Utah CHAPTER 7 BANKRUPTCY
Chapter 7 bankruptcy is often called liquidation bankruptcy. As opposed to Chapter 13 where the debtor must make a monthly payment for up to 5 years, Chapter 7 bankruptcy allows the debtor a “fresh start” without the burden of making any payments to the court for distribution to unsecured creditors. The risk in filing for Chapter 7 relief is the possibility of liquidation. The trustee that is assigned to oversee your Chapter 7 case is in charge of determining whether you own any “non-exempt assets” which they can sell for money to distribute to your creditors. Many Chapter 7 cases are “no asset cases” in which the trustee determines that there are little or no non-exempt assets worth selling. If you do have non-exempt assets that are reasonably valuable, you could be at risk in Chapter 7 of losing these assets. It is therefore important to know which assets are exempt and which are not. It may also be the case that one or more of your assets is partially exempt. This can happen because Utah’s Bankruptcy exemptions are set at certain amounts, so if the value or equity in your car or house is above the exemption amount, the trustee could sell the property, pay you back the exemption amount, and use the rest to pay creditors. Here is a list of Important Exemptions:
- Up to $2,500 of equity (value minus debt) in a vehicle ($5,000 for joint filers).
- Up to $20,000 of equity in your home ($40,000 for joint filers).
- Unlimited amount of equity in the washer, dryer, microwave, stove, refrigerator, freezer, sewing machine, carpets in use, beds and bedding, family clothing, and 12 months of provisions.
- $500 for sofas and related furnishings ($1,000 for joint filers).
- Your 401(k) plan, IRA, KEOUGH, or other ERISA-qualified plans.
Advantages of Filing Chapter 7
Chapter 7 bankruptcy is often the best choice for debtors who cannot afford to repay their debts. It allows them to discharge their debts and get a fresh start.
There are several advantages of Chapter 7 bankruptcy, including:
- Provides a fast fresh start. You are not stuck for five years making monthly payments.
- Once you file, any income you receive after filing is yours.
- No repayment plan.
- No debt limits.
- Lower attorney fees.
The process is relatively quick and simple, and it can provide relief from creditors and a fresh start financially.
Disadvantages of Filing Chapter 7
- You must be current on your payments to secured creditors (house, cars, etc.) if you want to keep them.
- The Chapter 7 trustee may sell your assets (including any lease or the debtor’s business) having more than nominal value over and above any liens and exemptions.
Is it better to file Chapter 7 or Chapter 13 Bankruptcy?
The type of bankruptcy you file for will depend on a variety of factors, including your income level, the amount of debt you owe, and your assets. Chapter 7 bankruptcy is typically best for those with a low income and a high amount of unsecured debt, such as credit card debt. Chapter 13 bankruptcy is typically best for those with a regular income and a smaller amount of debt. Contact us at DexterLaw.com for more details on how you can get the help you deserve today. You may also schedule a free consultation here.