Chapter 7 bankruptcy is designed to give you a fresh start. During the process, you will make a list of everything you own, and another list of everyone you owe. If you own anything valuable, the Court checks to see whether that property is exempt (meaning the Court can’t touch it). If it is not exempt, then the Court can sell it and give the money to your creditors. In exchange, the Court discharges or forgives all of your dischargeable debts completely.
What property can I keep?
In Utah, items that qualify as exempt include; most of your ordinary household furnishings, all of your clothing, your ordinary personal items, one motor vehicle or equity in one motor vehicle with a maximum value of $2,500, up to $20,000 per spouse equity in your residential home, and many other items. Nearly all Chapter 7 debtors receive a discharge without losing any property at all.
What debts go away?
All of them, except recent back taxes, student loans, debts incurred by fraud, debts incurred in a divorce decree, child support and alimony. There are a few other categories, but they only apply to very few individuals.
Do I have to go to Court?
Every debtor in bankruptcy must appear at a meeting of creditors, which is a short, 5-10 minute meeting where you testify under oath that you listed all of your debts and all of your property. Very few cases ever go to Court beyond that meeting.
What about tax refunds?
If you receive a tax refund during a Chapter 7 bankruptcy, or if you are entitled to receive a tax refund at the time you file your bankruptcy, there is a chance the Court may allocate the money. You should talk to our legal team regarding the sensitivity of timing if you need to use your tax refund proceeds.
What about bank accounts, cash, and retirement accounts?
Due to the fact bank accounts are not exempt, make sure you time the filing of your case between paychecks so that you don’t have a lot of money because none of the cash or bank accounts you have are exempt. 401(k) accounts are fully exempt. IRA accounts are exempt except for contributions made during the 12 months prior to filing your bankruptcy case.
How much does it cost?
Most cases are around $1000 in attorney’s fees, and the Court fee is $335. There is also a $33 per-person charge for credit reports. High income and self-employment cases are a little more. We offer flexibility in payments if you are not able to pay the full amount. In the meantime, I can stop some of the phone calls and harassment but the case can not be filed until the fees are paid in full.