Bankruptcy is a right guaranteed by the United States Constitution as well as Federal and State statutes. Bankruptcy is designed to allow people to gain a fresh financial start by eliminating or reorganizing debt. Your creditors MUST stop all collection activities IMMEDIATELY after bankruptcy is filed. 

There are two types of bankruptcy that apply to most situations. The most common type of bankruptcy is Chapter 7 Bankruptcy. Under Chapter 7 a person is allowed to keep “exempt” assets (probably the majority of what you own), the non-exempt assets may then be sold to pay creditors. An experienced bankruptcy attorney will identify any issues and plan to reduce or eliminate the loss of belongings. The result of a successful bankruptcy proceeding is a “discharge,” which releases the debtor from payment of affected debts.

The second most common type of bankruptcy is Chapter 13. Under Chapter 13 we create a repayment plan which typically must repay only a fraction of your debt. The specified payment is made each month for a period of 3 to 5 years, similar to a car payment. Chapter 13 is often the most effective in dealing with secured creditors, such as mortgage companies and financing companies, who might otherwise repossess a home or car. Chapter 13 has additional advantages because it can extend the time to repay debts and reduce the interest rate and total debt repaid on car loans. We may even be able eliminate your 2nd mortgage or HELOC. Chapter 13 can also suspend collections against friends or family who cosigned on loans.

You should consider filing bankruptcy if you are being harassed by debt collectors, sued, garnished, are facing forclosure, or owe substantially more than you can afford to repay.

It is far better to deal with the problem today and receive a fresh start then to allow the financial problems to fester.

In general, any person or business can file for bankruptcy under Chapter 7. There is no minimum amount of debt required; however, a person who files usually owes considerably more than he or she can repay. Although it often makes sense for a husband and wife to file jointly, one may file without the other.

Only individuals can file under Chapter 13. Businesses must file under Chapter 11 to obtain a reorganization, which is a much more expensive and complicated process. Individuals qualify for a Chapter 13 bankruptcy if they owe less than $1,010,650 in secured debt and $336,900 in unsecured debts.

If you previously filed a Chapter 7 Bankruptcy (and received a discharge) you must wait 8 years before you may file another Chapter 7 and 4 years to receive a discharge under Chapter 13.  However, in some cases a Chapter 13 can provide relief even if filed sooner than 4 years after filing a Chapter 7.

If you previously filed a Chapter 13 (and received a discharge) you must wait 6 years before filing a Chapter 7, but only 2 years before filing under Chapter 13.

The first question to ask is, which state s exemptions apply? If a person has moved within the past two years then the exemptions of another state may apply. (That can be both good and bad depending on the other state). If you have moved from out of state make sure that your bankruptcy attorney checks to see whether those exemptions apply. If your attorney doesn’t you may end up wasting time, taking unnecessary steps or even losing thousands in assets!

Certain property is exempt in Bankruptcy proceedings and can’t be taken.  Most exemptions apply to each individual and can be doubled for assets jointly owned.

Here is a brief summary of Utah bankruptcy exemptions:

• Home equity for a primary residence with up to 1 acre up to $30,000 ($60,000 if co-owned)
  • Or other real estate worth up to $5,000 if not the primary personal residence.
• Car ($3,000 in equity in one vehicle for each owner)
  • We may also be able to claim an exemption for a motor vehicle that is actually used in your principal business
• Clothing (unlimited, excluding furs and jewelry)
• Sofas, Chairs and related furnishings up to $1,000
• Beds and bedding
• One refrigerator, freezer, washer, dryer, microwave, and sewing machine
• Equipment and Tools of Trade worth up to $5,000
• Dining and Kitchen Tables and Chairs worth up to $1,000
• Heirlooms or items of sentimental value up to $1,000
• Musical instruments, animals, and books worth up to $1,000
• Food storage & provisions for 1 year
• Personal Injury proceeds (to the extent compensatory)
• Various Financial Accounts & Benefits: a 401K, disability benefits (public and private), unemployment, child support, and most retirement accounts (excluding contributions made during the previous year).

After filing bankruptcy a person can keep most income or property received, with limited exceptions (large commissions or accounts receivable may be at risk, as well as life insurance policies and inheritances within 180 days).

