Bankruptcy Laws in Utah
Despite bankruptcy’s ability to relieve debts, certain kinds of debts are not allowed for elimination in Utah. These include alimony, child support, most student loans, and taxes.
The United States recently passed a new bankruptcy act that will not most often allow individuals with a certain amount of income to qualify for Chapter Seven bankruptcy. If individuals can afford to pay creditors through Chapter Thirteen bankruptcy they will not be eligible for Chapter Seven bankruptcy.
The means test will evaluate if an individual’s personal income is high enough for him or her to make the necessary payments for a repayment plan. Personal income for the past six months will then be calculated against Utah’s state median. If an individual’s income is less than or the same as the state median, he or she is eligible for Chapter Seven bankruptcy.
Means Test
If an individual’s income comes above the state median, he or she will be required to pass the means test before he or she can be eligible for Chapter Seven bankruptcy. To determine of an individual can pass a means test, he or she will need to subtract particular expenses from his or her monthly income.
These can include vehicle or mortgage rearrangements for cure; five years left of a secured debt; property debts; fifteen percent of an income for a charitable contribution; expenses permitted through the IRS; disability insurance; health insurance; health savings account; five percent allowance though the court’s permission for clothing and foods necessities; utility expenses; expenses for the care of an ill, disabled, or elderly family member; fifteen hundred dollars annually for a child under the age of eighteen who attends private or public school; and no more than ten percent of administrative expenses for Chapter Thirteen bankruptcy.
After all the deductions if an individual’s disposable income rises above one hundred sixty-seven dollars, he or she is not eligible for Chapter Seven bankruptcy.
Chapter Seven Bankruptcy
Chapter Seven bankruptcy allows individuals to eliminate their debt through the liquidation of their property. Only certain kinds of property qualify for liquidation, which is called non-exempt property. Exempt property is generally the kinds of property that is necessary for daily use.
These can include homes, motor vehicles, furniture, some pensions, clothing, food, unpaid wages, farming equipment, military uniforms, jewelry under certain values, books, and others. If a form of property reaches a certain value it is normally deemed as non-exempt. A court will assign a trustee to the Chapter Seven case. The trustee will then liquidate the property for the current value–rather than the value when originally purchased–and then use the acquired funds to pay off creditors.
Chapter Thirteen Bankruptcy
Chapter Thirteen bankruptcy allows individuals to use their own personal income to pay off outstanding creditors. The court will evaluate an individual’s debt, income, expenses, and living situation and will prepare a repayment plan for him or her. This payment plan will designate how much payment is necessary each month to pay off all debts in no more than five years.