How long do I have to wait to buy a house after filing chapter 7 bankruptcy in Utah?

Because you’re asking this question, I have to start out with a warning: BE CAREFUL!

I get it; you are being smothered by debt, and you want to get your finances under control. You want a fresh start so that you can buy a house and build the life you’ve always dreamt of. You are not alone! And this is a goal that a chapter 7 bankruptcy attorney in Utah can help you accomplish by discharging your debts.

But it takes time. You did not get yourself into this mess overnight, and you can’t get out of it overnight either.

The fact is that chapter 7 bankruptcy offers immediate relief by stopping debt collectors from harassing you, and pausing your monthly payments so that you can catch your breath. But you probably will not be able to get a mortgage right away.

FHA or Conventional Mortgage?

First of all, if you are planning on getting an FHA loan, you will have to wait at least 2 years from the date of discharge of your bankruptcy. That is the FHA’s lending policy, and there is not much you can do do about it. If you are considering a Conventional Mortgage (and you probably should be!) then the lender will determine how soon after filing you can get a mortgage. It’s possible you could find someone to give you a mortgage sooner, but more likely you will actually have to wait longer than 2 years after discharge to get a conventional mortgage. The standard time period is 4 years.

The decision of whether to get an FHA mortgage or a conventional mortgage is important, and how soon you can get one should not be your only concern. Out of haste, many people opt for an FHA mortgage because the qualify with a poor credit score, low down payment, and can apply sooner after filing bankruptcy. But this may not be a wise decision because it is going to cost you a fortune in interest rates and mortgage insurance.

A conventional mortgage does not require mortgage insurance if you have 20% down. You will need a better credit score, and you’ll have to wait longer, but you will save a ton in interest rates.

So, why not rent for a bit after filing Chapter 7 bankruptcy in Utah?

I know that you don’t want to wait any longer to buy a house. But if making rash financial decisions is what got you caught in this mess in the first place, then your best bet is to be careful with your financial future moving forward. Make sure you’re on solid ground before you try to leap to the next level.

High interest rates may be part of the reason you’re in this position. So be careful. Rent a house for a while. You don’t have to rent forever, just for a few years. Rebuild your credit by being responsible with car loans and credit cards. Save up a larger down payment. Then you can get the house of your dreams without digging yourself back into the same hole you’re in now!

Secured Debts versus Unsecured Debts, and how they can affect your Utah Bankruptcy Filing.

This post is a “cornerstone post”, which is what I like to call posts that discuss a basic area of bankruptcy law, and that might be linked or referred to in other blog posts. As a result, it might be less interesting, but more informative than the “topical” posts on the blog. Enjoy!

What are the different kinds of debt?

If you’re considering bankruptcy, or assessing the health of your current financial situation, you may think about the debt you have in categories such as: doctor’s bills, credit cards, personal loans, title loans, check advance loans, car loans, and mortgages, etc. You are not wrong to look at your bills this way, but it is important to realize that the bankruptcy court may not categorize them the same way you do.

According to bankruptcy law, some of your debts would be grouped together in ways that don’t make sense, such as car loans and Mortgages. Likewise, some debts you think are alike may be treated differently by the bankruptcy court, such as a car title loan, and a payday advance. In bankruptcy, there are really only two different classifications of debt: Secured and Unsecured. Whether you owe money to a reputable hospital, or a shady payday loan center, the only thing the bankruptcy court cares about is whether the debt is tied to an asset. Or to put it another way, is it ‘backed up by collateral’? If it is, it is a secured debt. If it is not, it is an unsecured debt. Very simple, no?

Examples of secured debts and unsecured debts.

Secured Debts: Mortgages and HELOCs, Liens (for example: judgment and tax liens), Car Loans Payday loans

Unsecured Debts: Medical Bills, Credit Cards, Bank Fees, Purchase Money Security Interests (“PMSI” -see below for greater detail)

How does the type of debt I have affect my bankruptcy?

The types of debt you owe has a huge effect on your bankruptcy, it can affect your choice between chapter 7 bankruptcy, and chapter 13 bankruptcy, your chapter 13 plan payments, your liquidation analysis, exemptions, equity, and whether you’ll need to sign a reaffirmation agreement.

