The following are interesting things to know about filing bankruptcy. The decision to file bankruptcy can be tough so here are things you need to consider or know about before you make that decision:
• Deadlines: Deadlines are critical in bankruptcy court. The rules in bankruptcy are very complex, can be technical, and all case deadlines must be met. Failing to file the appropriate forms or documentation on time may result in your case being dismissed or delayed.
• You need to qualify to file for bankruptcy: Many people who would have qualified for a Chapter 7 discharge before the 2005 changes must now use Chapter 13 instead, which involve repayment of some of your debts. This is determined using the Means Test.
• Repayment Plans: In a Chapter 13 bankruptcy case a repayment plan that must be filed with the court. The court has a process that will determine exactly what income and expenses you have, and then calculate the reasonable expenses and monthly repayment amount for your case. In Utah this plan must be submitted to the court and confirmed.
• DIY Bankruptcy: Representing yourself in bankruptcy can be a huge mistake. The laws and the corresponding rules in bankruptcy can be very confusing, and many common errors could cost you a chance at a new financial start. An experienced attorney can help you determine the right laws to help you, represent you at the hearings and the meetings with creditors, and get most of the time save you money in the end.
• Focused Court: The Bankruptcy Court is a federal court which exclusively deals with bankruptcy cases. These courts are located around the United States, and they only handle bankruptcy cases and matters related to this legal area. You reside in an area that is served by a bankruptcy court.
• You get your own Trustee: The Department of Justice and the Bankruptcy Court in Utah will appoint a trustee in your case. This trustee will be responsible for overseeing your specific case and ensuring that all of the documentation is filed. The trustee is not in favor of either the consumer or creditors, but is an officer of the court instead.
• Get the best attorney: Choosing the right attorney that you can afford to represent you in bankruptcy court is very important and can affect the outcome of your case. You want a lawyer who will aggressively defend you and work hard to overcome any objections that may be presented by your creditors or the trustee. Experience is also very important, so you want an attorney who is very knowledgeable in bankruptcy law and that has been in the game for a long time.
• Your goal is a discharge: Another interesting things to know about filing bankruptcy is that a bankruptcy discharge is an order issued by the bankruptcy court stating which of your debts are forgiven. Usually this will include most unsecured debts that have not been repaid are eliminated in the process unless you have reaffirmed your obligation.
Utah Chapter 7 Bankruptcy or Utah Chapter 13 Bankruptcy
There are several situations where a Chapter 13 is preferable to a Chapter 7. A Chapter 13 bankruptcy is the only choice if you are behind on your mortgage or business payments and you want to keep your property, either in Utah or another state, at the end of the bankruptcy process. A chapter 13 bankruptcy allows you to make up their overdue payments over time and to reinstate the original mortgage agreement. In general, if you have valuable property not covered by your Utah bankruptcy exemptions that you want to keep, a chapter 13 filing may be a better option. Also, people file Chapter 13 bankruptcy because they have too much income to file a Chapter 7 bankruptcy or have the kind of debt that is non- dischargeable in a Chapter 7 (e.g. certain taxes). However, for the vast majority of Utah residents who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.
Advantages to a Utah Chapter 7 filing:
• You receive a complete fresh start. After the bankruptcy is discharged the only debts you owe will be for secured assets on which you choose to sign a “Reaffirmation Agreement.”
• You have immediate protection against creditor’s collection efforts and wage garnishment on the date of filing.
• Wages you earn and property you acquire (except for inheritances) after the bankruptcy filing date are yours, not the creditors or bankruptcy court.
• There is no minimum amount of debt required.
• Your case is often over and completely discharged in about 3-6 months.
Disadvantages to a Utah Chapter 7 filing:
• You lose your non-exempt property which is sold by the trustee. If you want to keep a secured asset, such as a car or home, and it is not completely covered by your Utah bankruptcy exemptions then Chapter 7 is not an option.
• If facing foreclosure on your home, the automatic stay created by your Chapter 7 filing only serves as a temporary defense against foreclosure.
• Co-signors of a loan can be stuck with your debt unless they also file for bankruptcy protection.
• If you filed a prior case and received a discharge of your debts, you can only file a second Chapter 7 bankruptcy case eight years after you filed the first case.
