A tough economy makes things even harder for those who are already struggling. That's why federal law allows people who can't weather the financial storm to fix their finances by filing for bankruptcy. Chapters 7 and 13 are the types of bankruptcy filings individuals use most often. Chapter 7 is a liquidation bankruptcy that lets people keep some property, sell the rest to pay creditors, and erase any remaining debts. Chapter 13 gives debtors breathing room to reorganize and come up with a plan to repay their debts over three to five years. Although bankruptcy laws are federal, Utah law also affects bankruptcy filings.
Locations for Filing
Utah's only bankruptcy court is in Salt Lake City, although there are also branches in Ogden and St. George.
Can I file for Chapter 7?
Residents can file for Chapter 7 liquidation bankruptcy if their incomes are less than the state median of $49,697 for one person. That limit increases with each additional family member, up to $66,825 for a family of four and even higher for larger families. Those who earn more than the median may still file under Chapter 7 if they pass a stringent means test.
Chapter 13 Repayment
Income also determines how long residents have to repay debts under Chapter 13 bankruptcy plans. Those who earn less than the state median are usually permitted 36 months, although the court can allow more time. People who earn more than Utah's median income may be allowed up to 60 months to repay.
Protecting your Property
Federal law allows those in bankruptcy to keep some of their property by exempting it from the bankruptcy proceedings. Although federal law lists dollar values for exemptions, residents must instead use the amounts the state has set. In many cases, Utah's exemptions are similar to what the federal system allows. For example, Utah's exemption for a home is $20,000, while the federal homestead exemption is $21,625 per person. Spouses can double that amount under both Utah and federal exemption rules. Utah also lets residents keep up to 75 percent of their disposable earnings, or 30 times the federal minimum wage, whichever is more. The federal level is 75 percent.
There's a two-year residency requirement to use Utah exemptions. If you haven't lived in Utah that long, an attorney can help you figure out which exemptions you should use.
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For legal advice regarding your situation, please contact a Utah bankruptcy lawyer.
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