Utah Bankruptcy Attorney Explains The Chapter 7 Bankruptcy Process

The Difference Between Chapter 7 and Chapter 13 Bankruptcy

For consumers, the Chapter 13 and Chapter 7 Bankruptcy Process of the United States bankruptcy code offer opportunity to move out from under unmanageable debt. Essential differences between Chapter 7 and Chapter 13 include the following:

  • Chapter 7 is a liquidation bankruptcy. Non-exempt assets are sold and proceeds are distributed among creditors. Upon completion of bankruptcy, debt is discharged.
  • Chapter 13 is a wage earner’s plan that enables debtors to keep their property. Debtors repay all or some of their debt over a three- to five-year period.

The Chapter 7 Bankruptcy Process

For many, Chapter 7 is a more attractive bankruptcy option. It is a faster path to discharge of debt, providing a fresh financial start within a year. However, eligibility for Chapter 7 changed in recent years.

Are You Eligible For Chapter 7 Bankruptcy?

In 2005, the federal government enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Legislators felt business interests and consumers were taking advantage of bankruptcy relief — specifically Chapter 7 liquidation. BAPCPA tightened eligibility for liquidated bankruptcies, requiring more debtors to use Chapter 13, a plan that involves payback of some debt.

Why You Need A Utah Bankruptcy Attorney

Qualifying for Chapter 7 is now subject to a complicated means test. Roughly, eligibility for Chapter 7 rests on whether your income is below the state median income of individuals or families in a similar situation. Working with a Salt Lake City bankruptcy lawyer is essential for determining if you qualify for Chapter 7.


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