What do I need to bring to the §341 Meeting of Creditors?

Short answer: four things

1. Driver’s LicenseSocial-Security-Card
2. Social Security Card
3. Bank statement covering the date of filing
4. Last pay stub you received

Driver’s License and Social Security Card

While it is important to bring all of these to documents to the Meeting of Creditors, it is more important to bring your Driver’s License and Social Security Card than it is to bring your bank statement or your pay stub. The reason is this: the trustee must be able to confirm your identity to make sure that you are who you say you are.

People usually bring their Driver’s License because they keep it in their wallet but there are a fair amount of people who forget to bring their Social Security Card with them. I’ve seen the trustees handle this in different ways. Some trustees refuse to hold the Meeting and file a Motion to Dismiss the case for failure to comply with the bankruptcy code.

Some trustees ask how far away you live and if it’s less than an hour away the trustee may require you to go home to get your Social Security Card and bring it back to him that very same day. Generally when the trustees require this they will go ahead and hold the meeting anyway.

I have in some cases been able to send in a W-2 (which has your Social Security Number on it) to the trustee through email a few days later and that has satisfied them but I wouldn’t count on it. If you cannot produce your Social Security Card the same day as your Meeting of Creditors I would expect to see a Motion to Dismiss your case filed by the trustee.

Bank Statement Covering the Date of Filing

When you file a bankruptcy the idea is that you are actually bankrupt so any money left in your bank account on the date of filing is not exempt and is property of the bankruptcy estate. If the amount is $100 or less the trustee will not do anything.

At the Meeting of Creditors, the trustee will look at the balance of your bank account at the end of day of the day that you filed for bankruptcy. Some trustees will actually have you circle this balance on your statement so it makes it easier for the trustee to see the amount.

So which statement do you need to bring? Let’s use an example. Let’s say you filed for bankruptcy on September 20 and your Meeting of Creditors takes place on October 20. You will need to bring a statement that shows the balance at the end of the day for September 20. Typically banks have monthly statements so you would need to bring your September statement.

Last Pay Stub You Received

There are two sections of the bankruptcy petition that require you to state your income–Schedule I and Form 22. The bankruptcy trustee must verify that your income, as stated on the bankruptcy petition, is consistent to what you are being paid.

“But I already gave my attorney my pay stubs!” you might say. You do have to give your attorney your pay stubs for a couple of months prior to the date of filing and he will send those onto the trustee. The trustee will also require that you bring the last pay stub you received before the 341 Meeting of Creditors.

So which pay stub do I need to bring? Again, let’s use an example. Let’s say you get paid on the 1st of every month and on the 15th of every month. And let’s also say that you filed your bankruptcy on September 20 and your Meeting of Creditors takes place on October 20. You would need to bring just one pay stub, the pay stub you received on October 15.

Make your life, and your attorney’s life, easier and come prepared with these documents to your §341 Meeting of Creditors.

Dance Moms Star Abby Lee Miller is Indicted for Bankruptcy Fraud

When I was dating my wife I thought that we had similar tastes in TV shows and movies. It was only after we were married that I realized that we have very, very different tastes in media. But that’s ok, we both humor each other and will watch and try to enjoy what the other wants to watch.

14 Abby Lee Miller

One of the TV shows that I don’t care for, but my wife absolutely loves, is “Dance Moms”. For the life of me, I cannot understand what is appealing about this show. The plot more or less exactly the same every episode. The parents’ behavior is akin to the behavior you see on The Jerry Springer Show (I almost linked to a youtube video showing highlights of The Jerry Springer Show but I thought it might be inappropriate for a legal blog; oh well). And the host’s voice, Abby Lee Miller, is grating to my ears. But, alas, my wife enjoys this show.

I was surprised to see, then, in the news that Abby Lee Miller was charged with bankruptcy fraud. Apparently she did not disclose all of her income when she filed her bankruptcy petition. The best part is how Judge Thomas Agresti found out about the income.

“‘He was clicking through the channels one night and saw Ms. Miller’s ‘Abby’s Ultimate Dance Competition,’ ads for ‘The Maniac is Back’ and her appearance on ‘American Idol.’ ‘I realized that there’s an awful lot of money coming into this plan, this case,’ the judge said during a 2013 hearing, ‘and it hasn’t been disclosed.'”

I occasionally have clients that do not want to disclose certain income, transfers, or assets on their bankruptcy petition. This is a very bad idea. Rule 9011 of the Federal Rules of Bankruptcy Procedure states that an attorney must make a reasonable inquiry into the client’s situation and circumstances. Any good bankruptcy attorney will not sign a petition that does not fully disclose all the information requested on the petition. Be sure to be honest and truthful with your bankruptcy attorney.

How do bankruptcy attorneys get paid?

Short answer for chapter 7: bankruptcy attorneys get paid in full by the debtor before the case is filed.

Short answer for chapter 13: bankruptcy attorneys get paid through the chapter 13 plan.

Better Call Saul

This is a common question I get and it is understandable why people would be confused by this. This question comes to me somewhat like this: “How can someone who needs to file for bankruptcy afford to pay an attorney? Attorneys are expensive!”

In a chapter 7 bankruptcy there are two fees you must pay: the attorney’s fees and the Court filing fee. Many firms, including my own, require that the attorney’s fees be paid in full before we file the bankruptcy petition.