The way to understand how they affect your bankruptcy is to imagine what rights your creditor has. If your creditor has an unsecured debt, that means that they have a promise from you to pay them back, and nothing more. If you do not pay, they cannot come to your house and take something of yours and sell it. (Unless, of course, they turn their unsecured debt into a secured debt by getting a judgment lien, but that is a topic for another post). On the other hand, if your creditor has a secured debt, that means that they have both a promise to pay, and some collateral that they can take back and sell to get their money if you default on the debt.

If, for example, you enter a chapter 7 bankruptcy, your estate is liquidated by the trustee. In practicality, this usually does not mean that you’ll lose any of your assets because they are generally covered by exemptions. But in theory, what happens is that the trustee takes your stuff and sells it. Now if you have a car loan, some medical bills, and two credit cards, and the only asset you have is a car, then the only creditor that is going to receive a distribution from the trustee is the car financer, because they have a secured debt, which means that the money from the sale of the car belongs to them.

How Can a Utah Chapter 7 Bankruptcy Attorney Help You?

As I’ve mentioned, there are two types of bankruptcy in Utah that can be useful to consumer-debtors like yourself: Chapter 13, and Chapter 7. They are both “bankruptcy” but they are very different. While Chapter 13 Bankruptcy is more of a payment re-structure, Chapter 7 is a liquidation, and that makes it very attractive for people with little assets who are facing mounds of debt.

Utah Chapter 7 Bankruptcy Attorneys

What is Chapter 7 Bankruptcy?

Picture Chapter 7 bankruptcy like this: a debtor has taken on credit, and finds him or herself unable to repay that debt. In a Chapter 7 bankruptcy, the debtor simply “throws the towel in”. Whatever assets he or she may have (usually there aren’t any) are sold and distributed among the creditors, and the debtors debts are cleared. He or she is free to start over debt free!

Chapter 7 or Chapter 13, which is better?

It depends on your situation…but that doesn’t tell you much does it? So let me tell you about some advantages of Chapter 7 bankruptcy:

  • It is quick! As opposed to a Chapter 13 bankruptcy, which can take up to 5 years, Chapter 7 bankruptcy can be completed within a few months.
  • It’s even quicker than it sounds! Even though it takes a few months for a Chapter 7 bankruptcy in Utah to be officially completed, because of the nature of Chapter 7 bankruptcy, and the “automatic stay” it is basically done as soon as you file.
  • It will often discharge (“get rid of”) all of your unsecured debt without any payment or asset liquidation. Whereas, in a Chapter 13 bankruptcy, a debtor is often required to make some portion of payment to their unsecured creditors, in most cases, Chapter 7 debtors do not repay anything to unsecured creditors, the debts are simply discharged!
  • It is cheaper! The attorney fees for Chapter 7 are significantly lower because Chapter 7 bankruptcy involves a little bit less work, and is completed in a shorter time period.
  • There are “no hoops to jump through”. A Chapter 7 bankruptcy is completed fairly quickly after it is filed. There are no ongoing requirements to submit tax returns, make monthly payments, and inform the Trustee’s Office of changes in financial circumstances, or to request permission to take on new debt, as there are with a Chapter 13 bankruptcy.

Ok, great! So how does Chapter 7 Bankruptcy work in Utah?

Here’s a basic overview of a Utah Chapter 7 Bankruptcy case:

  • Stage 1 – Draft and file your petition. Although it is not against the law to file your own petition, you really need a good Utah bankruptcy attorney to help you with this part. Here’s some more info on why you shouldn’t file bankruptcy without an attorney.
  • Stage 2 – the 341 Meeting. About 30 days after your petition is filed with the Court, you will need to attend a “First Meeting with Creditors”. Don’t worry, it’s not nearly as daunting as it sounds! It is the only time you will need to go to “Court”, and it is technically not even Court, there is no judge present. If you have an attorney that has taken care to get the trustee all of the information he needs, your meeting will be very short, maybe 5 minutes or so.
  • Stage 3 – the waiting game. After your 341 meeting, your creditors have a period of time to object to your bankruptcy, or take issue with something in your petition. If you have hired a good Utah Chapter 7 Bankruptcy Attorney, there is a low probability of any objections.
  • Stage 4 – discharge! Once the trustee has all the documents they need, and the time period for your creditors to object has passed, the Bankruptcy Court Judge will automatically sign an order of discharge, wiping your debts away! You don’t even need to go to Court!

