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Bankruptcy Basics Series Part 3: Bankruptcy Limits

Bankruptcy Limits

Debts Bankruptcy Does Not Discharge.

Bankruptcy Limits: As I mentioned before, some debts cannot be discharged in a bankruptcy. Certain types of debts, such as child support, alimony, most student loans, some federal income taxes and all employer withholding taxes cannot be discharged in bankruptcy. The debtor wrongful conduct makes some debts non-dischargeable.

Examples of such conduct are…

Incurring credit card charges without the intent or ability to repay or obtaining loans using false financial information. Bankruptcy does not wipe out most mortgages or leans. The debtor who wants to keep his or her house must continue making mortgage payments. A debtor who wants to keep a car which is being financed must likewise continue making the payments. A debtor who is behind on mortgage payments may use Chapter 13 to keep his or her home. By catching up on past due payments over time plus making regular mortgage payments.

Chapter 7

And in a Chapter 7 case certain property can be redeemed from a lien or in other words purchased for what it is worth. For example, in bankruptcy proceeding the court may determine that a car in which the debtor owes $3,000.00 is only worth $1,500.00. The debtor then may keep the care by paying the lump sum of $1,500.00 in either chapter. Some liens on exempt personal property may be avoided all together. So that the debtor keeps the property without making further payments. Under certain circumstances a debtor may be denied a discharge altogether and continue to owe all debts as if the bankruptcy had never been filed.

A Denied Discharge

Some of the reasons for being denied a discharge are fraudulently transferring assets, hiding assets, making false statements. Or disobeying the bankruptcy court. Such acts may also be federal crimes, for which the debtor can be fined or imprisoned. We will tell you more about that at a later segment of this video.

Limits on Frequency of Discharges

The bankruptcy code limits the frequency with which an individual may receive a discharge. These limits depend on the chapters under which the debtors file. As mentioned earlier, the law permits debtors in bankruptcy to keep or exempt certain property in order to make a fresh start.

However, to keep leaned property such as a home or a car the debtor must still pay the secured debt. In chapter 7 the exemption process means that a trustee cannot sell exempt property for the benefit of creditors. Generally, the trustee can only sell non-exempt property. Sometimes an item of property is only partially exempt and the trustee can sell it and pay the debtor the amount of the exemption.

Here’s Some Examples

For example, if the debtor owns a car worth $3,000.00 and lives in a state where there’s a car exemption of $1,000.00 the trustee may sell the car. Give the debtor $1,000.00 the exempt amount and use the remaining $2,000.00 to pay creditors. In such situations the debtor may keep the car by paying the trustee $2,000.00 the value of the car that is not exempt. The bankruptcy code provides certain federal exemptions. It also allows each state to adopt its own exemption law in place of the federal exemptions. The availability and the amount of property you may exempt therefore depends on the state where you live.

Some common examples of exempt property under the bankruptcy code are, a portion of the equity in the debtor’s home. A portion of the equity in one motor vehicle, and some or all “tools of the trade” used by the debtor to make a living. Such as auto tools for an auto mechanic or dental tools for a dentist. You’ll lose any exemption you don’t claim. It’s therefore very important for you to consult an attorney to determine which exemptions are available. It’s also important to carefully list, describe and value all property you claim as exempt in the schedules filed with your bankruptcy petition.

Bankruptcy Basics Series Part 2: Types of Bankruptcy

Bankruptcy Basics Series Part 2: Types of Bankruptcy

Considering bankruptcy? This video provides bankruptcy basics – the process, the relief it offers and finding the legal help you may need.

Types of bankruptcy

There are three main type of bankruptcy cases. These are referred to by their chapter number in the bankruptcy code. Chapter 7, Chapter 11 (mainly for businesses), and Chapter 13.

The bankruptcy code is federal, not state, law and bankruptcy cases are filed in the United States Bankruptcy Court. Not in a state court. The most common types of cases for individuals are Chapter 7 and Chapter 13.

Chapter 7: Liquidating Bankruptcy

A chapter 7 is a liquidating bankruptcy in return for having debts discharged. Meaning the debtors no longer legally obligated to pay them. The debtor must turnover certain property to the Chapter 7 bankruptcy trustee. The law allows the debtor to keep some property as exempt so the debtor can make a fresh start.

In most Chapter 7 cases, ALL property is exempt and so a debtor keeps all of the property. Those cases are sometimes called no-asset cases. If the debtor has more assets than can be exempted, the trustee sells the non-exempt property. Then distributes the proceeds to the creditors according to priorities established by law. Very often there is not enough money to pay for anything more than the cost of administration. So the creditors receive nothing.

The principal advantage of chapter 7 is that the debtor emerges from bankruptcy without any future obligations on his or her discharge debts. Some debts cannot be discharged. For example, debts incurred through fraud or debts for child support and alimony.

Chapter 13: The “Home Saving/Car Saving” Chapter

A Chapter 13 case is often used by individuals who want to catch up past due mortgage or car loan payments and keep their assets. In Chapter 13, the debtor must propose in good faith to pay all or part of the debts from future income over a period of 3 to 5 years.

If the court approves the plan, the debts may be settled in this manner even if some creditors object to the plan. If the debtor makes the required payments he or she will be able to keep his or her property. Chapter 13 can be a better choice than chapter 7 for those who are behind on their home mortgage or car loans as well as for other reasons.

