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BANKRUPTCY

We understand the economic climate, priorities, feelings and concerns of people in Utah. We have lived in Springville, Spanish Fork, Provo, Pleasant Grove and Lindon almost all our lives. We enjoy working with accountants, insurance agents, brokers and other professionals to prepare a plan that works for the clients. We really listen and take care to help accomplish the debt resolution, estate planning and asset protection goals to the extent possible. Enabling clients to solve financial problems and take care of the financial needs of their family is our greatest satisfaction.

At the law offices of Bird & Fugal, clients can expect a bankruptcy lawyer who will listen to their wants and needs and help them get the full debt relief and asset preservation available to them under the law.


Feelings need to be acknowledged and respected. When there is simply not enough money to pay everyone, both debtors and creditors get hurt. Creditors feel disappointed, put off, frustrated, and angry, and then they become aggressive. Debtors feel sorry that they cannot pay their creditors. They feel powerless to pay and become worried, discouraged, depressed, stressed, and hopeless. Eventually, they find it necessary to try to avoid debilitating creditor harassment. Such a person in need of debt relief usually feels a strong desire to make good choices to resolve their problems.

“I may not have gone where I intended to go,

but I think I have ended up where I needed to be.”


-- Douglas Adams,

Choosing an experienced bankruptcy attorney is a good first choice. As experienced bankruptcy attorneys we explain to our clients their options and their likely outcomes as best suits their different circumstances.

We have helped a variety of people achieve strongly positive outcomes: people who have been involved in businesses, people with high income who wonder if they qualify for bankruptcy, people involved in lawsuits, people in foreclosure and repossession, people suffering medical bills, people unemployed or divorced, and people too poor to pay attention. We help them determine if they qualify for bankruptcy relief and whether it makes economic sense for them.

We counsel whether a Chapter 7 bankruptcy or a reorganization bankruptcy or out of court work out will be most beneficial and then lead and represent clients through the process. In doing so, we focus on helping every client retain the benefit of their property and income that is essential for self and family while getting as much relief from financial bondage as they can.

Deciding to file bankruptcy is a big step and should not be taken lightly. Our Utah County bankruptcy lawyers make sure that filing is in the best interests of our clients before encouraging them to pursue it. If you are moving towards filing for bankruptcy, review the section below to ensure that you follow the appropriate steps and avoid costly mistakes.

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CHOOSING THE RIGHT ATTORNEY

Bankruptcy Do's & Don'ts

Our firm cares about helping clients pursue the debt-free future they desire. If bankruptcy is the best option for your situation, we encourage you to adhere to the following do's and don'ts.

What to Do When Filing Bankruptcy in Utah

  • DO seek competent legal counsel before filing
  • DO put together a list of all your debts
  • DO gather a list of all your assets and property (including home, clothes, tools, accessories, toys, etc.)
  • DO provide accurate income documentation 
  • DO be thorough and accurate in filling out forms
  • DO try to make payments on loans secured by property you want to keep, if possible
  • DO talk with an attorney about your tax refunds, returns, withholding and obligations


It may be even more important that you carefully review the following counsel:

  • DON'T continue to use your credit cards
  • DON'T hide or give your property away to a family member or friend
  • DON'T try to pay off personal or family loans (over other creditors)
  • DON'T touch your retirement money or accounts
  • DON'T take out new loans just before filing
  • DON'T file bankruptcy without consulting with an attorney

Have more questions about the bankruptcy process? Want to find out if bankruptcy is the right option for your financial future? Be sure to contact our firm today to schedule your free, no-obligation consultation. We are here to help you take the next step in securing your debt-free future. 


​​​​​​​Persons who have filed for bankruptcy relief have important statutory obligations.

Debtors' Duties

Debtors have a duty of full and timely disclosure of their whole financial condition: all assets, all creditors, income, expenses, and prior transactions must be listed appropriately on the statements and schedules. Debtors must appear as directed at the meeting of creditors and answer questions under oath about their financial condition. They may also be required to appear at other examinations. The purpose of such disclosures is to allow the court, the trustee and creditors to ascertain whether assets are recoverable and whether debtors qualify for the relief they are seeking. Debtors are also required to turn over non exempt assets or pay their value to the trustee and to co-operate with the trustee in recovering assets. Though helping poor but honest debtors have a financial fresh start is an important purpose of the bankruptcy system, an equally important purpose is to enable the trustee to collect and distribute the debtors' non-exempt assets to creditors. Thus, failure of the debtor to perform these duties is grounds for denial of discharge and other penalties.

