Is Cheaper Better?

c0b79ae5a520a9b97f471e18d7330927I had a friend in college who would only drink a particular brand of bottled water. It never ceased to amaze me how much money this girl spent on a product that was readily available, at no cost, almost everywhere you go. I don’t care if it came from a glacier in the middle of Antarctica- how is it any different than my parent’s hose in Ogden Utah?

The cost of products and services is a part of our every day life experience. The legal industry is no exception. Every week we receive calls from folks looking into hiring a lawyer. Inevitably, the question is asked “how much does he charge?”  I get asked all the time why I do not include pricing on my website, my Facebook page, or on my google landing page. This is very understandable question. I ask that question whenever I call to buy something as well.

The thing is- hiring a lawyer is not like buying a bottle of water. This article written by a successful entrepreneur who went through bankruptcy provides an excellent guide-post in successfully navigating the bankruptcy process. His very first tip: pick the right lawyer. His first choice was the attorney that was cheapest. This choice almost ruined his case.

I almost always offer a free consultation to prospective clients. At the end of the consultation, after I get a good idea of the needs of the particular client, I then quote my retainer amount. I always preface it with “I’m not the most expensive but I’m also not the cheapest. You can find an attorney that charges less. I charge what I charge because I need to limit the number of cases I take so that I can best focus on achieving the best result for my client.”

There is so much more than price when you are choosing an attorney. You need to ask questions so you can gauge the competence of the person you are talking to. Ultimately- you need to feel that you can trust this person with your legal needs.

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Bankruptcy Trustee vs. College Kids


There is an ever-increasing trend in bankruptcy practice for court-appointed bankruptcy trustees suing college kids and their parents to recover money paid toward tuition.

Under 11 U.S.C. § 548, the trustee may reverse a fraudulent transfer of property made by the debtor in the two years preceding the debtor’s bankruptcy filing. 11 U.S.C. § 544 allows the trustee to look back even further (in Utah- four years) if allowed by pertinent state laws. A transfer will be “actually” fraudulent where it is made with “the intent to hinder, delay or defraud creditors.” Similarly, a transfer will be “constructively” fraudulent where the debtor does not “receive reasonably equivalent value and the debtor was insolvent at the time of the transfer or became insolvent as a result thereof.” Once reversed, the trustee may recover the value of the fraudulent transfer from the party that received the transfer for the benefit of the debtor’s creditors pursuant to 11 U.S.C. § 550.

Parents who file for bankruptcy after paying for the skyrocketing cost of college tuition can face scrutiny from trustees who argue that the money should have been spent on their own growing debts, as reported in The Wall Street Journal.

Under the U.S. bankruptcy code, trustees believe that they can sue to take back money that a bankruptcy debtor spent several years before filing for bankruptcy if a trustee finds that the person didn’t get “reasonably equivalent value” for that expense. The law doesn’t define “reasonably equivalent value.” So- most of these cases, the trustees seek to reverse the tuition payments as “constructively fraudulent transfers.”

The trustees argue that the debtor-parents who are paying the tuition fail to receive “reasonably equivalent value” since the child is the one actually getting the educational benefit.

According to the Massachusetts law firm of Duane Morris,  “courts have issued conflicting opinions concerning these types of avoidance actions. For example, some courts have relied upon the “societal expectation” that parents assist with the cost of their child’s post-secondary education. See, e.g., Trizechahn Gateway, LLC v. Oberdick (In re Oberdick), 490 B.R. 687, 712 (Bankr. W.D. Pa. 2013). Conversely, some courts have held that such payments are avoidable because the benefits received by parents in exchange are not “concrete” or “quantifiable,” or because the parents are under no legal obligation to cover these types of costs for adult children. See, e.g., Gold v. Marquette Univ. (In re Leonard), 454 B.R. 444, 457 (Bankr. E.D. Mich. 2011).”

Duane Morris also reports about a Massachusetts case, DeGiacomo v. Sacred Heart University, Inc. (In re Palladino), Adv. Pro. No. 15-01126, 2016 Bankr. LEXIS 2938 (Bankr. Mass. Aug. 10, 2016), the Massachusetts bankruptcy court concluded that the debtors’ pre-bankruptcy payment of their child’s college tuition was not avoidable as a constructively fraudulent transfer because the debtors received reasonably equivalent value. The bankruptcy court held that “[a] parent can reasonably assume that paying for a child to obtain an undergraduate degree will enhance the financial well-being of the child which in turn will confer an economic benefit on the parent.” Accordingly, the court concluded that this benefit “constitutes a quid pro quo that is reasonable and reasonable equivalence is all that is required” to shield a transfer from avoidance as a constructively fraudulent transfer.

