Hard times have hit everyone everywhere. If you live in Utah, there are many options for handling your debts. Chapter 13 bankruptcy can help you dig your way out of debt and keep what matters to you. If you find yourself struggling right now, you can file for bankruptcy. It may take a few months to sort out, but ultimately you will come out ahead with fewer creditors harassing you along the way.


Different Types of Bankruptcy

Personal bankruptcy is different from business bankruptcy. Each category has its bankruptcy options. As an individual facing a mountain of debt, you will want to consider the personal bankruptcy options: Chapter 7 versus Chapter 13.


A Chapter 7 bankruptcy:

  • Completely discharges all unsecured debt.  Unsecured debt is mostly credit card debt, but it can also include loans for vehicles and property.
  • A judge can require you to sell property and vehicles to repay some of the debt before allowing a discharge of the remaining debt.
  • A Means Test is required to ascertain if you are entirely unable to repay the debt amounts you owe. If you definitely can’t repay your debts, and it is not likely that you will ever be able to do so, Chapter 7 is granted, and debts are discharged.


A Chapter 13 bankruptcy:

  • Restructures debt
  • Requires creditors to work with you to reduce or negate interest in the interest of paying down debt.
  • Requires you to sell anything in excess of your home and one car to pay debts (e.g., boats, vacation properties, etc.)
  • Creates a settlement plan for paying off all current debt
  • May include debt relief counseling to avoid amassing more debt while restructuring and paying off the debt you have


Both of these bankruptcy options are beneficial, but both come with restrictions and requirements you have to meet.


Benefits of Filing a Chapter 13 vs. a Chapter 7

If you file Chapter 13, you agree to repay your debts. You are not avoiding your debts or responsibilities, something future lenders and creditors prefer to see. While filing for a Chapter 7 may not be avoiding your financial obligations per se (especially if you really can’t repay them), it is not the best option given its very negative impact on your credit score and credit rating.

Additionally, seeing a Chapter 13 bankruptcy on your credit report is less damaging in the eyes of lenders and creditors than a Chapter 7. They know that you had trouble repaying things but that you in earnest found a way to repay your debts anyway. That tells them that you may be worth the risk even if your credit score is lower than they would like to see. The same cannot be said for filing Chapter 7, which negatively impacts your credit score and follows you for the next ten years.


When to Consider Filing a Chapter 13 Bankruptcy in Utah

Filing a Chapter 13 bankruptcy in Utah begins as soon as you hire a Utah bankruptcy attorney. Most Utah bankruptcy attorneys will listen to your case and provide a free consultation before you hire them.

If you are having a difficult time deciding if you should file for a Chapter 13, some tips to follow are:

  • Take the Means Test for Chapter 7. If you fail the means test, you can’t file Chapter 7.
  • If you have a steady job, your income will be a factor when filing for Chapter 13.
  • If you have sufficient income to support a post-bankruptcy repayment plan, your Chapter 13 will be approved.
  • Chapter 13 does have more protections for personal property that you own, but not much in the way of protection for liquid assets. Cash on hand or investments that can be cashed out are examples of things that may be required to start the repayment plan.
  • Chapter 13 repayment plans are anywhere from 36 months to 60 months long. There are no penalties if you pay in full early.
  • Chapter 13 will appear on your credit report, but it can have an equally positive and negative effect because you are repaying the debts.
  • Chapter 13 will fall off your credit report in seven years. That’s three years shorter than a Chapter 7.
  • Unpaid taxes, alimony, and child support can all be included in Chapter 13 because you are using this plan to repay your debts and catch-up on outstanding amounts.
  • Mortgage payments and car loan payments can be included in Chapter 13 too.


As you can see, filing for a Chapter 13 may be very beneficial to you, but only if you are employed and earning a decent wage. If you really desire to make good on everything you owe, then filing a Chapter 13 is an excellent option.


Are You Ready to Get Started?

One drawback to filing a Chapter 13 is that it often takes several months longer to file and complete than a Chapter 7. If you file today, your debt consolidation and repayment plan for Chapter 13 is not likely to start for six months, at least. It does cost more in court and legal fees, but you can roll some of those fees into your repayment plan.

The best and only way to get started is to contact a Utah bankruptcy lawyer (if you live in Utah, of course). A Utah bankruptcy lawyer will look at your case and provide you with a brief assessment of your situation.

You will need to accumulate several documents and write down everything you own and its approximate value. Bank statements and paycheck stubs are also important, regardless of which type of personal bankruptcy you end up filing. Once you have secured your legal counsel, he/she will give you a list of tasks to complete to prepare in advance for your bankruptcy filing and hearing.

Be sure to complete everything according to the deadlines your lawyer gives you, or the bankruptcy cannot proceed. You will be stuck in limbo with your debts until all the necessary tasks and paperwork are complete and returned to your lawyer. You will also need to inform all creditors of your intent to file bankruptcy and then refer all of them to your lawyer. You will still have to pay your bills until the date of your bankruptcy hearing.  

We Can Help

Fillmore Spencer’s Utah Bankruptcy attorneys are ready to help you reclaim control of your financial future.  Schedule a free initial consultation to discuss your unique situation and explore your options.  The sooner you call, the sooner we can help you get your financial life back on track.


If you still have questions, contact us for a free consultation with one of our Utah Bankruptcy Attorneys. 

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