Pursuing bankruptcy under Chapter 7 of the Bankruptcy Code is the most straightforward way of getting a fresh start on your financial future, especially when combined with our credit rebuilding program. The vast majority of all Chapter 7 cases filed in Utah are “no-asset cases,” meaning that the debtor does not lose any assets or income when filing a Chapter 7 bankruptcy. You must meet the income requirements to file Chapter 7, determined by the amount of money your household makes and the number of people in your household.
If you think this may be the right option for your situation, you should seek help from a Salt Lake City Chapter 7 bankruptcy lawyer. A skilled bankruptcy attorney’s assistance will be essential to ensuring you comply with every filing requirement and complete the process efficiently.
Chapter 7 bankruptcy is essentially a liquidation of both “non-exempt” assets and debts. A non-exempt asset is anything owned by the debtor, which is not protected by Utah’s exemptions. These exemptions are quite liberal and include home and automobile equity, household furnishings, and even guns. Check out our comprehensive report on Utah’s bankruptcy exemptions.
Once a person files for bankruptcy under Chapter 7, they grant control over everything they own and owe to a trustee, who sells as many non-exempt assets as necessary to pay off the filing party’s debts.
The trustee keeps about 25% of any liquidated assets as an administrative fee. The first debts paid from the remaining liquidated assets are priority debts like unpaid income taxes less than three years old or past-due child support. Any leftover funds are distributed pro-rata to unsecured creditors who file a timely valid claim in the bankruptcy case.
The Bankruptcy Code forgives or “discharges” most remaining non-priority debt balances. However, the Code does NOT discharge any priority debts and a few non-priority debts in Chapter 7 bankruptcy. For example, the Code excepts from discharge fraudulent debts, alimony, child support obligations, and most types of student loans.
Secured debts are those whose payments are guaranteed by a security interest in a physical asset (a.k.a. collateral) like a car or house. In Chapter 7, the debtor chooses whether to keep the collateral and continue to pay the debt or surrender it and eliminate the debt.
A local Chapter 7 bankruptcy attorney will go into further detail about which debts a particular individual might be able to eliminate through this type of filing.
Once someone files for Chapter 7 bankruptcy, the Automatic Stay grants immediate relief from collection efforts, meaning that collection agencies and creditors must stop all efforts to collect on debts until the bankruptcy process is complete. Additionally, the Chapter 7 bankruptcy process tends to proceed more quickly than a Chapter 13 bankruptcy, especially with an experienced attorney’s assistance.
The Chapter 7 trustee cannot take any of the debtor’s income earned AFTER the bankruptcy is filed. However, commissions earned before filing but collected after filing are considered property of the bankruptcy estate subject to distribution to creditors. For example, a real estate agent who has a fully executed purchase and sale agreement BEFORE filing bankruptcy will lose the commission if the closing occurs AFTER filing.
As mentioned above, there are income-based restrictions on who can file for Chapter 7 bankruptcy in Utah. Specifically, suppose a person earns more than the state median income for a household of their size, and their average monthly income available after expenses exceeds about $7,500. In this case, they generally cannot file under Chapter 7. Additionally, anyone who successfully files for Chapter 7 bankruptcy cannot file again until eight years have passed since their first filing.
While Chapter 7 bankruptcy usually does not allow you to keep non-exempt assets and property, it does allow for the discharge of most of your debts. However, it does not universally wipe the slate clean for every kind of debt, so discussing your options with legal counsel could be beneficial before making a binding decision.
A Salt Lake City Chapter 7 bankruptcy lawyer will ensure you pick the right course of action for your unique circumstances and work tirelessly to help you pursue a positive final outcome. Call today to learn more.