This is an interesting issue to watch. Many people predict that student loan repayment is reaching crisis levels, like the housing bubble did in 2008. I am not convinced by this argument, because the research doesn’t support it. (Urban Institute, University of Maryland, Education Review, Forbes. ) However, the rising cost of colleges and the increased use of student loans is a concern that needs to be brought under control.

I believe that there is a concrete financial benefit that parents receive by assisting in their children’s education. Parents assisting adult children with college tuition should not be sued because they end up in bankruptcy three years after offering the assistance. Unless the trustee can prove some sort of concrete fraudulent intent, the assistance should be left alone.

If you find that you cannot keep up with your debt because of unfortunate financial circumstances- call today to see if bankruptcy is a viable option for you.

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Bankruptcy and the Book of Mormon


Wall Street Journal blog post discussed an interesting bankruptcy case in Illinois. Anna Robinson filed for chapter 7 bankruptcy in 2014.

When you file for bankruptcy, all of the property you own becomes property of the bankruptcy estate. The bankruptcy estate, is defined as “All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.” See Section 541 of the Bankruptcy Code.

So- when Ms. Robinson filed for chapter 7 bankruptcy, all of her property became the legal property of the bankruptcy estate. As such, all non-exempt property owned by Ms. Robinson became at risk for being liquidated by the bankruptcy trustee. Ms. Robinson’s case is interesting because she has an original 1830 edition of the Book of Mormon, one of the main works of scripture for the LDS Church. The papers filed in Ms. Robinson’s bankruptcy cited a recent sale of a similar Book of Mormon for over $45,000. Ms. Robinson had a total of around $23,000 in unsecured debt that she was attempting to discharge through bankruptcy.

The Trustee assigned to Ms. Robinson’s bankruptcy case attempted to force her to sell the rare edition of the Book of Mormon. Ms. Robinson objected to this, and argued that Illinois law allowed her to “exempt” the Book of Mormon from the bankruptcy estate. (See discussion regarding exemptions here).

A federal Judge allowed Ms. Robinson to keep the book, because the assets that Illinois law says a bankrupt person may keep include “necessary wearing apparel, Bible, school books and family pictures.” State lawmakers around the U.S., actually, make long lists of things that a bankrupt person can keep after filing for Chapter 7 protection to make sure that the process doesn’t leave that person penniless. Utah is no exception (see here). This judge overturned the Bankruptcy Court judge, who previously held that Ms. Robinson should have to sell the book (because her family had ten other original copies).

Various states have different exemptions that allow people to keep property through the chapter 7 process. When preparing to file for bankruptcy, its crucial that you seek out the advice of a local bankruptcy attorney that is knowledgable in state exemptions. Our attorneys are well versed in all Utah exemptions. Call (801) 781-2026 or visit our website at to schedule an appointment for a free consultation.

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Undue Hardship of Student Loans


Many different financial experts predict that student loan debt could be the next financial time-bomb facing the U.S.economy (WSJ, MarketWatchNPR, Forbes). One particular reason for this, is that the Bankruptcy Code provides practically no relief for “student loans.” Traditional, or government-backed student loans, have been nondischargeable through bankruptcy for quite some time. One of the major Molotov cocktails hurled by Congress in The Bankruptcy Abuse and Consumer Protection Act (“BAPCPA“) was the expansion of the student loan exception to discharge for private student loan lenders. In fact, one major misconception for many debtor-clients of mine is that only “student loans” or “loans from the government or banks to finance education” is nondischargeable.

