Bankruptcy
About Bankruptcy Law
Bankruptcy law is primarily comprised of the federal statutory law contained in Title 11 of the United States Code. One of the primary goals of the bankruptcy laws are to provide debtors with financial difficulty an opportunity for a fresh start.
In furtherance of this goal, bankruptcy law provides for the development of a bankruptcy plan that allows a debtor to resolve his debts through the division of his assets among his creditors. This court supervised division provides an orderly manner for the debtors non-exempt assets to be dispersed among the creditors with some measure of equality. It also also provides the debtor with assurance that when the bankruptcy is discharged they will have a fresh start free from the financial obligations incurred previous to the bankruptcy.
The form of the bankruptcy plan will depend on whether the debtor files a chapter 7 bankruptcy or a chapter 13 bankruptcy. A chapter 7 bankruptcy is a complete liquidation where all the debtors non-exempt assets are distributed to creditors and the debtor emerges in a relatively shorts time, usually under six months, free of the unsecured debts discharged through the bankruptcy. A chapter 13 bankruptcy is a reorganization where the debtor forms a plan that lasts from three to five years during which they make regular payments to bankruptcy court and pay down a portion of their total unsecured debt. As the end of this three to five year period the bankruptcy and all remaining unsecured debt is discharged.
Bankruptcy Chapter 7 FAQ’s
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Chapter 7 bankruptcy is a fresh start and a liquidation of your debts and your estate. When you file a chapter 7, a trustee (usually an attorney) will be assigned to administer your estate and take whatever assets they can and sell them to pay your creditors. The majority of chapter 7 cases are considered “No Asset Cases,” and the debtor (you) loses little or nothing because the assets are either exempt or of no value to the trustee.
Qualifying for a chapter 7 can be tricky in some cases. Generally speaking it depends on your income. If you make more than the average family of your size, you may not qualify. However…You need a good, competent attorney (like me) with the experience and creativity (like me) to get you qualified.
Most of your assets are exempt up to a certain value. In most cases, you may keep up to $20,000 (each owner) of equity in your primary residence. What that means is that usually you get to keep your home if the trustee can’t sell it for enough to pay off all mortgages and liens, closing costs etc. AND give each of the owners at least $20,000 cash. Contact us for more details. Other exemptions include automobiles* your furniture and appliances, musical instruments*, business tools*, clothing, sentimental items*, retirement plans such as a 401K, burial plots, and many other items. Contact us for more details. (*some exemptions are allowed only up to a certain value)
Having the right attorney means everything when it comes to exempting your property so you can keep it. You need an attorney that not only understands the exemptions, but one that will be willing to fight for your right to enforce them.
If an item of personal property is not exempt, the trustee may force you to turn that item over for sale or auction. If you really want to keep the item, most trustees will let you buy back the item from them. Most of the time this includes items such as automobiles, ATV’s, boats, etc. that are paid for, and/or have value above the exemption amount. If you have a tax refund coming to you at the time you file your case you WILL lose part or all of that refund. Contact us for more detail on how to protect your tax refund.
The filing of the case will stop all efforts to collect debts, including all garnishments, foreclosures, writs of execution and all court hearings related to the debt collection. If a collector continues to harass you in any way, after they have notice of the bankruptcy filing, we may be able to have them sanctioned and get them to pay you money! (Wouldn’t that be cool?)
Most of your unsecured debt (credit cards, medical bills, personal loans, deficiency amounts on repossessed cars, attorney fees etc.) are completely discharged in a chapter 7. Secured debt (car loans, RC Willey etc.) can usually be reaffirmed if you want to keep the item or surrendered if you want to give the item back to the lender and be free of the debt. In some cases even taxes and student loans can be discharged. Contact us for more information.
Depending on your specific situation, a chapter 7 can take as little at 3-5 months or as long as several years. Most “No Asset” cases are closed within 4-5 months.
It will lower your credit score and can stay on your credit for up to 10 years. However, most people filing a chapter 7 bankruptcy already have such bad credit that a chapter 7 doesn’t really hurt them much. In fact, many lenders will be “chomping at the bit” to lend you money right after you file a chapter 7. Contact us to find out why.
In Utah, most “competent” bankruptcy attorneys charge attorney fees ranging from $750 to $1,000 per case. In addition to the attorney fees, you must pay a court filing fee of $299 and approximately $30-$50 for a mandatory credit counseling class. (Contact us for more detail) If you own a business or have some other complicated matter, costs may increase.
As soon as you complete some personal and financial information for us and complete your credit counseling class we can be ready to file almost immediately. Occasionally we will file an “emergency” case (to stop a foreclosure or garnishment) but… be prepared to pay more in attorney fees.
This is one areas where having the right attorney can be critical. Generally speaking you cannot file another chapter 7 case within 8 years of a prior filing. However, there may be other “creative” alternatives that will accomplish the same thing as a chapter 7. I’m not disclosing my secrets here. You’ll have to come in and see me for more info.
Bankruptcy Chapter 13 FAQ’s
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First, it’s a chapter of bankruptcy that only experienced attorneys should file. If you hire an inexperienced attorney you can almost bet on having some major problems. Chapter 13 is a reorganization of your debt. In a chapter 13 we will put together a plan paying back a portion of your debt. Other than your regular mortgage payment(s) and living expenses, you will have one monthly payment to the chapter 13 trustee.
This varies from case to case depending on your assets, your debts, and your monthly income. We can usually come up with a pretty good estimate by the end of your first appointment.
In a chapter 13 you get to keep most of your assets. Usually the only assets you lose are luxury items that you owe money on, such as extra cars, boats, ATV’s etc. In some cases we can get creative and even keep those items.
Again, if you have luxury items pledged as collateral the court may make you surrender them. The court feels that including luxury items in a plan means you will be making payments on unnecessary items. Contact us for more detail on how to keep those items.
During your plan the chapter 13 trustee will make payments to your creditors. Your secured creditors such as mortgage arrearages and auto lenders will be paid in full during the life of your plan. The same is true for taxes and child support or alimony. In most cases your unsecured creditors will also receive a small amount. If the plan is confirmed (approved by the court) and you complete it, most of your remaining debt is discharged just like it would be in a chapter 7. Contact us for more details.
The Federal Bankruptcy Court for the District of Utah has approved a standard rate of $2,750 for attorney fees. Most of these fees are not collected up front and are included in your chapter 13 plan payment. You must also pay filing fees in the amount of $274 and a small fee for two separate credit counseling classes.