Advantages to a Utah Chapter 13 payment plan:
• If you choose and you can afford the payment plan, you can keep all your property, exempt and non-exempt.
• While debts are not canceled as in a Chapter 7 discharge they can be reduced under a Chapter 13 payment plan.
• You have immediate protection against creditor’s collection efforts and wage garnishment.
• More debts are considered to be dischargeable (including debt you incurred on the basis of fraud and credit card charges for luxury items immediately prior to filing).
• If the Chapter 13 plan provides for full payment, any co-signers are immune from the creditor’s efforts.
• You have protection against foreclosure on your home by your lender as long as you meet the terms of the plan.
• You have more time to pay debts that can’t be discharged by either chapter (like taxes or back child support).
• You can file a Chapter 13 at any time.
• You can file repeatedly.
• You can separate your creditors by class where different classes of creditors receive different percentages of payment. This enables you to treat debts where there is a co-debtor involved on a different basis than debts incurred on your own.
Disadvantages to a Utah Chapter 13 payment plan:
• You create a payment plan where you use your post bankruptcy income. This ties up your cash over the Chapter 13 plan period.
• Legal fees are higher since a Chapter 13 filing is more complex.
• Your plan and therefore your debt will last for 3 to five years.
• You are involved in the bankruptcy court process for the term of the 3-5 year plan.
• Stockbrokers and commodity brokers cannot file a Chapter 13 bankruptcy petition.
Filing for Bankruptcy without an Attorney
You are not required to have an attorney to file for bankruptcy. In some simple Chapter 7 cases, you can file on your own (it’s called filing “pro se,” meaning that you represent yourself) if you are willing to put in some time and research. However, in many cases, it’s a good idea to have a bankruptcy attorney. The importance of an attorney depends on the complexity of your case and whether you are filing a Chapter 7 or Chapter 13 bankruptcy.
When Is it Feasible to File Without an Attorney?
The general rule is the simpler your bankruptcy, the better your chances are to complete it and receive a discharge on your own. So it’s usually more feasible to file without an attorney if you are filing a simple Chapter 7 bankruptcy. If your household income is less than the state median, you own little or no assets, and you don’t have any priority debts or creditors alleging fraud against you, then your case is likely simple enough for you to handle without an attorney.
What Is a Priority Debt?
Bankruptcy is an excellent tool that helps many people overwhelmed with debt get back on their feet. But it might not discharge (get rid of) everything that you owe. Priority debts get paid first if money is available to pay creditors. More importantly, they’re non-dischargeable—they don’t go away in bankruptcy.
Debts that you’ll remain responsible for include (many, but not all of these debts are priority in nature):
• child support, spousal support, or another domestic support obligation
• fines, penalties, and restitution imposed as punishment for violating the law
• some taxes
• intoxicated driving debts
• homeowners’ association dues assessed after filing for bankruptcy
• retirement plan loans
• money borrowed to pay off non-dischargeable tax debt (for instance, the credit card debt incurred after using your account to pay a tax bill), and
• debts determined non-dischargeable in a previous bankruptcy.
A student loan won’t get wiped out either unless you can prove to the court that it would be a hardship to make you pay it. Most people are unable to meet the standard, however. It can be costly to file and litigate the lawsuit necessary to prove the case, as well. Additionally, any creditor can file a non-dischargeability complaint asking the court to determine that a debt shouldn’t be discharged in your case. To win, the creditor will need to prove that one of a variety of situations exists.
• You committed fraud (for instance, you wrote a bad check or lied about your income on a credit application).
• You charged a luxury item less than 90 days before you filed for bankruptcy.
• You intentionally harmed someone or damaged their property.
• You embezzled funds or stole money.
• You failed to list all creditors in your bankruptcy petition.
If you suspect that you might have non-dischargeable debts, or that a creditor might file a lawsuit against you, it’s probably not a good idea to represent yourself. Instead, consider speaking with a bankruptcy attorney. The lawyer can consult with you about the status of your debt and whether proceeding forward is in your best interests. However, keep in mind that even the simplest Chapter 7 requires you to fill out extensive paperwork, gather financial documentation, research bankruptcy and exemption laws, and follow the local rules and procedures.
When Is it a Bad Idea to File Bankruptcy Without an Attorney?