If you have assets that are worth more than the Utah exemptions you should talk to a qualified attorney about your options, including: Chapter 13 Bankruptcy, exemption planning, or negotiating to buy out the Chapter 7 trustee.

Exemption planning is an important part of an effective bankruptcy. Although emergency bankruptcy filings are sometimes necessary, it is often to your advantage to plan several weeks in advance to get the most out of bankruptcy. Effective planning can save you thousands!

Most debts will be discharged (forgiven) in bankruptcy, including credit cards, medical bills, and most other debt. Debts that are secured by collateral will only be discharged if the debtor returns the property (though they may be redeemed or crammed-down).

Debts that won’t be discharged are student loans, most taxes, alimony and child support, government fines and penalties, debt obtained through fraud, and some debts obtained right before filing bankruptcy.  A discharge may also be denied if a person is not completely honest in a bankruptcy case, such as by concealing assets or transfers of property.

Will I lose my home if I file for bankruptcy?

If filed correctly, you should not lose your home because of bankruptcy. The most common way that a person loses their home after bankruptcy is because they simply can’t afford to make the monthly mortgage payments even after eliminating their other debts. The other way that a person could possibly lose their home is by filing a Chapter 7 bankruptcy while having too much home equity. In Utah a person is entitled to keep $20,000 in equity ($40,000 if owned in joint tenancy). This can be avoided by proper exemption planning or by filing under Chapter 13. Losing your home should be a strategic decision and should never be a surprise, talk with an experienced bankruptcy attorney if you think either of these situations may apply to you.

First, filing bankruptcy imposes an “automatic stay,” which causes all collection activities, including foreclosures, to stop immediately. Second, bankruptcy gives you some time to get funds to catch up your payments. Third, bankruptcy gives you the ability to force your mortgage company to receive the past due payments slowly over a period of up to 5 years with no interest or penalties (by filing under Chapter 13).

Under the current bankruptcy laws we can’t force your bank to lower your monthly mortgage payments.  However, we may be able to eliminate your second mortgage or HELOC.  These situations call for Mortgage Stripping (also called Lien Stripping).

If you have two mortgages on your home and the home is worth less than the first mortgage then the second mortgages can be stripped off in a Chapter 13 Bankruptcy. For example, lets say that our home is worth $200,000 and has a first mortgage of $210,000 and a second mortgage of $70,000. Because the home is worth less than the first mortgage ($200,000 < $210,000) we can strip off the second mortgage. That means that you only have to pay the first mortgage to keep the home. The same principles apply when there are more than two mortgages or liens on a home. This housing market provides many opportunities to strip loans from depreciated homes.

Utah has a homestead exemption that protects $30,000 in home equity ($60,000 if owned jointly). If you only have the exempt amount of home equity then you will not lose your home as long as you keep your mortgage current. Under Chapter 13 you can keep your home even if you do have more than the exempt amount of equity in your home. However, under Chapter 7 it is possible that the trustee will request to sell your home if they determine that there is more than the exempt amount of equity. He/she would be required to give you a check for $20,000 to $40,000 and would then give the rest to your creditors. If you have a substantial amount of equity in your home then you should discuss asset protection techniques with your attorney and should also consider a Chapter 13.

You will not lose your car in a Chapter 7 Bankruptcy unless you have substantially more than the exempt amount of equity in your car. If you owe more than what the car is worth then you can keep your car(s) as long as you continue making payments. You may also surrender your car without penalty.

If you have substantially more than $3,000 (or $6,000) in equity then you will want to consider filing a Chapter 13 bankruptcy, where you can keep your car and make minimum payments to the bankruptcy trustee (maybe as low as $50/mo). In a Chapter 13 bankruptcy we can also lower interest rates to around 5% and often lower your car payments. Contact an experienced bankruptcy attorney for more information and other options to help you keep your car or to help you carefully plan out how to purchase a replacement before filing for bankruptcy.

This is a common question. The short answer is … it depends.  Bankruptcy uses different exemptions than medicaid and other programs. The Utah legislature thinks that it is sufficient to allow each person only $3,000 in equity in a car.  I don’t think that’s enough, but that is what we have to deal with.  Transferring your car to a family member won’t work. If you have a lot of equity in your vehicle then you may want to discuss filing a Chapter 13 bankruptcy or other planning options.  Contact me to discuss a few legal methods to help you keep your vehicle.