For instance, some of the debts that cannot be discharged in a Chapter 7 can be discharged in Chapter 13. Also, the debtor can pay some non-dischargeable federal taxes over the term of the Chapter 13 plan without interest. Chapter 13 can only be used by an individual debtor, not by a corporation.

An individual engaged in business, not as a corporation, might use Chapter 13 to pay debts or settle them over a period of time. While he or she continues to own and operate the business. Chapter 13 can be used only if the total debt owed are less than certain limits for secured and unsecured debts.

Chapter 11: Reorganization (Mainly for Businesses)

Another type of bankruptcy case is a Chapter 11 reorganization. It is generally used by businesses but can be used by individual debtors who do not qualify for Chapter 13 because their debts exceed the Chapter 13 limit.


Bankruptcy Basics Series Part 1: Bankruptcy Overview

Bankruptcy Basics Series Part 1: Bankruptcy Overview

Considering bankruptcy? This video provides bankruptcy basics – the process, the relief it offers and finding the legal help you may need.

Bankruptcy Basics

If you are considering bankruptcy, this video will give you basic information about the process, the relief it offers and how to find the legal help you may need.  Thank you for watching this video on bankruptcy basics.  This video will explain what bankruptcy is and what happens in a bankruptcy case. This information is provided to help consumers, individuals like you, understand the bankruptcy process.

People who are having trouble paying their debts sometimes consider bankruptcy as a remedy for this situation. Bankruptcy is a legal process by which you can deal with your debts when you can no longer pay them.

Discharging Debts in Bankruptcy

By filing bankruptcy many individuals find that they’re able to get most, if not all, bills discharged. Meaning wiped out. Keep most, if not all, of their property and or get extra time to pay bills if you have a regular income.

An individual called a debtor usually files bankruptcy to obtain a discharge. This will wipe all or most of his or her debts so that they will not have to be paid. A married person may file alone or with the persons spouse.

Once the bankruptcy begins, creditors cannot try to collect debts from the bankruptcy debtor or sue the debtor to obtain a judgement. With a few exceptions, the creditors have no claim on the debtor’s future income or future assets.

Alternatives to Bankruptcy

Alternatives to bankruptcy: Bankruptcy is not the only way to deal with too much debt. In some situations, another approach might be better. Alternatives may include an out of court settlement with creditors. Reduction of payments to creditors, attaining help from a consumer credit counseling service. Or payment of debts by selling or borrowing on property.

These alternatives, however, require some cooperation from creditors and are more likely to succeed if tried soon after financial difficulties begin.

Utah Bankruptcy News January 2018

Read recent and local events regarding Utah bankruptcy news and debt related topics. Being informed is a vital part of of your Start Fresh solution.

Story image for utah debt from Fast CompanyBYU Law takes on ‘debt collection epidemic’ with new online tool

ABA Journal3 hours ago
“Early in the semester, we realized that debt collection was a legal crisis in Utah,” said Kimball Dean Parker, LawX co-founder and class instructor, in a press release. He said that in the last five years, debt collectors filed over 330,000 lawsuits in Utah and that more than 98 percent of those sued did not hire .

Story image for utah consumer bankruptcy from ACA International

Total Bankruptcy Filings Decline in Calendar Year 2017

ACA InternationalJan 17, 2018
Commercial bankruptcy filings in 2017 increased, while total filings from businesses and consumers declined overall last year, according to a news … filing rate (total filings per 1,000 population) through 2017 were: Alabama (5.66); Tennessee (5.51); Georgia (4.66); Mississippi (4.12); and Utah (3.96).

Story image for utah consumer bankruptcy from KSL.comSolar industry on edge as Trump weighs tariffs on panels

KSL.comJan 22, 2018
The trade case grew out of a complaint by Suniva Inc., a Georgia-based subsidiary of a Chinese company, which declared bankruptcy last April. Suniva was joined by SolarWorld Americas, the U.S. subsidiary of a German company. Both blame their difficulties on a surge of cheap imports,
mostly from Asia.

Story image for utah debt from KUTV 2News

Deep pocketed donor agrees to pay off Utah GOP’s legal debt

Utah PolicyJan 11, 2018
The Utah GOP has struck a deal with a big donor to pay off the party’s legal debt from their challenge to the SB54 law. Party Chair Rob Anderson announced the deal with Dave Bateman, the chairman of the Entrada company, to pay off the more than $400,000 in legal bills from the lawsuits over the law that …

Why are so many Americans crowdfunding their healthcare?

Financial TimesJan 10, 2018
Within a decade it had begun to take hold for personal causes. … From 2005 to 2013, medical bills were the single largest cause of consumer bankruptcy in the US, according to Daniel Austin, a Northeastern …. In 2016, a Utah hospital charged a father $39.95 for letting him hold his newborn baby.

 Story image for utah bankruptcy from Auto Finance News (blog)

Utah Lender Issues First Securitization Backed by Bankrupt Borrowers

Auto Finance News (blog)3 hours ago
Salt Lake City-based Avid Acceptance, an auto lender that focuses on loans made to consumers in bankruptcy, issued its inaugural auto securitization backed by $95 million worth of subprime assets, according to Kroll Bond Rating Agency’s presale report. Loans made to consumers in chapter seven or …