Before the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect in 2005, the decision on whether a debtor was eligible for Chapter 7 bankruptcy was largely left to up to a judge.
Under the current bankruptcy law, debtors must meet specific criteria in order to qualify. The stricter rules can make it more difficult to obtain debt relief, as anyone who fails to meet the eligibility requirements cannot file a Chapter 7 petition. Of course, most people are still eligible to file Chapter 13 if they don’t meet the requirements for Chapter 7.
Wondering if you are eligible? Here, the legal professionals at the Law Office of Davis & Jones explain what it takes to qualify for Chapter 7 bankruptcy in Utah.
Income Requirements
Utah debtors who earn less than the state median income – which currently stands at $62,535 for a one-person household – are typically eligible for Chapter 7.
Bankruptcy qualification is based upon the debtor’s income over the previous six months. This includes not only wages but also investment income, unemployment benefits, workers’ compensation, and child or spousal support payments.
Means Test
Anyone who earns more than the Utah median income may still qualify for Chapter 7 if they pass the means test.
The means test compares the debtor’s income and living expenses to determine the amount of disposable income available. Each Utah county and region allows debtors to deduct different expense amounts, and those with limited disposable income can file a Chapter 7 petition.
If the Means Test shows enough positive income, then Chapter 13 is still an effective tool to help reorganize your debt and make life more affordable!
Credit Counseling
Debtors who want to file for any type of bankruptcy must first complete a credit counseling course within 180 days prior to filing the petition.
The purpose of the course is to explore the potential of the debtor to resolve their debts without filing for bankruptcy. Credit counseling is mandatory, and debtors are required to submit a certificate of completion to the Utah courts when they file.
A full list of approved counseling agencies can be found at https://www.justice.gov/ust/eo/bapcpa/ccde/CC_Files/CC_Approved_Agencies_HTML/cc_utah/cc_utah.htm. Or, come by our office and we can help point you in the right direction!
Previous Bankruptcies
A previous bankruptcy case does not prevent a Utah debtor from qualifying for Chapter 7 or Chapter 13, but the date the petition was filed affects their current eligibility.
Anyone who filed for Chapter 7 and obtained a bankruptcy discharge within the last 8 years cannot file Chapter 7 again until that 8 years has passed. Debtors with a past Chapter 13 bankruptcy must wait until 6 years after the date they filed to be eligible for Chapter 7.
A Chapter 13 can be filed anytime after a previous Chapter 7 – but may not be eligible for a discharge unless the case is filed more than 4 years after the Chapter 7.
Are you eligible for Chapter 7 or Chapter 13 bankruptcy in Utah? For expert advice on your debt-relief options, turn to the Law Office of Davis & Jones.
Our team of legal professionals has decades of combined experience navigating the Utah bankruptcy process and helping Salt Lake City area residents discharge their debts. If you need a fresh financial start, contact the Law Office of Davis & Jones, P.C., and schedule a free consultation to find out if you qualify to file for Chapter 7 bankruptcy today.