First, the bankruptcy automatic stay prevents your car from being repossessed. Second, bankruptcy gives you some time to catch up your payments if you are behind. Third, in a Chapter 13 you can make up the past due payments over a period of up to 5 years. Fourth, you may be able to pay back only what the vehicle is worth rather than what is owed.

ATVs, boats, gun collections, etc. are typically not exempt assets and are not protected in bankruptcy. That means that in a Chapter 7 bankruptcy the trustee has the ability to collect these assets and sell them in order to repay your creditors. However, it is extremely rare for people who file for bankruptcy to lose their televisions and other basic property.

Often ATVs and other toys are secured with loans or credit cards and do not have equity. You can usually keep these items in a Chapter 7 if you continue to make the payments to the person owed. Sometimes we can even reduce your payments to the actual value of the goods, which is usually less than what is owed. Even if your TV and other nonexempt assets are fully paid for, the trustee will not take them if he/she determines that the costs of examining, collecting, selling, and distributing the proceeds exceeds the equity in the items. We have dealt with the bankruptcy trustees extensively and during your Free Consultation we will discuss whether the trustee is likely to go after assets in your situation.

DO NOT transfer these assets for less than fair market value because you think that you may lose them in bankruptcy!

It is very important to talk to a knowledgeable and experienced bankruptcy attorney about exemption planning to make sure you maximize your assets and avoid Fraudulent Transfers and Preferences. If the situation is handled incorrectly you may cost yourself or your loved ones thousands of dollars and also risk losing the forgiveness of your debts. Talk to an experienced bankruptcy attorney before transferring any property or paying money to family.

What happens if I cosigned on a loan for someone else?
Your bankruptcy filing will not have any effect on the other person. They can still keep their car or home even if you signed as a cosigner – as long as they make the required payments.

What happens to the cosigner of one of my debts?
Unfortunately, bankruptcy does not relieve a cosigner of their duty to repay the debt, but there are still a few ways to protect your cosigner. In a Chapter 7 bankruptcy the only way to protect the cosigner is to repay the debt after the bankruptcy. In Chapter 13 bankruptcy the cosigner will not have to make payments or be negatively affected during your bankruptcy if you reaffirm the debt, timely make the required plan payments, and repay the debt in the bankruptcy plan.

Bankruptcy can appear on your credit for up to ten years, but the practical affect is usually only felt for a couple years.  Because debts are permanently wiped out, the debts will stop showing as being past-due.  As a result your debt-to-income ratio will improve. Creditors also know that new debts after bankruptcy won’t be eliminated.  Most clients receive multiple credit card offers and offers for car loans after filing bankruptcy.   We caution clients to rebuild credit wisely.

Yes. Yes, you do. You also specifically need a lawyer who is experienced with bankruptcy filings. Bankruptcy is governed by a complicated web of statutes, rules and regulations, together with case law. Based on the number of calls that I get from people who have not hired me I can tell you that it is apparently not very hard to mess up what would otherwise be a simple case.

I have received many calls from people who have filed bankruptcy themself, usually with the help of a petition preparer, who then discover that they will lose thousands of dollars because of an oversight or simply because their timing was off by a week or so. At that point it is too late to help. A chapter 7 case can’t simply be cancelled and the person must turn over money (which they often no longer have) or face serious legal problems.

“But, come on, we’re buddies, tell me the truth, can’t I just do this without a lawyer?” No, it is simply too risky. Bankruptcy law is a mine field. You might get through it just fine, but you might file the wrong week and lose $3,600 that you don’t have, like someone I recently spoke with who hired an “experienced” non-attorney petition preparer. The knowledge, experience, and service we provide is more than worth the fees. Especially with our discharge guarantee.

A chapter 13 bankruptcy is a repayment plan where you typically repay only a portion of your debts. Filing Chapter 13 bankruptcy is kind of like calling a “time out” for your finances. We can stop all debt collection, lower car interest rates and payments, allow time to catch up on your mortgage, and create a budget that only requires you to repay the amount of debt that you can afford to repay. At the end of the 3 to 5 year period you will typically have your cars paid off, mortgage current, tax debts resolved, and other dischargeable debts forgiven. This is usually much cheaper than informal debt consolidation plans and is also guaranteed to succeed as long as you follow the terms of the repayment plan.