Utah Bankruptcy Rates Finally Falling, But Still High

December 19, 2012

Personal bankruptcy filings in Utah appear to have peaked, according to a recent report, and are showing signs of significant decline for the first time since 2005. Utah bankruptcy filings fell by 13 percent during the first nine months of 2012, the Salt Lake Tribune reported recently.

While this certainly is good news for Utah homeowners, the progress is relatively modest in comparison to the gains seen in the national bankruptcy rate, which declined 14 percent during the same period according to the National Bankruptcy Institute. Despite the overall improvements, Utah remains the fourth-highest state in the U.S. for bankruptcies per capita, with 5.99 bankruptcy petitions filed for every 1,000 people in Utah during the first nine months of 2012.

Utah bankruptcy basics

Bankruptcy is a court procedure that helps people and businesses to repay their creditors and get out of debt. There are different types of bankruptcy for different situations. Depending on their specific circumstances, people who file for bankruptcy generally choose between two types: Chapter 7 "liquidation" bankruptcy, or Chapter 13 "reorganization" bankruptcy.

Chapter 7 bankruptcy is a court-supervised process during which certain types of property may be "liquidated," or converted to cash and distributed to creditors. However, because many types of property are exempt from liquidation, people who file for Chapter 7 bankruptcy in Utah are frequently able to do so without forfeiting any assets at all. To qualify for Chapter 7 bankruptcy, debtors must pass a "means test," which establishes their income level. People whose incomes are too high to qualify for Chapter 7 may have to choose a different form of bankruptcy.

Unlike Chapter 7 bankruptcy, it is generally not necessary to liquidate any assets during Chapter 13 bankruptcy. Instead, a person's debts are reorganized and paid off over three to five years according to a court-approved repayment plan. Certain debts, such as back taxes and overdue child support, are prioritized over other types of debt in the repayment plan and are paid off first. At the end of the repayment period, certain remaining debts may be discharged. To qualify for Chapter 13 bankruptcy, a person must show that he or she has enough income to keep up with the payments as required by the payment plan.

Talk to an attorney about unmanageable debt

When considering bankruptcy, it is important to seek advice from a knowledgeable bankruptcy lawyer who can help you weigh the pros and cons of bankruptcy in order to determine which type of bankruptcy, if any, is right for your situation. To learn more about your options when faced with unmanageable debt, contact an experienced bankruptcy attorney in your area.

Article provided by JLJ Law Group, PLLC
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