What Is A Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy is most people’s classic understanding of bankruptcy. It is also called a “straight bankruptcy” or a “liquidation bankruptcy”. In Chapter 7, the person who is claiming bankruptcy, also called the debtor, files a bankruptcy petition and everything that they own is put into a bankruptcy estate. It is administered and the remaining debts are then liquidated.
If there are assets, most times that is not the case, but if there are assets to be sold, then a trustee will take possession of those assets and sell them. They will distribute any of the proceeds from that sale to the debtor’s creditors. After that, the debtor’s debts are discharged, and then they do not owe any money. It is the quickest bankruptcy and the most classic form of bankruptcy.
What Are The Requirements That Must Be Met In Order To File For A Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is open to pretty much anyone; the one requirement is that you have to pass what is called the Means Test. A Means Test is that essentially if you have too much income, then they will not allow you to file a chapter 7 bankruptcy. There is no limit on the amount of debt that you can have, and there is no limit to the certain types of debt you can have.
You can be a business, an individual or you can file with your spouse. All those people can do chapter 7 bankruptcy, but you cannot have more than the median income amount for your state, or your household size. If you are under the median income level for your household size, then you pass the means test and you are eligible to file a chapter 7 bankruptcy.
What Are The Chapter 7 Bankruptcy Exemption Rules In Utah?
Some of the exemptions in Utah are harsh. Other states are a lot more favorable and the federal exemptions are as well. However, they are pretty low in Utah. If you have a car exemption in the amount of $3,000 per debtor or if you are filing jointly with your spouse, that would be $6,000 total income.
You also have $30,000 for your primary residence. These are the main exemptions that are most commonly used and are most important. There are exemptions that cover pretty much all of your personal property for clothes, appliances, furniture, personal artifacts. All of those personal items are technically part of your assets and they become part of the bankruptcy estate.
However, they will all be exempted and to the extent that they are not exempt, they are generally not valuable enough for the trustee to take in. The only thing that is not going to be exempted will be a vehicle or something similar that was worth more than the exemption limit, which is $3,000 per person; or if you have more equity than $30,000. Other than that, your personal property is almost always going to be covered, or else, it is just not worth enough for the trustee to bother with.
If you need answers to Frequently Asked Questions about Chapter 7 Bankruptcy, call the Koehler Law Offices PLLC for a FREE 20 Minute Initial Consultation at (801) 441-2013 and get the information and legal answers you’re seeking.