Consultation - Rogers & Russell, Utah Lawyers

When you file for a bankruptcy, the ownership of almost everything you own passes from you to a bankruptcy estate that is managed by a court appointed trustee. Yes, everything includes your clothes, your TV, and even your toothbrush. So does filing for bankruptcy look like the scene from The Grinch Who Stole Christmas where the Grinch dresses up like Santa and takes everything— even the cat? The short answer? No.

The reason you don’t lose what you own is because each state and the federal government have passed laws that exempt certain property from the bankruptcy estate.

Exemptions

In a bankruptcy proceeding, if something qualifies under an applicable exemption, then you get to keep that thing. The federal government has created a model list of exemptions and each state has decided whether it wants to adopt the federal rules or create its own exemption rules.

Utah has decided not to follow the federal rules and has chosen to create its own rules regarding what you are allowed to exempt. However, all states have exemptions that let you keep property so you can get a fresh start. Utah, for example, allows you to protect $42,300.00 in equity in your home (as of 2020). If there multiple owners on the property you can protect up to $84,600.00 of equity in your home (as of 2020). Even if you have more equity than you can protect, there are options in bankruptcy where you get to keep all your assets, your home and car included. I discuss this below.

Which Exemptions apply?

The determination of which law governs your exemptions starts with a fairly simple question: where have you lived for the past 2 years? If you have lived in one state, that state’s law determines the exemption law that applies to you. If the answer to the 2-year question is not a single state, there are some complicated timing rules that kick in and it is best to discuss these with a knowledgeable attorney.

Does a Trustee or someone come to my home to take a look at my stuff?

The idea of everything passing into a legal entity controled by another person (the trustee) sound daunting and maybe even dangerous. However, if you are open and honest in your paperwork and you have an attorney with a good reputation, trustee’s rarely make house calls. You simply fill out your paperwork and disclose those assets to the court and your creditors. Again, if your are honest in those filings you’ll have nothing to worry about.

What about Non-exempt property?

As home prices soar again many people have equity in their homes. This means that sometimes you have more equity than you can protect. If you think this is the case you need to speak to a knowledgeable attorney (like the ones at Rogers & Russell). There are still options to keep the unprotected asset through a bankruptcy.

Long story short, the attorneys here at Rogers & Russell can help you protect what is yours and help you eliminate debt that is weighing you down. Call us today to set up a free consultation.

Duplicative, Maybe, but don’t ignore!

The reason for these two letters is one in the same: the IRS has been provided information that does not match up with your filed tax return. Consequently, the IRS will send you these notices proposing change(s) to your return, usually resulting in additional taxes being owed, and giving you a chance to respond to the proposal. It is not an official audit. You can agree or disagree. If you do agree, just sign the form and send it back. However, if you disagree you must take advantage of every available option to reconcile the discrepancy. Start by calling the IRS to try to clarify the issue and offer additional information that might help resolve the problem. If that isn’t enough, follow the instructions in the notice and mail or fax a signed statement to the IRS with evidence explaining the reason you disagree with the proposed changes. This needs to be done before the deadline stated in the notice. The IRS will respond to you with its own letter and give you a chance to compare records. Be careful though, the IRS may not agree with what you have to say, and you will not be given an extension of time to file a Tax Court petition while the matter is pending.

You can fight the IRS, but you have limited time to do so

If you don’t have any luck working directly with the IRS and feel compelled to file a Tax Court petition, just remember that a late petition will not be considered by the Tax Court. And if you’re going to file a petition, make sure you have all your records in order and are confident that the IRS’s position is inaccurate. There are a lot of reasons why your challenge could be successful, like bad information was sent to the IRS, you forgot to report something but you have additional information that renders the proposed change ineffectual, or you were a victim of identity theft that resulted in faulty reporting. Not wanting to pay the IRS is NOT a good reason to file a tax court petition; you’ll waste a lot of time and money fighting and will still end up paying the IRS what it said you owed to begin with – just with more interest that had compiled all that time.

You have Questions, We have Answers

Will I lose My House or Car in a Bankruptcy?