People contemplating filing for bankruptcy are usually paying bills to unsecured creditors or the wages are being garnished. When you file a bankruptcy all those payments stop. I advise people to stop paying their credit card bills or medical bills and instead pay me.

In a chapter 13 there are also two fees that you must pay: the attorney’s fees and the Court filing fee. Each case is a little bit different but generally chapter 13 attorneys require between $400 and $800 upfront. This will cover the Court filing fee and will compensate the attorney for some of his time. The rest of the attorney’s fees are paid through the chapter 13 plan.

What happens if I do not give my bankruptcy trustee a copy of my next year’s tax return?

Short answer: revocation of discharge (this is bad).

7134294207_4beca17693_b

Nearly every bankruptcy trustee asks you to send to him/her a copy of your tax return. If you do not send the trustee a copy of your tax return then the trustee can, and usually will, motion the Court to revoke the discharge of your debts. You do not want this to happen.

Trustees have to put on a tough face because debtors are always forgetting to hand over their tax refunds. As I mentioned two weeks ago, collecting tax refunds is low hanging fruit for trustees.

Just last week one of the trustees here in Utah implemented a new policy. At the 341 Meeting of Creditors the trustee will schedule a 2004 Examination with you for next year sometime in January to April. This is an extended Meeting of Creditors but the trustee is given great powers to demand that you hand over documents and information. The trustee said that if you get a copy of your tax return before the date you decided on then you will not have to attend the 2004 Examination.

If you filed for chapter 7 bankruptcy then please, PLEASE talk to your bankruptcy attorney before you spend your tax refund.

Where does my discharged debt go when I file for bankruptcy? Do my creditors get paid for my debts?

Answer: your debt is gone; no one pays your creditors.

5106441340_558d48fb05_b

It’s a good question and one that I had when I was first introduced to bankruptcy law. This is a question that many of my clients ask me. Often they ask “who pays my creditors after bankruptcy?” It makes sense that people would think that someone, whether it’s the government or the trustee, will pay the creditors the debt that is owed to them.

Unfortunately for creditors (but fortunately for debtors) if the case is a “no-asset” chapter 7 (where the trustee does not take and sell any of your property), that debt is money they will never see again. Legally your debts are discharged at the end of a bankruptcy and the creditor cannot try to collect that debt ever again.

If there are assets that are sold in the bankruptcy case then the trustee will return to creditors a pro rata share of whatever is collected. This amount is always less than the original amount that is owed.

In many cases the debt being discharged is owed to a company, often times a credit card company or a hospital. These companies build into their business models the reality that they will not collect some debts. And despite having hundreds of thousands of dollars owed to credit card companies being discharged every day, everyone still gets credit card offers from credit card companies in the mail.

I don’t want to diminish the pain that many creditors feel, particularly individuals. While these big companies are able to absorb these losses, individuals feel the hurt a lot more when a debt is discharged. Not infrequently, these creditors had sympathy for someone and lent them money to help them overcome a problem.

Lesson to creditors: be careful who you lend to. If you cannot afford to lose that money, then don’t lend it. There is a good chance if a debtor files a bankruptcy you are not going to see that money again.

Fisker sold for $149.2 million

1024px-Fisker_Karma_PHEVFisker has been sold for $149.2 million to Chinese carmaker Wanxiang. Fisker experienced financial troubles which eventually led to the company filing for chapter 11 bankruptcy. While the sale seems to be fairly certain it still needs to be approved by US Bankruptcy Judge Kevin Gross.

While Fisker has failed to gain traction in the market, Tesla has proven to be a viable competitor in the automotive world, paying off its Department of Energy loan of $465 million and watching its stock price rapidly.

Payday loan bill flies through House Committee

imgresThe Utah Legislative Session is up and running and the bills are passing. One of the bills of interest to me is HB127. This bill is designed to reform many of the practices of Payday loan companies. Today it sailed through the House Business and Labor Committee by a vote of 12-0.

Why is this of interest to bankruptcy attorneys you ask? Just the other day I was talking to an individual who was telling me about her debts and she proceeded to list off seven payday loan companies that she hadn’t repaid. What I see happening are people obtaining payday loans in desperation to pay off debt hoping to be able to pay off the payday loan in a couple of weeks only to realize that they don’t have the money. Seeing that big interest is going to hit (the average interest being 474% for payday loans) they decide to get another payday loan to pay off the previous loan which then cannot be repaid. The cycle repeats itself. Wash, rinse, repeat. Soon they find themselves in a financial avalanche that they will never recover from.

Here are some of the more important provisions of the bill:

-Payday loans, usually for two weeks, currently can be renewed or “rolled over” for up to 10 weeks, after which no more interest may be paid. The bill would then give borrowers 60 days to pay off the loan before lenders could take any action against them.

-The bill would require lenders to file any default lawsuits where borrowers live or obtained the loan. Many lenders now make borrowers waive that right, and lenders do such things as sue people living in St. George in an Orem court — making cases difficult to defend.

-The bill would require lenders to do at least minimal checking to see if borrowers can afford the loans and rollovers, including looking at pay stubs, doing a credit check or looking at repayment history of previous loans.

-The bill would require the industry to report to the state how many loans go the full 10 weeks, how many end up in default, and the amounts involved. Advocates now claim that default rates are high while the industry claims it is low, and the data should show what is true.

What do you think? Is more regulation of payday loans good policy?