What do you need to survive? Could you get by with a car that is worth only $2,500? How about a house worth $20,000? Only make $24,000 last year and, as a single parent with two young children, are you counting on one of the last vestiges of government welfare, the Earned Income Credit, to help you survive next February?
In my experience, most people have an innate ability and goodness to decide what is necessary for survival. Unfortunately, the same cannot be said of the Utah Legislature. Welcome to Utah -- a pretty stingy state.
I know some people think not being able to pay a bill should be a crime, but since the days of Charles Dickens, debtor prisons have fallen out of use. By the time Utah became a state in 1896, most state constitutions had included something like Article I, Section 16 of the Utah Constitution: "There shall be no imprisonment for debt except in cases of absconding debtors."
You can't be arrested for not paying your debts in Utah. It is unconstitutional. You can be arrested for not showing up in court when ordered, but that isn't because you owe money -- it is because you didn't show up to court.
When contemplating the law relating to the collection of debt, I always think of Matthew 6:12: "And forgive us our debts, as we forgive our debtors." Each state has laws relating to how much the state forces a creditor to forgive a debt.
Laws are in place to keep a creditor from taking a debtor's clothes, so the creditor can't take the shirt off your back. Section 78B-5-505 of the Utah Code contains a list of what creditors can't take from debtors in Utah. The attorney-ese term is "exemption statute."
Exempt property is property a creditor can't forcibly take. Utah's exemption $2,500 and $20,000 for a house. Important caveat: A secured creditor who has taken property as collateral for a loan, like most home mortgages and car loans, can still take their collateral, i.e., foreclose or repossess. Exemption laws only apply to property that has equity or value or that is completely paid off. If you owe more on your house than it is worth, you don't have a homestead exemption.
Each state has its own exemption laws, and Utah's provide an interesting glimpse of what our lawmakers find necessary for survival. One unique Utah exemption is an unlimited exemption for "provisions for one year." I'm not sure if that includes ammunition, but I wouldn't want to be the creditor raiding the bunker to find out.
While a year's supply for the citizenry is a noble aspiration, one recent addition to Utah's laws is an unlimited exemption in unmatured life insurance policies. This exemption reads like an ad for the insurance lobby: "If you want to keep liquid cash away from your creditors, go buy a Variable Universal Life policy -- totally protected liquidity." Hardly noble and one of those exemptions that most people would find an abusive manipulation of the law for the primary benefit of insurance companies.
A most notable absence from Utah's exemptions is another form of hidden corporate welfare. The Earned Income Credit is provided to the working poor with children. If you don't work and have children, you don't get the Earned Income Credit, a check from the government at tax time.
That check is fair game for your creditors in Utah. To date, lobbyists representing several industries have blocked attempts by the state's consumer bankruptcy attorneys (who would also be negatively impacted by changing the law) to make the Earned Income Credit exempt property.
It is a glaring omission from our state's exemption law. It is the equivalent of allowing creditors to garnish food stamps and Social Security. One hand of the government giveth, the other taketh away. Too bad the poor can't afford lobbyists.
E. Kent Winward is an Ogden attorney. He can be reached at 801-392-8200 or firstname.lastname@example.org.