If you are facing significant financial strain, filing for Chapter 7 bankruptcy may be the right solution. However, like most anything else in life, filing for bankruptcy in Utah can come with advantages and disadvantages.
People potentially pursue Chapter 7 cases without fully understanding all the important implications. It is important to consider how bankruptcy will affect your life before making potentially life-altering decisions.
Before making any decision that might affect your life profoundly, you should speak with an experienced legal professional. To provide you with a general idea of the possible implications that a bankruptcy filing might have on your life, Lee Davis, an attorney at the Law Office of Davis & Jones, P.C., has assembled a list of some of the most important pros and cons relative to Utah Chapter 7 bankruptcy.
Pros: Automatic Stay
The moment your bankruptcy petition is filed, the Automatic Stay of 11 USC §362(a) goes into effect. The filing of a bankruptcy petition acts as a court order preventing creditors from hounding you for payment or taking/continuing any collection actions against you. The Automatic Stay can put a stop to foreclosures, repossessions, utility disconnections, eviction proceedings, wage garnishments, court proceedings and other collection harassment.
Pros: Debt Relief
When a Chapter 7 bankruptcy case ends, many debts are discharged. Credit card charges, medical bills, personal loans, vehicle loan and apartment lease deficiencies, and past-due utility bills are among the financial obligations you’ll be relieved of once you receive your bankruptcy discharge.
Pros: Asset Protection
Contrary to what many people think, filing for Chapter 7 bankruptcy does not automatically result in the loss of everything you own. Utah bankruptcy exemptions provide asset protection, and there is a good chance you will be able to keep your car, personal property and most of your other belongings.
Pros: Fresh Start
After completing your bankruptcy case, you will be in a great position to take control of your finances. Many of your debts will be completely erased, and you will no longer have to live paycheck to paycheck. Debt collectors will no longer be calling, and the burdens of debt will be lifted off your shoulders.
Consider All of Your Debt Relief Options
If you earn less than the Utah state median income – which is $67,625 for a one-person household in June, 2021 – you are likely eligible for Chapter 7 bankruptcy. You may also qualify if you earn more, but have limited disposable income. However, just because you can file a Chapter 7 claim does not mean that you should.
Chapter 7 is not right for everyone, and you could potentially be better off filing for Chapter 13 bankruptcy or pursuing an attorney-led debt settlement. Before choosing a debt relief strategy, you should speak to a lawyer to explore all of your options.
Now that we have explored looked at the positives to the Chapter 7 bankruptcy process, and now it’s time to discuss the negatives. The good news is that, in most cases, the perceived drawbacks all have a silver lining.
Cons: Income Limits
Not everyone who is struggling with debt has the option of filing a Chapter 7 case. If you do not pass the means test (which examines your income for the 6 months prior to filing), you will probably not be eligible for Chapter 7. If your income is above the applicable median, you can still obtain bankruptcy protection through a Chapter 13 filing.
Cons: Qualifying Debts
Chapter 7 bankruptcy can wipe out many debts, but some – including alimony, child support, most back taxes and student loans – will not disappear when your case ends. You are also still required to pay loans secured by collateral you want to keep such as a home or car. Some of these debts can be reduced or eliminated through a Chapter 13 payment plan in cases where Chapter 7 isn’t the best option.
Cons: Credit Score
Filing a Chapter 7 claim will affect your credit history, and the bankruptcy will be noted on your credit report for ten years. You will need to rebuild your credit score if its important to you. Although bankruptcy can drag down a high credit score, in many cases a Chapter 7 filing will actually improve your credit score because its helping to clean up years of negative information.
Should You File for Chapter 7 Bankruptcy?
If you are overburdened with debt, Chapter 7 could be the ideal solution. However, it is important to look at the potential consequences before filing a bankruptcy case. Before you begin the process, get an objective professional opinion.
The experienced bankruptcy lawyers at the Law Office of Davis & Jones, P.C., are here to provide you with the insight you need to make a smart decision on debt relief. Once you explain your financial situation and future goals, we can explore your options and help you determine if you should file for Chapter 7 or Chapter 13 bankruptcy.
Our bankruptcy attorneys offer free consultations. With our decades of experience in debt relief, we’re confident we can guide you toward a great approach to a brighter financial future. If you’re struggling to stay afloat and you live in Salt Lake City area, contact the Law Office of Davis & Jones, P.C., and make an appointment to discuss Utah Chapter 7 bankruptcy and other debt relief strategies today.