Pretty much anytime. Let’s be honest – you never went to law school. You’ve never studied the bankruptcy code. And even if you did, without the prior experience and background, you shouldn’t try to do this yourself.
This is like doing brain surgery on your financial life. You wouldn’t do brain surgery on yourself would you? Of course not. So don’t try to do brain surgery on your financial affairs. There are many reasons to file a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy. You may want to file a Chapter 13 bankruptcy because you wish to catch up on mortgage arrears, get rid of your second mortgage, cram down (reduce) your car loans, or pay back non-dischargeable priority debts, such as back taxes or support arrears. Or maybe you make too much money to qualify for a Chapter 7 bankruptcy. No matter what your reason is, most Chapter 13 cases are too difficult to file on your own. Chapter 13 bankruptcies are a lot more complicated than Chapter 7s. In addition to filling out the official bankruptcy forms (and perhaps some local forms), you must also design a proposed repayment plan, something that is very difficult to do without the expensive software that most attorneys use. Also, certain actions such as stripping your second mortgage or cramming down a car loan will usually require filing additional bankruptcy motions and paperwork with the court. As a result, even some attorneys will limit their bankruptcy practice to Chapter 7 cases because they feel they are not qualified to handle a Chapter 13. In fact, an overwhelming majority of Chapter 13 cases filed without an attorney get dismissed by the court. So if you are planning to file a Chapter 13, it is a good idea to hire a qualified attorney.
If You Have a Complicated Chapter 7 Case
Certain Chapter 7 cases are more complicated than others. Your Chapter 7 will usually be more complex if you own a business, have income above the median level of your state, have a significant amount of assets, or have creditors who can make claims against you based on fraud. If any of the above applies to you, you risk having your case dismissed, your assets being taken and sold, or facing a lawsuit in your bankruptcy to determine that certain debts should not be discharged. In that case, it is advisable to hire an attorney to handle your bankruptcy.
If You Are Not Comfortable Doing it on Your Own
Even if you have a simple Chapter 7 case, bankruptcy can be an intimidating and time-consuming process. You will need to accurately fill out many forms, research the law, and attend hearings. If you are not comfortable with any aspect of the bankruptcy process, you should consider hiring an attorney who will prepare the forms, attend the hearings with you, and guide you through the process.
Filing for Bankruptcy in Utah
Are you a resident of Utah and thinking of filing for Chapter 7 or Chapter 13 bankruptcy? If so, you will have to participate in credit counseling before you file, complete the bankruptcy petition and other required forms, and file those forms in the Utah bankruptcy court. After filing, you must complete debtor counseling before receiving your discharge. Although most of the bankruptcy process is governed by federal law, there is some Utah-specific information you will need to know before filing.
Pre-Bankruptcy Credit Counseling and Pre-Discharge Debtor Education in Utah
In order to qualify for Chapter 7 or Chapter 13 bankruptcy, you must show that you received credit counseling from an agency approved by the U.S. Trustee in Utah within the six month period before you file for bankruptcy. You’ll also have to take a debtor education course before you get a bankruptcy discharge.
Utah Bankruptcy Exemptions
Utah has a set of bankruptcy exemptions which help determine what property you get to keep in Chapter 7 bankruptcy and play a role in how much you repay unsecured creditors in Chapter 13 bankruptcy. Some states allow debtors to choose between the state exemption system and a set of federal bankruptcy exemptions but Utah is not one of them. In Utah, you must use the state exemptions–the federal bankruptcy exemptions aren’t available.
Completing the Bankruptcy Forms in Utah
When you file for Chapter 7 or Chapter 13 bankruptcy, you must complete a bankruptcy petition, a number of schedules containing detailed information about your finances, and several other forms, including a lengthy form known as the “means test” (for Chapter 7) and a similar form for Chapter 13.
Finding Means Test Information for Utah
When you file for bankruptcy in Utah, you must compare your income to the median income for a household of your size in Utah. If your income is less than the median, you will be eligible to file for Chapter 7 and, if you choose to file for Chapter 13, you can use a three-year repayment plan (rather than five years). This is called the means test. If your income is above Utah’s median income, you still might qualify for Chapter 7, but you’ll have to provide detailed information about your expenses and payments on secured debts in order to find out. Most Chapter 13 filers also have to provide this information.
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It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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West Jordan, Utah
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