Debtor’s Benefits

The Automatic Stay

The automatic stay provided by 11 USC Section 362 is one of the most powerful and beneficial aspects of the Bankruptcy Code. Effective the moment the bankruptcy case is filed, the automatic stay prohibits any act to get money or property from the debtor, with limited exceptions.  So filing a bankruptcy case immediately stops foreclosures, garnishments, repossessions, evictions, executions, levies, and litigation. It provides a breathing space for debtors.

The automatic stay also provides a benefit to the bankruptcy estate. By prohibiting foreclosures execution sales and repossessions, the automatic stay keeps the debtor’s property intact in the bankruptcy estate so the most good can be gotten from it, either through a reorganization which maximizes its going concern value or a more orderly liquidation conducted by a trustee.

Creditors can ask the court for relief from stay to continue their collection efforts. Courts will grant relief from stay after appropriate notice and hearing for the reasons stated in the statute such as the collateral may not be needed for an effective reorganization, there may be no equity in the collateral, or the debtor may have stopped making payments and the creditor’s interest is not adequately protected. 


Exempt Property

Property exemptions are one of the primary protections for debtors in bankruptcy. Exemption statutes lists property debtors can keep free from creditors or from the trustee in bankruptcy. Most people in Utah are able to keep all their property.

Each state has its own exemption statutes which describe the property that is exempt from creditor attachment and execution. Also, taxing authorities have separate exemption statutes, and there are state and federal laws regarding garnishment of income and accounts. Which exemptions apply to a particular debtor depends on a variety of factors such as location of assets, domicile of debtor, time of claim of exemption, nature of the creditor’s claim and other specific circumstances. Thus, claims of exemption are best evaluated and asserted by legal counsel with knowledge of the law and circumstances .


Utah Exemption Statute

The most common Utah exemptions applicable to most people who live in Utah are described in the Utah Exemption Statute, Utah Code 78B-5-501 et seq.

Homestead: Utah laws allow an individual an exemption of up to $42,000 equity in the primary residence of the debtor on up to one acre of land located in Utah. If the debtor does not claim a residential exemption, the debtor can claim an exemption in real estate located in Utah in which he does not reside of up to $5,000.00 in value. The combined exemption of the owners of a single property is limited to $84,000 in their residence and $10,000 for non-residential property.

Household goods and personal items: The Utah statutes further allow exemption of listed household items: washer, dryer, refrigerator, freezer, stove, microwave, sewing machine, carpets, beds and bedding, clothing, family art, and a years worth of provisions. Also, burial plots, health aids, and benefits and proceeds from disability, illness, unemployment, life insurance, health insurance benefits, and personal injury and retirement are generally exempt.

In addition to the specifically listed items, the Utah Statute allows exemptions in certain dollar-amount-limited categories of items. There are four $1000 categories of household items:


$1000 worth of sofas, chairs and related furnishings;
$1000 worth of dining and kitchen table and chairs:
$1000 worth of animals, books and musical instruments; and
$1000 worth of heirlooms or other items of particular sentimental value.


Debtors are also allowed $3000 worth of one vehicle and up to $5000 worth of tools of trade and professional books.

Though debtor’s exemptions are very limited, bankruptcy trustees seldom take household items from debtors because household goods have so little resale value that they are not often worth the trustee’s time to try to sell them. On the other hand, creditors’ attorneys outside of bankruptcy, sometimes like to attach and have execution sales of non-exempt household items because of the extreme emotional leverage it gives them in pressuring debtors to pay a judgment for fear of loss of possessions that are very important to the debtor.

The Utah Exemptions apply to debtors outside of bankruptcy and to most bankruptcy debtors who lived in Utah 2 ½ years prior to filing for bankruptcy relief. You should consult with an experienced and knowledgeable attorney to learn which exemptions may apply to your particular circumstances.

Different Types of Bankruptcy

The bankruptcy code provides for different types of bankruptcy relief set forth in different chapters of the bankruptcy code. The main difference is between liquidation and reorganization. 


Liquidation
​​​​​​​

In a liquidation case a trustee is appointed to collect and sell a debtor’s assets that are not exempt and divide the money to the creditors according to the priorities of the Bankruptcy Code. The trustee has authority to conduct investigation regarding assets presently shown by the debtor as well as assets that were transferred away from the debtor during the 4 years prior to the bankruptcy. If assets were transferred away from the debtor without receiving reasonably equivalent value in return, the assets may be recovered by the trustee. Also, creditors who were paid by the debtor in preference to other creditors just before bankruptcy may be required to return those payments. The debtor is required to cooperate with the trustee and turn over non-exempt assets. When the trustee has gathered what money she reasonably can, she files a report saying what she plans to pay each creditor. When the report is approved the trustee pays out the money and then when all of the money is disbursed, closes the case. Most cases are closed as no-asset cases because there is nothing worth the trustee liquidating. The most common assets that trustees take and disburse are the debtor’s  tax refunds. Chapter 7 is the liquidation chapter.

