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Important Bankruptcy Articles

by Scott Blotter

Pre-Bankruptcy Planning

When you file bankruptcy an estate is created, 11 U.S.C. §541. Property of the estate includes all your legal or equitable interests in property as of the commencement of the case. Additionally, it includes any legal or equitable interest in property acquired within 180 days of filing bankruptcy that is acquired: 1. By bequest, devise, or inheritance; 2. as a result of a property settlement agreement with a spouse, or of an interlocutory or final divorce decree; or 3. as a beneficiary of a life insurance policy or of a death benefit plan. Property of a Chapter 13 estate is not limited to property “as of the commencement of the case” but includes any interest you acquire after commencement of the case but before the case is closed, dismissed, or converted. Chapter 13 property also includes earnings from services performed after filing your bankruptcy and prior to closure, dismissal or conversion of your case.

It is interesting to note that 11 U.S.C. §541 specifically excludes ERISA qualified retirement plans. This means that most 401ks and other similar plans are not included as property of the bankruptcy estate. They are not available for the trustee to take and distribute to creditors.

Utah also has several exemptions that protect property from being taken by the trustee. The Utah exemptions are found in the Utah Code Chapter 23 Title 78. Some of the key exemptions include:

1. You may have up to $20,000 equity in your primary personal residence. If you spouse is also on title to the property, you each may have up to $20,000 equity ($40,000 total). The property must be located in Utah and is limited to the house and the surrounding land up to 1 acre.

2. You may have up to $2,500 equity in any one vehicle. Your name must be on title to the vehicle.

3. There is a $500 exemption for each of the line items listed below:

a. Sofas, chairs and related furnishings

b. Dining and kitchen tables and chairs

c. Animals, books, and musical instruments; and

d. Heirlooms or other items of sentimental value.

4. A $3,500 exemption for professional books or tools of the trade.

5. Some exemptions that do not have a dollar limitation are:

a. Burial plot

b. Washer and dryer

c. Fridge

d. Freezer

e. Stove

f. Microwave

g. Sewing machine

h. Clothing, and

i. Beds and bedding.

There are additional exemptions available. I recommend that you review your case with an attorney to determine the applicability of the foregoing exemptions and what other exemptions may be available to you. In order to claim Utah’s exemptions, you must have lived in Utah for two years prior to the commencement of your case. If you have not lived in Utah for the two years prior to filing your case you will need to use either another state’s exemptions or the federal exemptions. Again, consult an attorney to determine which exemptions apply.

In Utah there is no exemption specifically for cash. So any money you have that is in a regular checking or savings account is property of the estate and the trustee will likely require you turnover to him the balance in your accounts on the day you file. Tax refunds also are not exempt and you may be required to turnover your tax refund to the trustee (even if you haven’t received it yet). The trustee will keep your case open until s/he receives your tax returns and the pro-rated amount of your tax refund that is property of the estate.

The filing of a bankruptcy is like ringing a bell, once the bell is rung you cannot un-ring it. Once you file a bankruptcy, your bankruptcy estate has been created and you cannot change it. So, it is of paramount importance that you review your assets and the available exemptions prior to filing your bankruptcy. By so doing, you can marshal your assets to minimize the items taken by the trustee.

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