (75%) of earned, unpaid wages but bankruptcy judge may award more for low-income debtors.

Pensions - ERISA qualified benefits.
Pensions - public employees.
Pensions - others necessary for support.

Public Benefits - unemployment compensation
Public Benefits - workers compensation.
Public Benefits - general assistance.
Public Benefits - veteran’s benefits.
Public Benefits - AFDC.
Public Benefits - occupational disease disability benefits.

The Utah state exemptions are also supplemented by specific, federal exemptions. Some of these are as follows:

Wages - Seventy-Five Percent (75%) of earned, unpaid wages but bankruptcy judge may award more for low-income debtors.
Seamen’s wages per written contract while at sea.
Military savings acct deposits while on permanent duty outside continental USA.

Railroad Workers Employees unemployment insurance.
Military group life insurance.
Seamen’s clothing.
Klamath Indian tribe benefits for tribal members residing in Oregon.

Social Security benefits.
Veteran’s benefits.
Civil Service Employees retirement benefits.
Military Service Employees retirement benefits.
Foreign Service Employees retirement benefits
Central Intelligence Agency Employees retirement benefits.
Railroad Workers Employees retirement benefits.
Military Honor Roll Pensions.
Veterans’ Medal of Honor Benefits.

Federal government employees death and disability benefits.
War risk hazard death or injury benefits.
Longshoreman/Harbor Workers death and disability benefits.

Survivor’s benefits-military service.
Survivor’s benefits-lighthouse workers.
Survivor’s benefits-judges, court directors, judicial center directors, supreme court chief justice administrators.

The amounts of the exemptions are doubled when a married couple files together.

In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.


What Will Happen to My Home and Car If I File Bankruptcy?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

 

Jon H. Rogers, Attorney at Law

Northgate Business Center
825 North 300 West Suite N144
Salt Lake City, Utah 84103

Telephone: (801) 532-6272
Facsimile: (801) 532-4192

Email: law@rogersconsumerlaw.com
Website: www.rogersconsumerlaw.com