Utah Bankruptcy Laws: What are the Laws Regarding Bankruptcies in the State of Utah?
The state of Utah allows those with excessive debts to file for either Chapter 7 or Chapter 13 bankruptcy. Like all other states, Utah also follows federal bankruptcy laws, although there may be slight state-specific details of the law, such as exemptions and the qualifying median income amount.
That being said, here, we will discuss the laws and other important details that are related to bankruptcies in the state of Utah.
Filing for bankruptcy in Utah
Utah bankruptcy laws allow you to file for either Chapter 7 or Chapter 13. However, before going ahead, you need to go through credit counseling. Only after this will you be able to fill in your bankruptcy petition and other forms and file them in court. You will be asked to show that you have received credit counseling from an approved agency. Then, after filing, you must participate in debtor counseling again before you can receive your discharge.
Additionally, before you file for bankruptcy, you need to compare your income to the median income of a household your size. In case your income is lower than the median income, you can file for Chapter 7 bankruptcy. If you choose to file for Chapter 13, then you are allowed to follow a three-year repayment plan rather than the usual five-year plan. However, if your income is higher, then you are not eligible to file for Chapter 7. This procedure is known as Utah means test.
Chapter 7 vs. Chapter 13 bankruptcy
What are the differences between filing for Chapter 7 and Chapter 13 bankruptcy? Chapter 7 is where your assets and property are liquidated by a trustee so that the net proceeds can go to the creditors, thereby helping you clear your debts in as little as four to five months time. Any amount exempted goes to you, the debtor, while the trustee will take some percentage as commission.
As mentioned before, you need to take a means test to see if your income allows you to file for Chapter 7. If your income is too high, then applying for Chapter 13 is a great choice. People whose income are too high to qualify for Chapter 7 bankruptcy can file for Chapter 13, where you come up with a repayment plan that usually lasts for about four to five years. This means that during the stipulated time, you must clear all or part of your debt using your future income. In most cases, Chapter 13 is a smart choice for debtors who wish to prevent house foreclosure, pay back taxes, make up for a missed mortgage or car payments, or keep valuable property which is not exempt and more.
To be eligible to file for Chapter 13, you must have a disposable income on top of a "regular source of income." Additionally, the total amount paid that you pay to creditors should be at least as much as the amount that you would have paid if you had filed for Chapter 7.
Utah Bankruptcy Exemption
Utah bankruptcy laws protect certain assets and property from being taken by creditors or trustees. These bankruptcy exemptions allow you to keep your assets even after you file for bankruptcy.
In the state of Utah, an exemption limit applies to any you may have in your property. Equity is the difference between the actual value of the property and the debt you owe on that property. In case the property has been secured using a loan, and you are not falling behind on your payments, and exemptions also cover the equity, then the debtor may choose to continue making payments and keep the property. However, if the property is not exempt, then it may be liquidated.