Bankruptcy
Many in today’s economy struggle to keep their finances in order. Increasing financial responsibility and decreasing income often lead to large amounts of debt. If you cannot pay your debts and see no way out, we will show you options. If bankruptcy is your solution, Attorney Chad B. McKay will guide you through the maze of federal bankruptcy law.
The law office of Chad B. McKay has filed bankruptcy for Utah clients like you since 1991. He is a caring and knowledge lawyer who knows how to help. Call the law office of Chad B. McKay today to discuss your options. (801) 621-6021
10 things you should know about Utah bankruptcy
1. The U.S. Constitution has a Bankruptcy Clause (Article I, Section 8, Clause 4. Our founding fathers rejected the idea of debtors’ prisons and saw freedom in a fresh financial start.
2. It stops harassment from creditors the day you file.
3. Chapter 7 of the U. S. Bankruptcy Code allows a complete discharge of your debts if you qualify. Your debts will be wiped out.
4. Chapter 13 of the U. S. Bankruptcy Code allows a wage earner reorganization which allows you to pay a portion of your debts in monthly installments and discharge the balance.
5. Filing a Chapter 13 bankruptcy stops collections against co-debtors, people who signed the debt with you.
6. You can often file a Chapter 13 bankruptcy even if you were discharged in a Chapter 7 bankruptcy in the last seven years.
7. State and local income taxes can be wiped out in many cases.
8. You can usually keep your home after filing if you can make the payments.
9. Chapter 11 bankruptcy allows a business reorganization under which the business can delay payment of debt while restructuring and continuing to operate.
10. An emergency bankruptcy can be filed within hours.
What is Chapter 7 Bankruptcy in Utah?
The majority of all consumer bankruptcy filings are for Chapter 7. For those in dire financial straits, Chapter 7 provides a means for a fresh start. Chapter 7 is oftentimes referred to as liquidation because debtors are required to sell their non-exempt resources and distribute the proceeds to creditors. While the prospect of liquidating your property is indeed troubling, the key here is that debtors are only required to sell non-exempt resources. In many instances this means that debtors can file for Chapter 7 without losing any assets. Gaining a better understanding of Chapter 7 bankruptcy will help you determine whether it is suitable for your circumstances.
Who is a Candidate for Chapter 7 Bankruptcy?
Liquidation can be problematic for businesses so Chapter 7 bankruptcy is generally most appropriate for individual debtors. But even among individuals, Chapter 7 bankruptcy is not always the best alternative; Chapter 13 bankruptcy sometimes provides a better remedy to those with a regular income. It is safe to say, however, that for debtors with little or no income, Chapter 7 bankruptcy is usually the most suitable type of bankruptcy. The one limitation is that debtors who have had their debt discharged under Chapter 7 bankruptcy or have completed a Chapter 13 plan within the past eight years cannot petition for Chapter 7.
Do You Qualify For Chapter Seven Bankruptcy?
In determining whether to file for Chapter 7 bankruptcy you should evaluate your financial situation with a bankruptcy attorney. Ultimately you must decide whether you have enough debt to justify filing for bankruptcy. The amount of debt is not as important as your inability to repay it. Some debtors file for bankruptcy with a relatively small amount of debt while others wait until they have accumulated exorbitant amounts of debt before filing. With the assistance of an attorney, you should evaluate your debt, income, expenses and assets. A careful examination of this will help you determine whether Chapter 7 bankruptcy is suitable.
Chapter 7 bankruptcy only discharges certain types of debt so the first thing to consider is whether filing will discharge your debts. In most instances, Chapter 7 bankruptcy discharges the following types of debt:
Medical bills
Civil judgments
Credit card debt
Unsecured loans
You also need to know which types of debt cannot be discharged under Chapter 7 Bankruptcy. The following debts fall into this category:
Student loans
Unpaid taxes
Alimony
Child support
Secured loans such as mortgage and car payments
Criminal fines
Because Chapter 7 does not discharge every type of debt, the real question is whether your dischargeable debt is high enough to justify filing for Chapter 7. If your debt consists mostly of student loans and unpaid taxes, Chapter 7 is probably not a suitable remedy. If your debt consists mostly of credit card debt and medical expenses, however, Chapter 7 could be very appropriate. As a general rule, this type of bankruptcy is only suitable if your dischargeable debt outweighs your assets and you have little chance of repaying the debt.
Your evaluation would not be complete without also considering your assets. Some assets are exempt from liquidation, meaning that you can retain them. Other assets must be surrendered and sold during Chapter 7 Bankruptcy to provide creditors with at least partial payment. In most instances, the following assets are exempt from liquidation:
One automobile
A primary place of residence and the equity in the property
401K plans
Life insurance policies
Personal effects such as household items and clothing.
