Chapter 7

Chapter 7

Something thousands of Americans do every year is file for bankruptcy. This is certainly no different in Utah. One option available to certain individuals is Chapter 7 bankruptcy. This category of bankruptcy has certain advantages as well as disadvantages you should be aware of. The Chapter 7 process works quite differently from other forms of bankruptcy like Chapter 13.


Not everyone will qualify for a Chapter 7 bankruptcy. If you have filed a Chapter 7 bankruptcy within the past 8 years, you will not be able to file a Chapter 7 at this time. You may want to look at the possibility of filing a Chapter 13 bankruptcy. However, many people who have never filed for bankruptcy before may still be restricted from filing Chapter 7 and should consider a Chapter 13. A Chapter 13 bankruptcy consists of you working with your attorney to create a payment plan that will allow a person to make monthly payments into the bankruptcy, based on what you can afford. In a lot of cases, this means that unsecured creditors get paid a small percentage of the balance owed. Regardless of how much unsecured creditors are paid, at the end of the Chapter 13 bankruptcy, you will no longer be responsible for the debt. Whether a person files Chapter 7 or Chapter 13 will depend on a review of that person’s income level, assets, expenses and debt level. Part of this review will involve a comparison between a household’s monthly income and the median income of a similar household in that jurisdiction.


The two major differences between a Chapter 13 and a Chapter 7 bankruptcy are that a Chapter 7 does not require you to make monthly payments into your bankruptcy, and it doesn’t protect all of your assets. Quite often people are scared that they will lose everything they have if they file a Chapter 7 bankruptcy. However, certain kinds of assets may be classified as exempt from the liquidation process in a Chapter 7. Below are examples of some of Utah’s assets that may be exempt from liquidation:

  • Real property used as a primary residence of up to $30,000 in value.
  • A car or truck of up $3,000 in equity.
  • Certain kinds of pensions and retirement income such as 401k plans and IRAs.
  • Public benefits such as worker’s compensation and veteran’s benefits.
  • Most household furnishings and appliances If you’ve lived outside of Utah in the last two years, then different exemption rules may apply to you..

If you have assets that are not exempt in a Chapter 7 bankruptcy, the assets will be liquidated if it is worth enough to jusify the sale. For many people, losing certain assets to liquidation may be worth it to get out from under a sizable amount of debt. If you are considering bankruptcy, or are at the point where you realize that you will not be able to get out from under the burden of debt you currently have, you should meet with an attorney. This will allow you to know what your bankruptcy options are and make an informed decision. Below are some reminders of things to consider when filing a Chapter 7 Bankruptcy:

  • You can file a chapter 7 bankruptcy once every 8 years.
  • Chapter 7 immediately stops garnishments, repossessions, collections, lawsuits, foreclosure, and harassment by all collectors, even the IRS.
  • You can discharge almost any type of debt or judgement (there are a few exceptions, such as some taxes, child support and alimony, criminal fines, and student loans.)
  • In most cases, you can keep your car or your house if you continue making the payments.
  • In most cases, the Court does not take any of your property or possessions.
  • If you are married, you can file a joint case with your spouse, or you can file individually.

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