Filing Chapter 7 Bankruptcy in Utah

Chapter 7 bankruptcy is often called a "liquidation" since the bankruptcy court usually discharges most unsecured consumer debts which often include credit card balances and medical bills.  Some unsecured debts, however, cannot be discharged, such as child support, income taxes, and student loans.

Your Property in a Chapter 7 Case

Debts that are secured like mortgage and auto loans must be reaffirmed by the person filing bankruptcy ("petitioner") who must continue to make the loan payments to keep the property or be required to surrender the property to the lender. 

Typically a bankruptcy petitioner may keep his or her property unless the court trustee determines that the retained property has substantial equity exceeding state law allowances.  Utah law allows the petitioner to have $40,000 in a primary residence if married and $2,500 in equity in an automobile.

Who is Eligible for Chapter 7?

Some people may not qualify for a Chapter 7 bankruptcy.  If the petitioner resides in Utah and files in that jurisdiction, his or her household income cannot exceed the median income for Utah.  If the petitioner’s household income is too high because it exceeds Utah’s prescribed median income under a Chapter 7, then the petitioner use a Means Test to calculate the income and expenses to re-assess eligibility for a Chapter 7.  If the petition is determined ineligible to file a Chapter 7, then he or she may consider filing a Chapter 13 if appropriate.

Automatic Stay and Petitioner Protection

Once a Chapter 7 is filed, the federal Bankruptcy Code initiates an automatic stay, prohibiting creditor collection activities, such as collection calls and garnishments.Additionally, this can stop lawsuits and even a pending foreclosure of a home.

First Hearing: Meeting of Creditors

Around 30 days after a bankruptcy has been filed, Section 341 of the United States Bankruptcy Code requires holding a creditors "341A hearing".  This meeting, however, usually does not have creditors showing up, but the bankruptcy trustee may ask additional questions about income and assets and will ask the petitioner to confirm the truthfulness of his or her statements.

The Trustee

The trustee is responsible for liquidating assets to help pay back the creditors.  Approximately 90 days after the 341A hearing, the official discharge order will be sent to the bankruptcy petitioner.

Costs of Filing Bankruptcy

Typically two costs are associated with filing a Chapter 7 bankruptcy, including the federal court costs (Utah charges $299) and the attorney fees.  Bankrutpcy lawyer fees are negotiable, and the attorneys typically base the fees on the complexity of the Chapter 7.  Attorney fees range in amounts, with Utah fees typically costs from $750 to $1,500

First Meeting with Your Attorney

The initial consultation is important, and the law firm gathers information to assess which options may be available to the client.  Because Chapter 7 filings can be complicated, it is important to meet with an attorney who practices bankruptcy.  The attorney may be able to help the client successfully go through the bankruptcy process and get a fresh start on finances.