Any non-exempt assets can be subject to liquidation. Debtors with a significant amount of non-exempt assets must be ready to surrender them if they file for Chapter 7 Bankruptcy.
The U.S. Bankruptcy Code requires debtors to disclose all of their monthly income and expenses. In addition to wages earned, debtors must disclose all other sources of income. The income and expenses are subjected to a means test. Debtors who pass the means test are presumed to qualify for Chapter 7 Bankruptcy. Debtors who do not qualify may still be able to file for Chapter 13 Bankruptcy.
How Chapter 7 Bankruptcy Works
When you file for Chapter 7, an automatic stay is immediately issued which prevents creditors from collecting debts and repossessing your property. A trustee is appointed to collect all non-exempt assets. The trustee then sells the non-exempt assets and divides the proceeds among your creditors. Not everybody loses their assets – exempt assets are not subject to forfeiture. Once the bankruptcy is complete all of your dischargeable debts will be discharged.
If you are concerned about losing certain assets in a Chapter 7 proceeding, you may be able to sign what is called a reaffirmation agreement. A reaffirmation agreement essentially permits you to keep certain property outside of the bankruptcy. By executing a reaffirmation agreement you can continue to pay down a mortgage or car payment to prevent forfeiture.
The most difficult part of filing for Chapter 7 bankruptcy is determining whether it is suitable to do so. An attorney can help you evaluate your circumstances. After deciding that Chapter 7 bankruptcy is indeed suitable, the bankruptcy proceeding mostly consists of following the rules outlined in the U.S. Bankruptcy Code. A bankruptcy attorney can help you follow the appropriate timeline and ensure that all of the requisite paperwork is filed.
What is Chapter 11 Bankruptcy?
Chapter 11 Bankruptcy is primarily utilized by businesses looking to reorganize. While Chapter 7 bankruptcy is available to businesses, many businesses find that liquidation is disadvantageous. In some regards, Chapter 11 is similar to Chapter 13 in that debt is restructured and a new repayment plan is created. Chapter 11 also shares some characteristics with Chapter 7 because certain assets may be forfeited to repay creditors. Under Chapter 11 bankruptcy, businesses are permitted to continue operating after they have filed for bankruptcy.
Where Chapter 11 bankruptcy gets complicated is in determining which assets are exempt from forfeiture. Depending on the business entity in question, assets can be treated differently. Stockholders do not risk forfeiting their assets when a corporation files for Chapter 11 bankruptcy. Partners in partnerships may be required to forfeit personal assets or file for personal bankruptcy to protect their assets. Sole proprietors may have to forfeit their personal assets to repay their business debts. Asset exemptions become even more complicated when dealing with international businesses or when parent companies are involved.
Chapter 11 Bankruptcy can also be utilized by individuals who have secured debts that exceed $1,010,650, and/or unsecured debts that exceed $336,900.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy differs from Chapter 7 bankruptcy because the debtor actually repays some or all of the debt. This is accomplished using a Chapter 13 restructuring plan which provides debtors with better terms such as lower interest. Because restructuring debt involves repayment instead of discharge of debt, debtors who utilize Chapter 13 bankruptcy must have a regular income. Debtors work with their attorney to determine how much of their future income they can use for repayment of debt.
How Chapter 13 Bankruptcy Works in Utah
Debtors who file for Chapter 13 bankruptcy can provide input as to how their restructuring will proceed. Debtors work closely with their attorney to determine terms most favorable to their particular circumstances. The attorney drafts a written plan and submits it to the court for approval. Repayment begins about 30 days after your case is filed with the bankruptcy court, and the debtor is allowed a 3 to 5-year window in which to repay creditors. Debtors are permitted to retain all of their property. Creditors are required to follow the plan closely and cannot collect debts not outlined in the plan. The court oversees the entire process to ensure that debtor and creditor alike adhere to the terms of the plan.
Filing for Chapter 13 bankruptcy requires more involvement from the debtor than filing for Chapter 7 bankruptcy. The first step is determining whether it is suitable to file for Chapter 13 bankruptcy. As with Chapter 7 bankruptcy, it is necessary to fully evaluate not only your debts, but also your assets, income and expenses. Chapter 13 bankruptcy is most appropriate for those with a regular income but who continue to have difficulty repaying debts and covering monthly expenses.
Upon deciding that Chapter 13 bankruptcy is a good alternative, you should create a budget you can live with. Based on this budget, and with the assistance of an attorney, you should create a Chapter 13 restructuring plan to repay your debts. Your attorney will submit this plan to the court for approval and help you with filing forms and pleadings in a timely fashion. Throughout the bankruptcy proceeding, you will be required to attend meetings with creditors and the court. Once you have made all of the payments required by the Chapter 13 plan, the plan will be terminated and all debts included in the plan will be discharged.