Chapter 7 Bankruptcy

Chapter 7 bankruptcy is designed to get you a fresh start. You 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, you may exempt 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, child support and alimony, and debts incurred in a divorce decree. 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, then the Court may take the money. You should talk carefully to your attorney about timing if you need to use your tax refund proceeds.

What about bank accounts, cash and retirement accounts?

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 $850 in attorney's fees, and the Court fee is $306, and there is a $50 charge for an internet credit counseling interview that must be done before filing. High income and self-employment cases are a little more. You may pay fees over time, and I can stop some of the phone calls and harassment in the mean time, but the fees must be paid in full before the case can be filed.
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-Sue H. Ogden, UT