Tag: Chapter 7

What is the §341 Meeting of Creditors?

Posted on by Sean Wood in 341 Meeting of Creditors, Bankruptcy, Chapter 11, Chapter 13, Chapter 7

Most people only have to attend one meeting when they file a bankruptcy which is called the Meeting of Creditors. This meeting is outlined in 11 U.S.C. §341 so bankruptcy attorneys often call it the “341 meeting” or simply a “341”. Normal non-attorney folks just call it the “Meeting of Creditors”.

22 Meeting

When does the Meeting of Creditors take place?
This meeting will be set by the Court and it usually occurs between 4 to 6 weeks after the date of filing. The Court will mail you a notice with the date, time, and place but your attorney will probably tell you as well.

Where does the Meeting of Creditors take place?
There are four locations in Utah where these meetings take place. Usually your meeting will be assigned to the location nearest the home address you listed on your bankruptcy petition. The addresses to all four locations are listed below.

Federal Building
324 25th St.
Room 6026
Ogden, UT 84401

Ken Garff Building
405 S. Main Street
Suite 250A or 250B
Salt Lake City, UT 84111

Provo City Library at Academy Square
550 N University Ave
Room 308
Provo, UT 84601

Washington County Boulevard Office Building
87 N. 200 E.
3rd Floor
St. George, UT 84770

What do I need to bring to the Meeting of Creditors?
I covered this in another post but there are four things you need to bring:

1. Driver’s License
2. Social Security Card (or other proof in the form of a document not prepared by you with your full social security number listed on the document, like a W-2)
3. Most recent pay stub (the last pay stub you received before the Meeting of Creditors)
4. Bank statements covering the month of your filing date

What happens at the Meeting of Creditors?
You should arrive at least 15 minutes before your scheduled time so that your attorney can meet you there and discuss your case if he needs to. You will then go into the room with your attorney where the meeting will be conducted. Although your case will be assigned to be heard during a 1-hour block with a number of other people, usually your case will last only 10 minutes.

The trustee will go through his list and call the names of the cases for that time. When your name is called your attorney will go with you and will sit right next you in the seats upfront. The trustee will then ask you questions about your case and the petition we filed. Answer the questions truthfully and accurately. If you don’t know the answer then you can defer to your attorney. Below is a list of some of the more common questions the trustees ask:

· whether you have read through, understand, and signed your petition
· whether the information listed on your petition is true, complete, and accurate to the best of your knowledge
· whether you read the bankruptcy information sheet
· whether you have listed all your property in your schedules and whether you have listed accurate values
· whether you have transferred any property in the last two years
· whether you have repaid any of your creditors within the three months prior to your bankruptcy
· whether you have repaid any relatives or close friends in the last year
· whether you have sold or given away any property or transferred any money in the past several years
· how you determined the value of your property listed in your paperwork
· whether your income is accurate in your schedules and on your “Means Test”

After the trustee asks you questions about your petition, he will then ask “are there any creditors with questions?”. At this point any of your creditors may come forward to ask you questions. Most of the time there are no creditors with questions. If you owe the State of Utah money then the Utah State Tax Commission will be sure to show up. If you have purchased something from RC Willey you can bet that they will be there. But for most creditors it’s not worth paying someone to appear at the meeting because they are not likely to recover anything.

Once the trustee and the creditors have finished asking questions then you are free to go. Sometimes the trustee will ask for some additional documentation and if he does then get that to your attorney ASAP so he can get it to the trustee.

Should I be a nervous Nellie about the Meeting of Creditors?
No, you should not be a nervous Nellie about the Meeting of Creditors. There is no reason to be nervous. The Meeting of Creditors is not held in a Court nor is it before a judge. You will be placed under oath and are required to answer truthfully. The reality is this—if you have been honest with your bankruptcy attorney and all your financial information is provided in your petition then you really have nothing to hide.

So, just tell the truth and you will be fine. Trust me, I’ve been to a gazillion of these and it’s really not as bad as most people picture it in their minds.