How can a Utah Chapter 13 Bankruptcy Attorney help you?

Chapter 13 bankruptcy is one type of bankruptcy relief available to Utah residents under the United States Bankruptcy Code. If some of the following apply to your situation, then you should talk to a Utah Chapter 13 Bankruptcy Attorney, (like me!) about your options:

  • You are behind on your mortgage payments.
  • You have a second mortgage, or a home equity line of credit (HELOC), and are struggling with debt.
  • Your household income is above the median income for Utah. (The median income changes, at the time of writing this post, it is around 52k annually for a one-person household)
  • You have some equity in high-value assets such as real property, or vehicles.
  • You are facing a foreclosure, or a wage garnishment.
  • You are employed, but simply not bringing in enough money to keep up with debts.

How does Chapter 13 Bankruptcy work?

Chapter 13 bankruptcy is a type of bankruptcy in which your assets are not liquidated. Instead, you enter a monthly payment plan, known as a “Chapter 13 Plan”, which pays back your secured debts and a portion of your unsecured debts over a period of between 3 and 5 years? After this period, you can stop making monthly payments, and any remaining debts are discharged!

How can I tell how long my plan will last for?

The length of your Chapter 13 plan is determined by your income, and your budget. If your current monthly income (defined as your average monthly income over the 6 months prior to your bankruptcy filing) is below Utah’s median income, then your plan length can be as short as 3 years, but you can elect spread your payment amounts out more by taking up to 5 years if you wish to.

If your current monthly income is above the Utah’s median income, then your plan must be 5 years in length.

How do I know how much my payments will be?

Calculating your chapter 13 plan payments is very complicated. I hate to give you the attorney line that “you need to have a qualified attorney help you”, but in this area of the law it is true. Roll your eyes if you’d like, but the truth is there are many factors that affect the amount of your plan payment, and they are too complicated for someone who doesn’t have experience with bankruptcy to handle correctly.

Technically, Chapter 13 plan payments can be as low as $1, although it’s hard to imagine that would ever happen. They can also be as much as thousands of dollars per month. Most chapter 13 plan amounts are between $250 and $500. But it really depends on your situation. Here are some factors that affect your payment amount:

  • The amount of arrears on your mortgage
  • Disposable income in your budget
  • The value and equity you have in assets like houses and cars
  • The amount of unsecured debt you have
  • Your liquidation analysis (something you really need to discuss with your attorney)
  • Whether you are paying your debts “in the plan”, or “outside of the plan”

Why Chapter 13 instead of Chapter 7?

The decision between filing Chapter 7 bankruptcy and Chapter 13 bankruptcy depends entirely on your situation. For some people Chapter 7 is best, for others Chapter 13 is the better option. Again, I hate to say it, but talk to an attorney about this! It’s not a decision you want to make without all the information. That being said, here are some situations in which Chapter 13 tends to be better:

  • You have equity in a house or car(s) that exceed the exemption amounts for those items, and you don’t want to lose them.
  • You are facing foreclosure.
  • You have a second mortgage. (Hint: it can be stripped! One HUGE advantage of Chapter 13 bankruptcy)
  • You make more than the median income for Utah. (Hint: you may not qualify for Chapter 7 bankruptcy)
  • You do not have a lump sum of money to pay an attorney fee and filing fee up front.

What happens when I decide to file bankruptcy with a Utah chapter 13 bankruptcy attorney?

  1. Step One: find a great attorney who has lots of experience with Chapter 13 bankruptcy, and takes a lot of pride in his work and his client’s satisfaction. Make sure that attorney is able to immediately relieve the stress and anxiety you’ve been facing due to your struggles with debt and creditors. Might I suggest myself…
  2. Step Two: you will have a consultation with this attorney, and provide the necessary financial information. Your petition will be drafted and filed. If you’ve chosen your attorney wisely, this process will be simple and painless.
  3. Step Three: Make your first Chapter 13 Plan Payment. It will be due 30 days after filing.
  4. Step Four: attend the First Meeting With Creditors, or “341 Meeting”.
  5. Step Five: If you’ve chosen your attorney wisely, he will make sure your Chapter 13 Plan is confirmed by the Bankruptcy Court.
  6. Step Six: continue to make your monthly payment plans. You may also have to contribute a portion of your tax refunds each year.
  7. Once your plan payments are complete, you will receive a discharge, and your bankruptcy case will be closed, SUCCESS!

