Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is the most common form of bankruptcy. Chapter 7 Bankruptcy is also known as Fresh Start or Liquidation Bankruptcy. It usually takes 3-5 months from the time that you file for bankruptcy until you receive a forgiveness of debt (entry of the Notice of Discharge). Two important considerations with Utah Chapter 7 Bankruptcy are: (1) What happens to my debt? AND (2) What happens to my property?
What Happens to My Debt Under
Utah Chapter 7 Bankruptcy?
Forgiveness of Debt
Utah Chapter 7 Bankruptcy usually forgives the following debts, even if you have been taken to court and a judgment has been entered against you:
Credit card debts
Medical bills
Auto repossession deficiency debts
Personal or “Signature loans”
Auto accident claims
Judgments
Business debts
Leases
Guaranties
Tax penalties over 3 years old
Debt Not Forgiven/”Discharged”
Utah Chapter 7 Bankruptcy does not forgive or discharge all debts. Some debts will survive the bankruptcy process and are as valid and collectable as they were prior to the bankruptcy. These debts are:
Student Loans
Child Support
Alimony
Criminal fines or restitution
Debts resulting from intoxicated driving
Most taxes and any money borrowed on a credit card to pay those taxes
Debts you don’t list in your bankruptcy filings
Debts arising from a marital settlement agreement or divorce decree
Debts That May Be Forgiven/”Discharged”
There are three categories of debts which will be discharged unless the creditor objects to dischargeablity. These are:
Debts incurred on the basis of fraudulent acts
Debts from willful and malicious injury to another or another’s property
Debts from embezzlement, larceny or breach of trust (fiduciary duty)
Debts from embezzlement, larceny or breach of trust (fiduciary duty)
If you have a debt that fits under one of these four categories, your best approach is simply to do nothing and hope the creditor doesn’t come forward. If the creditor does object, you will have to respond if you want the debt to be discharged.
What Happens to My Property Under
Chapter 7 Bankruptcy?
In return for this forgiveness of debt, you agree to keep only certain property (your “exempt” property), turning the rest of what you own (your “non-exempt” property) over to the bankruptcy trustee.
Your Home and the Homestead Exemption. The homestead exemption allows individuals to claim $30,000 of their home equity as “exempt” in bankruptcy, and couples can claim $60,000 of equity as exempt. Of course, if you still owe money on your home, you must continue to make the mortgage payments if you want to keep your home.
For example, assume you have $50,000 of equity in your home above what is owed on it. If you are an individual filing Chapter 7 bankruptcy, only $30,000 of the equity is protected. In this case, the bankruptcy trustee could sell your home and distribute the remaining equity to your creditors. (To keep your home, you would need to file for Chapter 13 bankruptcy.) If you were a married couple filing jointly under Chapter 7, however, the $60,000 homestead exemption would allow you to keep your home.
Vehicle Exemption. Each individual is entitled to an exemption of up to $3,000 of equity in one automobile. Again, you must continue to make the car payments. If you are filing jointly with your spouse and you share one vehicle, you can each assert the vehicle exemption against the same vehicle if you are both on the same title. If the equity in the vehicle you share is not more than $6,000, it would be protected from bankruptcy.
Most Frequently Claimed Exemptions. Utah state law provides a limited list of things you are allowed to keep (“exemptions”), generally without regard to value:
Your washer and dryer, refrigerator, freezer, stove, microwave, sewing machine, carpets in use, beds and bedding, family clothing, and 12 months of provisions, as long as these items are not subject to a lien securing payment of a debt.
Personal injury settlements, judgments, etc. accruing as a result of bodily injury of the individual, to the extent the proceeds are compensatory.
Your 401(k) plan, IRA, KEOUGH or other ERISA qualified plan, EXCEPT amounts contributed or benefits accrued by or on behalf of a debtor within one year before the debtor files for bankruptcy.
Any money you earn after you file your bankruptcy case.
Additional Exemptions. Utah state law also provides a limited list of things you are allowed to keep (“exemptions”), up to a certain value:
Sofas, chairs and related furnishings up to $1,000 in resale value ($2,000 per couple).
Dining and kitchen tables and chairs up to $1,000 in resale value ($2,000 per couple).
Animals, books and musical instruments up to $1,000 in resale value ($2,000 per couple).
Firearms up to $250 in resale value ($500 per couple)
Tools of one's trade up to $5,000 in resale value ($10,000 per couple)
Married Couples
For those who are married, it is not required that both spouses file for bankruptcy – the husband or wife can file alone. Theoretically, you turn over your non-exempt or excess property to the trustee for distribution to your creditors. In practice, however, many debtors agree to pay the trustee additional money through a “buy-back agreement” so that they can keep most of their property.
Bankruptcy Process
Utah Chapter 7 Bankruptcy generally follows a certain timeline, which is as follows:
Schedule Your Free Initial Consultation
Call Millar Walker Attorneys and Counselors at (801) 424-5280 to schedule a free debt-relief evaluation. We are committed to getting you fast and affordable bankruptcy relief. Let us discuss your questions about stopping lawsuits, creditor harassment, and garnishments. We are available during regular business hours and by appointment evenings and weekends. We will work with you to find a financial arrangement so that you can get the relief you need.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
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