Reorganization

In a reorganization, the debtor proposes a plan to pay creditors over time, usually 3 to 5 years. The debtor proposes a budget which shows expected income and reasonably necessary expenses and shows money left over to pay to creditors. The expectation is that money over time will be better for creditors and the debtor than a quick liquidation of assets. The debtor has to show that the plan will provide creditors at least as much money as they would have gotten if the debtor had filed a Chapter 7 case. In addition the debtor must pay creditors projected disposable income over a specified time. If the payment is adequate, the debtor is allowed to keep property that a Chapter 7 trustee would have sold. In that sense a reorganization is like a debtor buying back his assets from creditors over time. 

There are several reorganization chapters of the bankruptcy code each for different types of debtors: Chapters 9, 11, 12, 13 and 15. Chapters 9 for municipalities and 15 for foreign debtors who have assets in the United States are seldom used.  Chapter 11 is for business reorganization, primarily for business entities, but humans can also file under Chapter 11. Chapter 11 has special sub-chapters with separate provisions for distinct types of debtors: Sub-chapter  IV for railroad and V for a small business debtors.  Chapter 11 has detailed requirements and procedures to ensure fairness to all participants. Those requirements and procedures make it very costly. Sub-chapter V, enacted in 2019, was intended to make a less cumbersome and less expensive process for small businesses to reorganize. Generally, reorganization bankruptcies are cost prohibitive unless the debtor has a strong net income.  If a business or individual is nearly dead financially, the cost of Chapter 11 will kill them. Chapter 7 is best for most debtors.


Chapter 7--Liquidation Bankruptcy

For most individuals, filing under Chapter 7 of the United States Bankruptcy Code is the most advantageous option available. The greatest benefit of Chapter 7 bankruptcy is that people can get in and out of the case within 90 to 120 days. It is designed for individuals who are unable to pay their debts.

Chapter 7 provides for a discharge of almost all of an individual’s debts. A discharge is a permanent order prohibiting creditors from trying to collect from the debtor. In some cases, however, debtors need to reaffirm certain debts that are secured by collateral, such as a car loan to be able to keep the car. Most Chapter 7 debtors are able to keep all of their property without having to liquidate any assets.

Debtors must go through a "means test" to determine whether the case should be permitted to proceed under this chapter 7. The means test analysis is intended to show whether the debtors would have enough income to pay creditors over time in a reorganization proceeding.  If the debtors’ income is higher than the median income for the debtors’ family size in the debtors’  state of residence and if allowable expenses leave enough disposable income to make a meaningful distribution to creditors, the debtors will not be eligible for Chapter 7. However, they would  be able to file a reorganization type case  under Chapters 11, 12, or 13.

Discharging Your Debts

When filing a Chapter 7 case, you can obtain a discharge of your existing debts if you comply with the requirements of the Bankruptcy Code. The main requirements are to provide complete and accurate information to the court and to obey court orders.  We guide you through the case so you qualify for the discharge.  Our goal is to relieve you of as much of your debts as possible with as little hassle as possible.

Filing for Chapter 13 Bankruptcy

If you are considering filing under Chapter 13 bankruptcy to obtain debt relief, you should first develop a strong understanding of the expense and burden of Chapter 13.  In Chapter 13 you develop and perform a plan to pay a trustee monthly payments to be distributed to your creditors over the next 3 to 5 years. Your attorney, your trustee and your creditors all have to be paid, so it is expensive. Any significant financial decision, such as buying a car, requires court approval. Tax returns and refunds need to be turned in to the trustee to help monitor your situation. It is like being married to the bankruptcy court for 3 to 5 years. It is expensive, it’s a hassle and lasts for 3 to 5 years. For most people in debt trouble, Chapter 13 is not the best option. If you don’t really need it, why bother? But it is available for persons who can’t get the relief they need in Chapter 7.

Some individuals who do not qualify for Chapter 7 bankruptcy may wish to proceed under Chapter 13. Chapter 13 bankruptcy allows you to pay a portion or all your debts in monthly installments over three to five years. All of your outstanding debt will be consolidated to be paid through the trustee. Any unsecured debt remaining at the end of the plan can be discharged.

Chapter 13 is more expensive and time consuming than Chapter 7 bankruptcy, but it also allows you to keep your assets without having to liquidate them Chapter 13 provides you with up to five years to become current on your mortgage debts and to repay creditors you owe.

In addition, Chapter 13 bankruptcy allows debtors to strip an unsecured junior mortgage. If you file under Chapter 13, you can take up to five years to pay any past-due taxes or domestic support obligations.

We can explain your options and help you choose and perform the option that is best for you.

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