How should I dress for the Meeting of Creditors?
It actually surprises me how few people ask me the question. However, it doesn’t really matter how you dress in my opinion and I don’t think the trustees care either. I’ve seen a variety of attires ranging from the dingiest jeans to expensive and fancy suits. Again, I honestly don’t think it matters how you dress.

What happens if I don’t attend my Meeting of Creditors?
If you don’t attend your Meeting of Creditors then you have made a huge mistake. If you don’t go to your 341 Meeting your case will be dismissed. You will not receive a discharge of your debts and the automatic stay will no longer be in effect. If your case is dismissed you can still file again but you will have to pay the filing fee again and the automatic stay is limited for repeat filings. The point is this: DO NOT MISS YOUR MEETING OF CREDITORS! If for some reason you have a scheduling conflict that you cannot resolve, contact your attorney as soon as possible so that he can try to reschedule the date.

If you have more questions about the Meeting of Creditor be sure to ask your attorney. Bankruptcy attorneys sometimes gloss over the details of the Meeting of Creditors simply because there are so many things they could tell you but they don’t have the time and you don’t really need to know everything they could tell you. But if you have more questions, ask your attorney and he should be able to give you an answer.

What are my options for paying my bankruptcy filing fee?

Posted on by Sean Wood in Bankruptcy, Chapter 13, Chapter 7, Court Filing Fee, Fee Waiver, Fees, Filing for Bankruptcy

Short answer: (1) pay in full, (2) pay in installments, or (3) apply for a fee waiver.

1. Pay in full21 Cash Register

This is the easy option for both me and for the client. When you make a payment to my firm for the attorney’s fees you also make payment for the filing fee. Paying in full makes it easier for me because I don’t have to worry about reminding the client to pay the filing fee. It’s also easier for the client because there is nothing else you have to do.

2. Pay in installments

Coming up with the money for attorney’s fees can be difficult when you are considering bankruptcy. Fortunately, the Court allows you to pay the filing fee in three installments. You don’t even have to pay the first installment when you file.

What the Court does require is that you make your first payment two weeks within two weeks of filing, the second payment within two weeks after the first payment, and the third payment within four weeks of the second payment.

Let me use an example. Let’s say you filed chapter 7 bankruptcy on Monday, February 1, 2016. The total amount for the filing fee is $335.00. Your first payment is due on or before February 15, 2016. Your second payment would be two weeks after that, on Monday, February 29, 2016, Leap Day (watch out for Leap Day William). Your third and final payment would be due four weeks later on Monday, March 28, 2016.

Below is a table showing how this works.

Payment Date Amount
File Bankruptcy February 1, 2016 $0.00
1st Payment February 15, 2016 $110.00
2nd Payment February 29, 2016 $110.00
3rd Payment March 28, 2016 $115.00

3. Apply for fee waiver

The last way to pay for your filing fee is to not pay at all. If you meet the guidelines then you file what is called the “Application to Have the Chapter 7 Filing Fee Waived”. This is only available to chapter 7 debtors; it is not available to chapter 13 debtors.

There are several factors the Court considers when deciding to grant or deny your application for fee waiver. The most important factor, however, is your income. If your monthly income is 150% or less of the poverty level for the number of people in your household then the Court will likely grant your application for fee waiver. I covered this in more detail in an earlier post.

Talk to your attorney about which payment method is best for you.

How do I get a free credit report?

Posted on by Sean Wood in Bankruptcy, Bankruptcy Attorney, Chapter 13, Chapter 7, Credit Report, Payday Loans

How do I get a free credit report?

Short answer: go to www.annualcreditreport.com and request a free credit report.

19 creditOne of the most important things you need to do when preparing for a bankruptcy is to identify all your creditors. You are required to list all of your debts and creditors on the bankruptcy petition. I’ve had a number of clients ask me ‘how do I identify all of my creditors?’

The best place to start is with a credit report. Credit reports are not perfect and they don’t list all of your debts but for most people the credit report will include most of your debts. There, however, are some items that are usually not reported on your credit report. Pay day loan companies, for example, generally do not go to the effort to report these loans to the credit bureaus. Small businesses also rarely report debts. That is why I recommend to my clients that they keep a stack of all the bills and legal documents they have received.