11 U.S.C. 523(8) states:

A discharge under Chapter 7, 11, 12, or 13 does not discharge an individual debtor from any debt:

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—


(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.
This broad statute pretty much encompasses any “loan” or “benefit” received for the benefit of an “educational institution“. If pushed to the extreme, a credit card used to purchase lunch, or beer, for a student could fall under this exception to the bankruptcy discharge.
Education By The Numbers reports that that the supply of college graduates in many fields of study is exceeding the demand for their skills, which aggravates graduate unemployment and underemployment, which in turn increases the rate of student loan defaults.
WSJ reports that in a February 2015 quarterly report, the New York Federal Reserve estimated that student loan debt had climbed to $1.16 trillion in 2014. This is an massive number that translates into approximately $30,000 per student, based on an analysis that estimates 40 million Americans with outstanding student debt.
Adding to this problem, bankruptcy offers no help for these people (like me) – and their parents, who often cosign on student loans along with their college kid (fortunately, my parents didn’t have to co-sign–insert relief emoji here).
So the big question- what to do about it?
As cited above, an individual cannot discharge a student loan debt unless not discharging the debt would be an undue hardship on the individual or his/her dependents. If only the analysis were that simple.
In Utah, or any state under the appellate jurisdiction of the Tenth Circuit Court of Appeals, you must prove the following factors to discharge student loan debt:
1. The Debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself/himself and his dependents if forced to repay the loan
2. That additional circumstances exist indicating that this state of affiars is likely to persist for a significant portion of the repayment period of the student loans; and
3. That the debtor has made good faith efforts to repay the loans.
See Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir, 1987), adopted by the Tenth Circuit in Educ. Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302 (10th Cir. 2004).
These factors are incredibly difficult to prove. The National Consumer Law Center studied student loan dischargeability actions and found the following:
  • A consumer’s prospects of winning a student loan discharge case are slim and worse than in typical civil litigation.
  • Student loan holders and their agents, including the Educational Credit Management Company (ECMC), very aggressively fight discharge cases and are far less likely to settle out of court than in typical civil litigation.
  • Most consumer debtors need representation by an attorney to bring a hardship discharge adversary proceeding.
  • Most consumer debtors, particularly those most in need of a discharge, cannot afford the litigation costs needed to bring a hardship discharge adversary proceeding.
This paper by the NCLC finds that one huge problem is that most consumer debtor’s need legal counsel to help them file their bankruptcy case. Filing for bankruptcy is not like filing your tax returns, it is much more complicated. Most studies show that individuals who file their bankruptcy case without an attorney are much more likely to have their case dismissed. (See The Do-It-Yourself Mirage: Complexity in the Bankruptcy System, in Broke: How Debt Bankrupts the Middle Class at 157 (Katherine Porter, ed., Stanford: Stanford University Press, 2012).
The real answer, as usual, lies with meaningful congressional reform of 11 U.S.C. 523(8). The student loan exception does not need to be eliminated. But, perhaps it should just be a little easier to discharge student loans, or provide a better process to repay, like through Chapter 13.
Two years ago, we successfully prosecuted a student loan dischargeability case and were able to assist one of our elderly clients out of her student loan debt. It is possible, if you fight hard enough. Call today for a free consultation to evaluate your situation for bankruptcy protection.
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New Utah laws affecting bankruptcy


The Utah legislature is poised to pass several laws this session that will directly impact bankruptcy cases in Utah. Most people know that bankruptcy cases are governed by federal law (Title 11 of the United States Code). However– changes in laws that involve property ownership are always relevant in bankruptcy cases, because property ownership is governed by state law. Changes to the Utah Exemptions Act are important for all bankruptcy cases, because Utah law has opted out of the federal exemption scheme. see Utah Code Ann. 78B-5-513.

Medical Marijuana


I support SB 259, which permits an individual with a ‘qualifying illness’ to use cannabis and cannabis products. I am a strong supporter of the addiction recovery community and support abstinence treatment (such as the 12 steps). Nevertheless- I do support this bill, primarily because I was convinced by a client of mine who suffers from a debilitating disease and only finds medical relief through cannabis.

One interesting question, to me at least, regarding the medical marijuana act, is how it will impact bankruptcy cases. In May, 2015 the Colorado law firm of Otten Johnson discussed several new issues that arose in Colorado among business bankruptcy cases and the quandary between state laws that legalize cannabis and the federal laws that criminalize it. Several bankruptcy cases were dismissed, or converted to Chapter 7, because the business debtor operated marijuana dispensaries that are in direct violation of federal laws. Read the interesting synopsis here. It will be interesting to see if these type of issues arise in business bankruptcy cases in Utah should SB 259 pass.