If you have questions about Chapter 13 bankruptcy in Utah, or other bankruptcy and consumer debt questions, please feel free to give us a call!

What is the chapter 7 means test?

The “chapter 7 means test” sounds like a big, complicated, ominous test. But it is usually pretty straight forward. Here are four things you should know about the means test.

1. What is the Chapter 7 Means Test?

The Chapter 7 Means Test is a measure of your current income level that determines whether you are eligible to file for Chapter 7 bankruptcy. If you do not “pass” the Chapter 7 means test, you can still file for bankruptcy, but you will need to do so under chapter 13, or chapter 11.

2. Why is there a Chapter 7 Means Test?

To put it simply, the Chapter 7 Means Test was added to the bankruptcy code in order to prevent too many people from declaring chapter 7 bankruptcy. Chapter 7 bankruptcy, also known as “liquidation” and “straight bankruptcy” is an extremely powerful legal tool; your creditors do not want you to file chapter 7 bankruptcy. The idea behind the means test is to put an income limit on chapter 7 bankruptcy filings. The rationale behind the means test is that if you earn more than a certain amount, you are not able to use the super-powerful chapter 7 bankruptcy, because you should have the “means” to pay something more back to your creditors, and you should be forced to file under chapter 13 instead.

Whether this is true in practicality is another story, of course, but the as it stands today, the law says you have to pass the means test in order to file under Chapter 7. So let’s look at what the limits are.

3. What are the income limits for Chapter 7?

The concept behind the means test, and its application are usually pretty straightforward. It can be as simple as this: is your current monthly income greater than the median income of your state? If so, you cannot file under chapter 7.

The median income is determined by the census bureau on a state-by-state basis, and is adjusted according to family size. Thus, if your family size is 4, your current monthly income limit is greater than if your family size is 2.

The median income numbers change frequently, so I won’t go into detail about what they are. But to give you some general idea, in Utah, the median incomes fall between 52,000 and 72,000 per year. You can find exact information about current median incomes on the U.S. Trustee Program website.

4. How is your income calculated?

The means test uses your “current monthly income” to determine chapter 7 eligibility. Your current monthly income is defined as your average gross monthly income over the 6 month period before filing your petition.

Thus, someone who was wearing well above the median income, and then lost their job might not be eligible to file under Chapter 7 for a few months until their zero income period brings their average monthly income down.

Ironically, the reverse is also true. If a person is unemployed for an extended period, and then obtains a high-paying job, they will still be eligible to file chapter 7 bankruptcy for a couple of months until their new income brings their average up!

How is bankruptcy like hamburgers? Bankruptcy mills, and why you don’t want to hire one.

Experience is a term that bankruptcy attorneys throw around a lot. It is certainly important that your bankruptcy attorney has experience. But is there a point at which too much experience, or maybe too many cases, becomes a bad thing? Do you want to hire the attorney who files the largest number of Utah bankruptcy petitions?

I don’t think you do.

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The bankruptcy firms that file the most bankruptcy petitions are known as “bankruptcy mills”. A bankruptcy mill is a law firm that performs a ridiculously high volume of bankruptcy filings. They are the fast food restaurants of the bankruptcy industry. If you want a fast and cheap hamburger, you may drive through at McDonalds. They sell more hamburgers than anyone. But they’re not good hamburgers, are they? Not when you compare them to a hamburger you can get in a restaurant, especially if the chef who prepares the hamburger really takes pride in his work. The McDonald’s hamburger is made from the cheapest frozen meat available, and put together by the dozen, in a hurry, by someone who – no disrespect intended – probably doesn’t care too much whether it is the best burger they’ve ever prepared.

I don’t know about you, but I’d prefer to get a hamburger prepared to order by a chef who takes pride in his work. Especially if it is the only hamburger I’m ever going to order again. When you file bankruptcy, don’t you want it to be the very last time you ever do it? Don’t you want to make sure that it is done correctly, by someone who takes pride in their work?

How do I know if I’ve hired a Bankruptcy Mill?

