As I’ve mentioned, there are two types of bankruptcy in Utah that can be useful to consumer-debtors like yourself: Chapter 13, and Chapter 7. They are both “bankruptcy” but they are very different. While Chapter 13 Bankruptcy is more of a payment re-structure, Chapter 7 is a liquidation, and that makes it very attractive for people with little assets who are facing mounds of debt.
What is Chapter 7 Bankruptcy?
Picture Chapter 7 bankruptcy like this: a debtor has taken on credit, and finds him or herself unable to repay that debt. In a Chapter 7 bankruptcy, the debtor simply “throws the towel in”. Whatever assets he or she may have (usually there aren’t any) are sold and distributed among the creditors, and the debtors debts are cleared. He or she is free to start over debt free!
Chapter 7 or Chapter 13, which is better?
It depends on your situation…but that doesn’t tell you much does it? So let me tell you about some advantages of Chapter 7 bankruptcy:
- It is quick! As opposed to a Chapter 13 bankruptcy, which can take up to 5 years, Chapter 7 bankruptcy can be completed within a few months.
- It’s even quicker than it sounds! Even though it takes a few months for a Chapter 7 bankruptcy in Utah to be officially completed, because of the nature of Chapter 7 bankruptcy, and the “automatic stay” it is basically done as soon as you file.
- It will often discharge (“get rid of”) all of your unsecured debt without any payment or asset liquidation. Whereas, in a Chapter 13 bankruptcy, a debtor is often required to make some portion of payment to their unsecured creditors, in most cases, Chapter 7 debtors do not repay anything to unsecured creditors, the debts are simply discharged!
- It is cheaper! The attorney fees for Chapter 7 are significantly lower because Chapter 7 bankruptcy involves a little bit less work, and is completed in a shorter time period.
- There are “no hoops to jump through”. A Chapter 7 bankruptcy is completed fairly quickly after it is filed. There are no ongoing requirements to submit tax returns, make monthly payments, and inform the Trustee’s Office of changes in financial circumstances, or to request permission to take on new debt, as there are with a Chapter 13 bankruptcy.
Ok, great! So how does Chapter 7 Bankruptcy work in Utah?
Here’s a basic overview of a Utah Chapter 7 Bankruptcy case:
- Stage 1 – Draft and file your petition. Although it is not against the law to file your own petition, you really need a good Utah bankruptcy attorney to help you with this part. Here’s some more info on why you shouldn’t file bankruptcy without an attorney.
- Stage 2 – the 341 Meeting. About 30 days after your petition is filed with the Court, you will need to attend a “First Meeting with Creditors”. Don’t worry, it’s not nearly as daunting as it sounds! It is the only time you will need to go to “Court”, and it is technically not even Court, there is no judge present. If you have an attorney that has taken care to get the trustee all of the information he needs, your meeting will be very short, maybe 5 minutes or so.
- Stage 3 – the waiting game. After your 341 meeting, your creditors have a period of time to object to your bankruptcy, or take issue with something in your petition. If you have hired a good Utah Chapter 7 Bankruptcy Attorney, there is a low probability of any objections.
- Stage 4 – discharge! Once the trustee has all the documents they need, and the time period for your creditors to object has passed, the Bankruptcy Court Judge will automatically sign an order of discharge, wiping your debts away! You don’t even need to go to Court!