From my reading of various legislative updates, I see two bills that may significantly impact new bankruptcy cases in Utah

HB 290 sponsored by Rep. Kraig Powell (R-Heber City) amends the terms “husband and wife” throughout the code to “spouse” or “married couple” as needed to retain the meaning of the statute. This impacts the homestead exemption and other areas involving the ownership of property between spouses. These changes are significant, not only in the exemptions act, but in all areas in Utah law that describe property ownership. As stated, property ownership is governed by state law, and these changes could have a profound impact on individual bankruptcy cases – particularly if the case involves a non-debtor spouse.

HB 165 sponsored by Rep. Brad Dee (R-Ogden) and Sen. Lyle Hillyard (R-Logan) amends the Act to exclude disability and veterans benefits from property that is exempt from execution if the recipient has been convicted of a felony and ordered to pay restitution to the child victim. As soon as the restitution has been paid, the exemption comes back into force. I’m not sure why this amendment did not take place in Utah Code Ann. 78B-5-508, where certain claims are allowed to attach against exempt property and why it is limited to disability and veterans benefits.


In other bankruptcy news, national retailer Sports Authority filed for Chapter 11 bankruptcy protection in Delaware. USA Today reports that SA “would seek to sell or close about 140 stores, or nearly one-third of its locations. The company admitted that it had lost market share to online retailers, became swamped with $1.1 billion in debt and failed to keep up with consumer trends, such as golf’s decline in popularity.”

In particular, CNN Money reported that the SA located at the Newgate Mall Ogden would be among the 140 stores to shutdown. Stores in Sandy, West Jordan and Taylorsville will also be closing. Sports Authority is not my store of choice for athletic gear, although I buy the occasional free weight and bike part. I do know that Santa was less than pleased with Sports Authority’s delivery system this past Christmas when it took 3 weeks to receive the family air hockey table because the delivery guys were shocked when my office wasn’t open at 11 pm. My guess is that Dicks, or another national outfit, will purchase SA’s assets, which is privately owned by a private equity group in L.A.


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The Stigma

Every so often I like to re-publish this post. Bankruptcy is a financial tool to get back on your feet. It is provided for in the constitution of our country.

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Walt Disney

Filing for bankruptcy protection is not an easy thing to do. It seems to me that one of the biggest obstacles to people finally filing for bankruptcy is the social stigma attached to it. Many people think that they are dead-beats or just irresponsible for filing for bankruptcy. Or that as soon as they file, that everyone in their ward or neighborhood will suddenly know about it. As if bankruptcy filings were included in the church announcements every sunday. This could not be any further from the truth. Often times, it is the economy and the decisions of other people (divorce or separation) that lead us in the filing for bankruptcy. It is IMPERATIVE for everyone thinking of filing for bankruptcy that they understand that bankruptcy is a FINANCIAL decision- not a MORAL one. The founders of our country understood the role of bankruptcy and provided for the creation of courts to administer bankruptcy cases in the  U.S. Constitution.

In my bankruptcy packet that I give to all new clients, I have a list of prominent individuals and business who have filed for bankruptcy. I think it is helpful, and interesting, to read the history of prominent, successful people who have filed for bankruptcy protection:

Mark Twain (Samuel Langhorne Clemens), 1835-1910, pre-eminent American author, lost most of his money investing in a worthless machine called the Paige Compositor, an automatic typesetting machine. He filed for bankruptcy in 1894 and discharged all his debts, but was determined to repay the debts. He knew he could earn money by giving lectures to large audiences, so he traveled to Europe and spent the next four years lecturing in every major city. He used the proceeds from these lectures to repay all his debts. He also wrote several of his more famous books after filing bankruptcy including Pudd’nhead Wilson andFollowing the Equator.

Henry Ford 1863-1947, automobile manufacturer, first two automobile manufacturing companies failed. The first company filed for bankruptcy and the second ended because of a disagreement with his business partner. In June 1903, at the age of 40, he created a third company, the Ford Motor Company with a cash investment of $28,000.00. By July of 1903 the bank balance had dwindled to $223.65, but then Ford sold its first car, and as they, say the rest is history.

Jerry Lee Lewis, 1935- , famous rock star, filed for bankruptcy in 1988 because of huge tax debts. He still gives live concerts and remains a successful musician.

Burt Reynolds, 1936- , movie actor, filed for bankruptcy in 1996 in Florida after his much publicized divorce from Loni Anderson. He had more than $10 million in debt. His dinner theater was foreclosed on by the mortgage lender and his ranch was sold. Since his bankruptcy he has continued to act in movies and was awarded the Golden Globe for Best Supporting Actor in the film Boogie Nights.