When you hire a Utah bankruptcy attorney, you should have lots of direct contact with him or her. You should have multiple opportunities to ask that attorney questions about your case, and you should feel that they know you and are familiar with your case. It is OK if that attorney has a staff that assists him or her in preparing your petition, and attending court appearances. But the key word is assist. 

You can tell you’re working with a bankruptcy mill if you have lots of contact with staff members, or a rotating cast of attorneys. They will most likely have trouble understanding the particulars of your case, and you may find yourself telling each different attorney or staff member the same thing over and over. They may not be able to answer your questions because they are not familiar with you and your case.

It goes without saying that this is not how you want your bankruptcy attorney to treat you. Here are a few signs that you’re dealing with a bankruptcy mill:

  • They have a large volume of clients. (hint: they have offices nationwide, they advertise on billboards, or their advertisements boast “thousands” of happy clients)
  • At your initial consultation, you speak with an assistant or paralegal before you talk with an attorney, and that person collects all of the information about your case. You may not even speak with an attorney at all!
  • They give you a really fat packet or worksheet – dozens of pages long – to take home and complete. (hint: filling out this worksheet means you are doing their work for them!)
  • You speak with an assistant, or a different attorney each time you call, or visit the office.
  • The attorney who attends your 341 meeting has never met you.
  • They are cheap, in spite of their vast experience!

How do I fire the bankruptcy mill I’ve hired?

I know that it is difficult to get away from an attorney once you’ve gone through all the trouble of selecting one. And that goes for all types of attorneys, not just bankruptcy attorneys. But you deserve to have an attorney that you know, like and trust! Do not settle for anything less. There are lots of attorneys out there that can meet your needs better than a bankruptcy mill will. If you find yourself stuck in a “mill” you should know these three things:

  1. You have the right to have proper representation from an attorney you have confidence in.
  2. You have the right to fire any kind of attorney, at any point during any case you’re involved in.
  3. Even if you have signed an engagement agreement that states your fee is “non-refundable”, your attorney cannot charge you an unreasonable fee, and it would be unreasonable for an attorney to charge you for work they did not perform. You are entitled to a return of fees your attorney has not earned! (Note: this is not my opinion, it is the opinion of the Utah State Bar Association!)

With those things in mind, I would suggest that if you find yourself stuck in a “mill” you get out as soon as possible. Fire that attorney and hire someone you trust!

Under Suspicion: Is someone going to snoop around my house if I file for bankruptcy?

Almost definitely not! Here’s why:

Lots of my clients are understandably concerned about their privacy, and are sometimes afraid that someone is going to be checking up on them after they file for bankruptcy to make sure they’re not hiding anything.

When you file bankruptcy in Utah, everything you own goes into a “bankruptcy estate“. Thus, if you own a lot of “stuff” and you file bankruptcy, the bankruptcy trustee that is assigned to your case can take your stuff and sell it to partially pay back your debts. However, almost everything you own will be protected by an exemption which prevents the trustee from taking a piece of property and selling it.

There are lots of exemptions for things like your house, your car, your furniture, your clothing, etc.

Also, in practicality, the things that aren’t covered by an exemption are usually not worth enough for the trustee to bother to sell.

My clients are sometimes worried that the trustee won’t take their word for it when it comes to what assets they may own. They are concerned that the trustee may want to come and check up on things. For instance, they think he may want to inspect their car, to see if it really does have 100,000 miles on it, or if it might be in better condition than you’re claiming. Or they are worried that someone is going to come to their house and go through everything to determine whether there are valuable assets that you haven’t claimed on your bankruptcy petition.

None of this is going to happen! First of all, the trustee does not have time to hassle with this. Second of all, the trustee does not want to spend the money necessary to have your things inspected. Third, the trustee knows that the benefit of checking up on every single bankruptcy filing to see if there are hidden assets is simply not worth it, because there almost never are hidden assets. Finally, the trustee is not just “taking your word for it” when you file your petition and tell him what assets you have. He is taking your sworn and recorded word, under oath for it, which he will obtain at your 341 meeting.

(As a corollary, clients are also sometimes concerned that the trustee is going to ask them why they filed bankruptcy at the 341 Meeting, and that they are going to have to give a good reason. This will also NEVER happen! It is not the trustee’s job to determine whether or not your filing is legitimate, it is only his job to protect your creditors and distribute the estate properly.)

