What is Personal Bankruptcy?
In opposite to business bankruptcy, personal bankruptcy falls into three categories: Chapter 7 (straight bankruptcy), Chapter 13 (personal reorganization), Chapter 11 (for business or high income/debt individuals).
Utah Personal Bankruptcy Information
Chapter 7 Straight Bankruptcy
A Chapter 7 involves three main entities: you, the trustee and your creditors. In a Chapter 7, all of you non exempt property is placed in the bankruptcy “estate”. The entity in charge of that estate is the trustee. The trustee’s job is to make sure all of the non exempt property makes into the estate and then distribute that property to your creditors.
Chapter 13 Personal Reorganization
Chapter 13 bankruptcies are for those that want or need to keep certain property that may be in the non exempt category above or merely want to keep some property they may lose if they file a Chapter 7. They are also for those who are ineligible for a Chapter 7. However, there are also some restrictions for those that want to file a Chapter 13; namely, the debtor may not have unsecured debts of less than $360,475.00 and secured debts of less than $1,081,400.00. These debt limits are subject to annual cost of living increases and represent values updated through April 1, 2010.
The perks of a Chapter 13 is the “strip-off” and “cram-down” powers. These are most applicable to normal people by getting rid of a second mortgage or reducing the amount of debt owed on a car. In a mortgage situation, if your first mortgage is $100k and your second mortgage is $50k as long as the value of your house is $100k or less you can completely get rid of your second mortgage. This is called a “strip-off”. In a car situation if your car is worth $20k and your loan amount is $30k the Chapter 13 allows you to reduce your loan amount to $20k. This is called a “cram-down”.
A Chapter 13 requires you to make payments of all your “disposable income” every month for either 3 or 5 years.
Chapter 11
A Chapter 11 operates similarly to a Chapter 13 except they are a lot more complicated and cost a lot of money. Corporations must file Chapter 11’s as well as those that don’t fall within the parameters of a Chapter 13 who either can’t or don’t want to file a Chapter 7.
Author, Matt Wadsworth, is a partner at Arnold, Wadsworth & Coggins Attorneys practicing bankruptcy law in Salt Lake City and Ogden, Utah.
Arnold, Wadsworth & Coggins Attorneys is a premier Utah law firm serving the Wasatch Front in the areas of family law, bankruptcy, criminal law, and civil litigation. Our attorneys provide clients with exceptional legal representation and personal attention. With over 35 years of trial practice and litigation experience, we bring big firm expertise at affordable rates