Walt Disney, 1901-1966, cartoon creator, filed for bankruptcy in 1920 after his main client of his new business filed bankruptcy. Disney said he could no longer pay his employees or the rent and had no choice but to file bankruptcy himself. In 1923 Disney formed a new company with a loan from his parents and his brother. In 1928 he created “Mickey Mouse” and became one of the most successful businessman in history.

Larry King, 1933-, talk show host, filed for bankruptcy in 1960 and then again in 1978. He said each time that he was deep in debt.

Donald Trump, 1946-, businessman, filed a Chapter 11 bankruptcy case for his casino empire in 2004 to reorganize his business after negotiations with his creditors failed. This was the second bankruptcy case for his casino business, in 1992 he had filed Chapter 11 bankruptcy for his casino business.

and last but not least, one of my heros:

Abraham Lincoln, (1809-1865), 16th President of the United States of America, declared bankruptcy in 1833 because of a failed business. He was required to repay his creditors over a period of 17 years, much longer than the maximum requirement in a Chapter 13 today, which is 5 years.

I cannot stress enough that filing for bankruptcy relief is a financial decision- not a moral one. Filing for bankruptcy does not make you a bad person or irresponsible. More often than not, filing for bankruptcy is the responsible thing to do for your family. Bankruptcy isn’t for all situations- but it can be an amazing tool to substantially eliminate or reduce your debt. Too many people wait until they are getting garnished or ready to have property seized before they call our office. I often ask myself- would the world be better off if Walt Disney had just decided to give in to creditors and close up his shop? Not according to my daughter.

Call today for a free consultation and get prepared for the future. The future can offer a lot of hope if you get moving.

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Bankruptcy Fraud and Tween Dancing


Abbey Lee Miller, star of Lifetime show “Dance Moms” was recently indicted on charges of bankruptcy fraud.

Based on the show description- I’m not surprised that I’ve never heard of it:

According to Wikipedia, ‘Dance Moms’ ” follows the Abby Lee Dance Company’s Junior Elite Competition Team of mostly preteen girls as they travel week-to-week to various dance competitions, winning awards and preparing for Nationals…while at the same time being prepared by Miller to be ‘professional, employable working dancers.’ The series depicts the doting mothers as rivals of each other on behalf of their own daughters, sometimes closing ranks against rival teams.”

Anyhow- back to the point:

The team at the Wall Street Journal Bankruptcy Beat are reporting that “Ms. Miller has been indicted on bankruptcy-fraud charges that she concealed income she earned from the show. Ms. Miller said her show wouldn’t bring in separate revenue—only publicity. A Pittsburgh jury has now accused her of concealing more than $750,000, according to the indictment. Ms. Miller filed for bankruptcy in December 2010 with about $356,000 in debt.” TMZ (who apparently broke the story, in addition to showing great tips on “Guess The Bunny Tail See Whose Hare-Raising Rear!”) also reports that “The indictment, which includes 20 counts related to the alleged scheme, also says Abby lied on monthly financial reports for her dance studio and did NOT report some of her income.”

All of the federal bankruptcy crimes are found in Title 18, Chapter 9 of the Bankruptcy Code. These include:

18 U.S.C. § 157 prohibits devising or intending to devise a scheme or artifice to defraud and, for purposes of executing or concealing the scheme either (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy proceeding; or (3) making a false statement, claim, or promise (a) in relationship to a bankruptcy proceeding either before or after the filing of the petition; or (b) in relation to a proceeding falsely asserted to be pending under the Bankruptcy Code.

So- it appears that Ms. Miller has been accused of not disclosing $750,000 of her income to the Bankruptcy Court. The maximum punishment for this crime is up to five years in federal prison.

It should be noted that Ms. Miller has only been accused of this. While the Wall Street Journal team states that a “jury” has accused her- this is a “grand jury.” She has not bee convicted yet. I can think of a number of defenses for Ms. Miller (namely- her statements on her future income appear to be purely speculative).

It is absolutely critical to be completely honest in your bankruptcy papers. The worse thing you can do is undertake to conceal assets from the lawyer and the court. It is also crucial to accurately disclose all sources of income in your bankruptcy papers. Trying to keep (and hide) your 2008 Ford F-350 is not worth spending 5 years in prison away from your family.

Bankruptcy provides for the honest, yet unfortunate debtor, a new opportunity in life.

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