As long as you are honest at your 341 meeting, and there aren’t any suspicious circumstances surrounding your bankruptcy, there will never be a stranger investigating your property!

 

What is your bankruptcy ‘DEFCON’ level?

There are DEFCON levels to categorize your financial picture! We’re all familiar with the cultural meme of DEFCON levels, right? I have a 19 month-old son, and when he he loses it because he can’t reach his “baba” or his “dada” won’t let him play with a sharp object, my wife always says, “he’s at DEFCON 5!”

Actually what she means is DEFCON 1; DEFCON 5 is the lowest state of alert, not the highest. But I won’t fault her for her mistake, I had to look it up myself before writing this.

Anyway, as I’ve mentioned before, Bankruptcy can be a powerful tool, but it is also a drastic measure. If you’re considering bankruptcy, talk to a Utah Bankruptcy Attorney to determine whether it is the best option for you. Here is the scale that I use:

DEFCON Circumstances of your financial situation: Bankruptcy ?
5 Smooth Sailing. Your bills are paid on time and you have insurance and savings to carry you through crisis. NO!
4 Fear losing your job, can’t pay off the total balance of your credit cards each month, do not save money each month. Probably Not
3 Falling behind in some payments of secured and unsecured debts, some bills are not paid each month, receive calls from collectors. Maybe
2 Are more than 2 months late on some bills, use new credit cards to pay minimums on other cards, have pending lawsuits, have total debt that you can’t pay off in less than three years, have been out of work for an extended time period. Probably
1 Have both secured and unsecured debts that cannot be paid, wage garnishments, bank account attachment, facing car repossession, facing foreclosure, have no income. YES!

This chart might give you a good idea about whether bankruptcy is a good option for you. Keep in mind that there are some situations where you are at DEFCON 4, but bankruptcy is a good idea because of the particular circumstances of a certain debt. Likewise, there may be individuals at DEFCON 2 for whom bankruptcy is not the best option.

As always, if you are considering bankruptcy, give me a call so we can talk about it.

Do you have a zombie home problem? A Utah Bankruptcy Lawyer may be able to help!

When the housing market crashed in 2008, a curious monster arose from the depths of America’s economic wasteland: the zombie home. But as the economy strengthens (tentatively), home prices are rising, and the zombies are waking up! If you’ve got a zombie-home problem, a Utah Bankruptcy Lawyer may have your solution!

Ok, you’ve got my attention. What is a ‘zombie home’?

A ‘zombie home’ is a home that is stalled somewhere in the process of foreclosure. The home is languishing between the default and repossession or sale by the bank.

Why, you might ask, would a bank fail to follow through on foreclosing on a house? The answer is that because home prices decreased so much when the housing market crashed, banks were sometimes better off not foreclosing on the house and carrying the loss on their balance sheet instead. In other words, the house may not have been worth enough to sell.

At the height of the housing market crisis, there were 300,000 or more zombie homes located throughout the United States, including here in Utah. Now that housing prices are rising, the ‘juice’ of foreclosure is beginning to be worth the squeeze for banks. The estimated zombie home numbers are now around 120,000 and falling fast.

Why is a zombie home a problem?

For starters, zombie homes are bad for the housing market and the areas they’re located in. In most cases, former owners who have been foreclosed on have moved out of zombie homes, and they are simply sitting there empty. They can become blights, lower surrounding property values, and attract squatters.

Of course, no one wants a property-value-sucking blight around; but that is not a direct problem for you, the home owner, who is facing a zombie home problem. If your home becomes a zombie home, you do face serious, direct problems, however. Because the bank has not taken possession or sold the home, you may still be on the hook for property taxes, HOA fees, municipal fines, utilities, trash removal, etc., etc. Even though you don’t live there! Furthermore, you might face liability for injuries or damages that occur on the property.

In some cases, former owners are still occupying zombie homes, because the bank has not taken possession of them yet. In this case you may have a different kind of zombie home problem: sooner or later the bank will be coming around to foreclose the property you’re living in, now that the housing market is recovering.

How can a Utah Bankruptcy Lawyer help?