Is it your bankruptcy attorney’s job to identify all your debts? People ask me this all the time and the answer is ‘no’. Not only is not his job, it’s also impossible for your attorney to identify all your debts. Your bankruptcy attorney can pull a credit report for you but, as I mentioned before, not all debts will be listed on your credit report. The person who knows your debts best, is you.

I always pull a credit report for my clients for a couple of reasons. First, I want to be sure I can identify as many debts as possible. Second, people often don’t keep track of lawsuits or judgments filed against them. Third, and most importantly, I can import all the data from the credit report into the software I use to create the bankruptcy petition which saves me huge amounts of time. As a side note, years ago, when I was a mere legal clerk, I used to manually enter in the data from credit reports into the computer. It was horrible. My eyes and my fingers hated me for it.

Although I pull credit reports for my clients, I encourage them to get and print out a copy of their credit report for our initial consultation. It helps both me and my clients figure out what debts they have.

Once a year you can order your free credit report from www.annualcreditreport.com. It’s a good idea, whether you are considering bankruptcy or not, to review your credit report to make sure there are no errors.

Can I keep the items I bought from RC Willey when I file for bankruptcy?

Posted on by Sean Wood in Bankruptcy, Bankruptcy Attorney, Chapter 13, Chapter 7, Creditors' Rights, Reaffirmation Agreements

Can I keep the items I bought from RC Willey when I file for bankruptcy?

Short answer: yes, if you want keep the item but you have the option to surrender the item.

18 RC Willey

About 4 to 6 weeks after you file any chapter of bankruptcy, you are required to attend what is called the “Meeting of Creditors”. At the Meeting of Creditors, the trustee will ask you questions about your bankruptcy petition. The bankruptcy trustee is an attorney appointed to represent the creditors in your case.

After the trustee has asked you some questions about your petition, he will ask “are there creditors with questions?” at which point any creditor can ask you questions. I would say a good three-quarters of my cases have no creditors that appear. When a creditor does show up it is generally the IRS, the Utah State Tax Commission, or RC Willey.

“Why does RC Willey show up to the Meeting of Creditors when no other creditors show up?” RC Willey tends to be a little more aggressive, for better or for worse, than other creditors. When you purchased a piece of furniture or any item from RC Willey on credit, RC Willey will retain a secured interest in that item, similar to the secured interest a lender has in your car or your house.

If for some reason you default on your loan, RC Willey has a right to take back the item that was sold to you, and they like to enforce this right. The reality is, however, they don’t want to take the item back from you. They want you to pay for the item. It is unlikely that RC Willey will recover more from acquiring the item and selling it at a discount than they will if you keep the item and pay them.

So what options do you have when you have purchased something from RC Willey? There are usually three options.

Option 1: Surrender the item

If you don’t care to pay for the item or it is a crappy item, you can tell RC Willey that you would like to “surrender” the item. Surrendering the item means you let RC Willey come take the item from you and whatever deficiency is left will be discharged in the bankruptcy.

Option 2: Reaffirm the debt for the full amount you owe

This is RC Willey’s preferred option. I always tell my clients, creditors care about one thing––collecting money. You do have the option to reaffirm the debt. When you file a bankruptcy, your contract with RC Willey is terminated. Reaffirming the debt means that you will voluntarily take on that debt again. If you reaffirm for the full amount, RC Willey will lend you credit in the future.

Option 3: Reaffirm the debt for fair market value

This option is usually the option I recommend to my clients. People generally like the items they purchased from RC Willey and would like to keep them. You do have the option of reaffirming the debt for the market value of the item. This amount is generally about half the amount you owe on the item, although it varies depending on the item.

The downside of reaffirming for fair market value is that RC Willey will NOT lend you credit in the future. For most people, this is not the end of the world. While I personally like RC Willey and I have purchased from them multiple times in the past, there are plenty of other furniture stores that WILL lend you credit.

