My Property?
This is often the first question I receive when consulting someone who is considering bankruptcy. The short answer is that in most cases you can keep everything in a Chapter 13 bankruptcy, and you can keep most of your property in a Chapter 7 bankruptcy. Even though Chapter 7 bankruptcy is sometimes referred to as a “liquidation,” it does not mean that all of your assets and property are taken away from you. Utah state law provides for exemptions under different categories of property that protect your possessions from being taken in a bankruptcy. Utah state law has exemptions for cars, homes, appliances and many types of retirement accounts like a 401k and an IRA. There are dollar limits on most of these exemptions.
Quite often, the question arises whether a person who files for bankruptcy may keep a car. Utah’s exemption for a car is $2,500.00, or a couple may allocate $5,000.00 towards one automobile or $2,500 each to two separate automobiles. A bankruptcy trustee will only be interested in your car if you have equity in it above and beyond both what you owe on a loan and above the car exemption under Utah law. For example, if you have a car that is worth $15,000 and you still owe $13,000 on the car loan, the trustee will not make an attempt to take the car because of your $2,500 exemption under Utah law.
Tax refunds are frequently taken by bankruptcy trustees in a Chapter 7 bankruptcy and you will have to hand over all but $2,000 in a Chapter 13 bankruptcy in Utah. The amount that a Chapter 7 bankruptcy trustee may take is determined by the time of year when the bankruptcy is filed. For example, if a couple is entitled to a $6,000 refund and their Chapter 7 bankruptcy is filed on April 30, the bankruptcy trustee is entitled to approximately $2,000 since one third of the year (four months) has passed. Please note, this applies to the refund you receive the following year which is the refund you accumulated for the current tax year. For instance, the refund you receive in the early part of 2013 is for your 2012 tax return. If you are entitled to a refund for a past year, the entire refund may be taken by the trustee.
Homes and mortgages
As long as you are current on your mortgage, you may keep your home after a Chapter 7 assuming the equity you have in your home does not exceed the homestead exemption amount in Utah. If you are not current on your mortgage then you may or may not be able to stay in your home. If you are too far behind to catch up within a fairly short period of time, you may want to look at a Chapter 13 bankruptcy.
If you do not want to stay in your home, then you should stop paying any mortgage. The Chapter 7 bankruptcy will not stop the bank from foreclosing on your home, but they will not be able to come after you for any money you may owe on the house.
Please fill out form for a FREE online Consultation.
Comments or questions are welcome.