If you’ve exhausted all efforts to refinance, restructure, or otherwise settle your defaults and arrears with the bank who holds your mortgage, then you have one final, absolute, powerful remedy to prevent a foreclosure: chapter 13 bankruptcy. You can file a chapter 13 bankruptcy any time before a foreclosure sale occurs to save your home.

A zombie-home foreclosure is just like a regular foreclosure. If the bank has sent you a notice of default, but hasn’t held a sale yet, you can file a chapter 13 bankruptcy petition, stop the process, and force the bank to allow you to cure the arrears according to your budget!

This way you don’t have to worry about liability for taxes, fees, fines, and damages; and you don’t have to leave your home!

So, if you find yourself with a zombie-home problem, please come talk to us! We’re Utah bankruptcy lawyers, and this is what we do!

 

Is it time to stop shaming bankruptcy? Why Donald Trump might tell you to look at your consumer bankruptcy filing as a business decision.

It has always bothered me a little that consumer bankruptcy clients who come to see me about filing for bankruptcy in Utah feel so much shame about considering bankruptcy, where, on the other hand, business icons do it all the time. The stigma that follows filing bankruptcy is palpable. My clients often feel that they have failed, and want me to know that they are not irresponsible people.

“I’m not a bad person, I’m not trying to screw my creditors, I just can’t keep up.” I could wallpaper my office with original Picassos if I had a dollar for every time I heard it.

I understand, and admire, these client’s sense of integrity. But I wish they would view their personal bankruptcies like world-class entrepreneurs do: as a business decision.

Raise your hand if you knew that Donald Trump has filed for bankruptcy FOUR TIMES!

Bankruptcy should be considered a business decision

Now, it is true that Donald Trump’s four bankruptcies were corporate, not consumer, bankruptcies. But does that really make a difference? Consider the explanation of how Donald Trump is able to file bankruptcy over and over, and yet remain wealthy, and retain at least enough respect and adulation to make a serious run at a United States presidential campaign.

Reason #1 – Trump’s bankruptcies are used as a business tool.

In each case, Trump filed for bankruptcy due to over-leveraged casino hotel resorts in Atlantic City. Is it somehow more honorable to file bankruptcy as a tool to fix a failed business plan, than it is to fix a failed personal finance plan? Don’t the best consumer finance advisors tell us to run our personal finances like a business? Don’t we invest our personal nest-eggs in real estate, stocks and bonds – just like corporations do?

If corporate bankruptcy is to be looked at as a business tool, how should consumer bankruptcy be any different?

Reason #2 – They did it too!

When confronted about his bankruptcy history, Trump has been quick to point out that many other world-class entrepreneurs have also filed bankruptcy. But this shouldn’t make you feel any different about your own personal finances. Any elementary school teacher will tell you that “they did it too” does not absolve you of responsibility. But even if it did, couldn’t consumer bankruptcy filers say the same? Everyone reading this article has several friends who have filed bankruptcy, whether they know it or not; it is, after all, not exactly the kind of thing people like to tell each other.

Reason #3 – His creditors knew what they were getting in to.

Trump and his apologists will tell you that the creditors that loaned him money knew that there was a risk involved. They were well aware of Trump’s personality, and aggressive business style. They took a calculated risk, and it didn’t pan out.

True, but how are you any different as a consumer? Credit card companies, pay day loan companies, mortgage lenders and health insurers alike all know the risks of lending you money. That is the function of credit reports and income verification. When Discover Card, for example, gives a person a credit card, they base the interest rate and credit limit on the person’s financial history. They expect a number of these risks to fail, and those failures are baked-in to their numbers. They know what they need to recover to make a profit, and they lend consumers money accordingly.

So how are consumer creditor’s calculated risks different than the risks Trump’s creditors took?

A word on personal responsibility.

There is also a big difference between spending irresponsibly, and getting yourself in to a hole that you have to file bankruptcy to get out of, on one hand; and being thrown in to a financial meltdown by forces outside of your control such as economic turns, job losses, and health problems. The later are not examples of irresponsibility so much as they are of misfortune. So why should we lump them together?

Almost all of my clients, by the way, fall in to the later camp. They are forced in to bankruptcy when a financial tragedy strikes their lives. If you find yourself in this position, give my office a call so that we can help you! Bankruptcy is a right spelled out in the Constitution, just like free speech; and according to Donald Trump, it can be a very helpful business tool as well!