What if I want to keep some of the items I purchased from RC Willey but not all of the items?

You can pick and choose which items you would like to reaffirm. Let’s say you really like a dining room table you purchased from RC Willey but you don’t like the sofa you purchased. You can reaffirm and keep the dining room table and surrender the couch.

What if I do not have the item?

Occasionally I will have a client tell me that they no longer have the item they purchased from RC Willey. I have heard all kinds of stories of what happened to items purchased from RC Willey from family members taking the items to foreign countries to ex-boyfriends and ex-girlfriends who have disappeared with the items. What happens then?

RC Willey has two choices––give up or file a suit for fraud against you. I say they have two choices but in every case I have dealt with RC Willey they just give up. Suits for fraud are rarely filed and usually involve tens of thousands if not hundreds of thousands of dollars of debt. Any claim RC Willey files against you is not a secured claim but rather an unsecured claim. After all, they cannot expect you to surrender an item you do not have.

How much does it cost to file a chapter 7 bankruptcy?

Posted on by Sean Wood in Bankruptcy, Chapter 7, Court Filing Fee, Fees

Short answer: there are two fees you will have to pay—attorney’s fees and the Court filing fee.

1. Attorney’s fees: depends on the complexity of your case but usually between $900 and $1,800.

2. Court filing fee: $335.

Money

Whenever I shop on Amazon and I do a search for a particular product, the first thing I notice is the rating of the product. I need (want) to buy quality stuff! The very next thing I look at is the price. If the price isn’t in the range I think I should be paying then I can easily dismiss the product and move on, period. I don’t need to take any more time analyzing the product.

Price is an important factor to consider when filing for bankruptcy. If you are considering filing for bankruptcy that means funds are already tight.

As I mentioned above, there are two fees associated with filing a chapter 7 bankruptcy—attorney’s fees and the Court filing fee.

The attorney’s fees are determined by the attorney or the firm he/she works for. Because bankruptcy attorneys cannot collect their fees after the client has filed for bankruptcy, this means that most attorneys will quote you a flat fee. This differs from the general billing practice which most areas of law, and lawyers, use, which is an hourly rate.

The amount of time I spend on each bankruptcy case varies. Some cases are fairly simple and I only spend a few hours on the case. Other cases are much more complex and require much more time to meet with the client, communicate to the client about the issues that need to be addressed, prepare the bankruptcy statements and schedules, draft additional motions, and attend additional meetings (i.e. extended 341 Meeting of Creditors, 2004 Examination). Because of this, I hesitate (as do most other bankruptcy attorneys) to simply quote a price over the phone without knowing much about the case.

That being said, if I do not foresee many problems arising in your case (and I would say a good 70% of cases fit into this category) I charge around $1,200 (at the time of this writing) for attorney’s fees. I used to charge less when I was young warthog because I was hungrier for business. After I got some experience under my belt, I am much better now at estimating how much time each case will take me.

In Utah I have seen attorneys charge as low as $800 and as high as $3,000 for a chapter 7 bankruptcy, but both of these are outliers. For your standard run-of-the-mill chapter 7 bankruptcy in Utah I would say most attorneys charge between $1,100 and $1,800. I always tell my clients that they can call around and get quotes from other attorneys. I probably shouldn’t do that, as it is definitely not in my financial best interest to do so, but I absolutely hate making my clients feel pressured.

The Court filing fee is far less complicated. Every chapter 7 in every state of the union (because bankruptcy is federal law) the filing fee is $335.

In total you are looking at spending between $1,500 and $2,200 total on a chapter 7 bankruptcy. You can file a bankruptcy without the help of an attorney but I would not recommend it (see here and here).

How do bankruptcy attorneys get paid?

Posted on by Sean Wood in Bankruptcy

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?

Posted on by Sean Wood in Bankruptcy

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

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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?

Posted on by Sean Wood in Bankruptcy

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

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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.

Can I keep my tax refund if I file for chapter 7 bankruptcy? Will the trustee take my tax refund if I file for chapter 7 bankruptcy?

Posted on by Sean Wood in Bankruptcy, Bankruptcy Attorney, Chapter 7, Taxes

Short answer . . . it depends. (skip to the end for a summary on when to file)

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I never counsel anyone to represent themselves pro se in a bankruptcy. The reason is this: it is very easy to lose more money representing yourself than it would be to hire a bankruptcy attorney.

The trustee assigned to your case has one goal which is to collect and liquidate as much non-exempt property as possible to return as much funds as possible to the creditors. The trustee also has an incentive to go after assets because he keeps a small portion of what he collects.

In almost every case the trustee can easily find some property that is not exempt. Typically those who file bankruptcy have less than $100 in their bank account. Why? Because money in a bank account is not exempt and the trustee could take all of this money if he chooses to. That being said, most of the time the trustee does not go after this money because it is not worth his time to file a motion to sell or liquidate property that will earn him a few dollars. Trustees call these types of assets “administratively burdensome” and do not pursue this property.

So what does all of this have to do with taxes? The trustee likes to collect more money without having to spend much time. Because of this all trustees goes after the low hanging fruit: tax refunds.

Bankruptcy attorneys know that the tax refund is not exempt and so they do not fight these types of motions. Bankruptcy attorneys will fight the trustee on how exemptions are applied. But for tax returns, there is no fighting. It is relatively easy for the trustee to collect a tax refund.

For many people who file bankruptcy, their tax refund is the single biggest windfall they will receive that year. The trustee knows this and will almost always go after your tax refund.

So how do you keep the trustee from collecting your tax refund? That depends on which month of the year you file. If you are one of the first people to file your tax return and get your tax refund in February then you can spend all of your tax refund and then file for bankruptcy. As long as you spent this money on non-exempt property (typically food, gas, necessities) then there is nothing the trustee can collect. If, however, you filed bankruptcy before you received and spent your tax refund then the trustee will require that you turn over the entire amount.

After about the month of May, most people have received their tax refund and the trustees stop pursuing the tax refund for that year. Depending on the trustee, around the end of June to the first part of August the trustee will start directing that you handover a pro rata share of your next year’s tax refund. Let me give you an example of how this works.

Let’s say you file a bankruptcy on July 1, 2015 and your 2015 tax refund will be $2,000. The trustee will ask that you handover your 2015 tax refund that you will get in early 2016. The trustee will then take a share that is equal to six months of the twelve total months of the year 2015, which will be 50% of the $2,000 which is $1,000. The reason is that all of the tax refund you are building up to the date of filing for bankruptcy is part of the bankruptcy estate. All tax refunds accruing after the date of filing is not part of the bankruptcy estate.

So let’s use another example. If you file on August 1, 2015 and your tax refund will be $2,000. This time the trustee will keep seven months of the total twelve months of 2015, which is $1,166.66.

If you file on September 1, 2015 and your tax refund will be $2,000 then the trustee will keep eight months of the total twelve months of 2015 (which is two thirds). That means the trustee will keep $1,333.33.

The later in the year you file, the greater the amount the trustee will be able to keep of your tax refund. Because of this, many of the people who file later in the year do not have a very sizeable tax refund if they have one at all. This also means that there are more bankruptcies filed in the months of February, March, and April. Debtors can receive their refund, spend it, and then file for bankruptcy without losing any of their tax refund.

Here are my basic guidelines for each month of the year.

January to April. Make sure you receive and spend your tax refund before you file for bankruptcy. The trustee cannot collect a refund if you have spent your refund (on exempt property).

May to June. Again, make sure you receive and spend your tax refund before you file for bankruptcy. Most trustees don’t start asking for the following years tax refunds until the end of June.

July to December. The trustee will take a proportional share of your tax refund. If your tax refund is large and you absolutely must file a bankruptcy then it is best to file sooner rather than later. If you aren’t getting much of a tax refund, or none at all, then it won’t matter when you file. If you are getting a large tax refund then it might, depending on your particular situation, make sense to wait until the next year to file for bankruptcy.