A Chapter 7 bankruptcy case is sometimes called a straight or liquidation bankruptcy since it provides a Chapter 7 discharge for debtors in return for the liquidation of their non-exempt assets. Prospective debtors must meet eligibility requirements and it is conceivable that all of the assets of a debtor are exempt in a Chapter 7 bankruptcy case, which results in a “no-asset” case and the liquidation of none of the debtor’s assets. Despite no loss of assets in this situation, debtors nonetheless receive a Chapter 7 discharge.
Unlike a Chapter 13 bankruptcy case, a Chapter 7 bankruptcy case does not involve the filing of a repayment plan. The first step to filing a Chapter 7 bankruptcy case is the completion of the “means test” and measurement of the debtor’s income. The means test is a mechanism for ensuring that debtors do not abuse the bankruptcy system.
While measuring income for the means test, prospective debtors must also measure the amount of non-exempt property in which they have an ownership interest using the exemptions adopted by the State of Utah. While any exempt property is important in both Chapter 7 and Chapter 13 bankruptcy cases, it is typically more valuable in Chapter 7 cases because debtors are liquidating property to gain a fresh start.
Once a bankruptcy case is filed, the non-exempt portion of the debtor’s real and personal property assets become the property of the debtor’s bankruptcy estate. Debtors apply the Utah exemptions to their property to exempt or exclude property from this bankruptcy estate. Any property in a debtor’s bankruptcy estate may be taken and sold – liquidated – by the Chapter 7 Trustee, with any proceeds used to pay general unsecured creditors. Accordingly, potential debtors must realize that filing a Chapter 7 bankruptcy case may result in the loss of property.
One of the Morrison Law Group’s qualified and knowledgeable bankruptcy attorneys can answer any bankruptcy debtor’s questions about any relevant bankruptcy law. The Morrison Law Group can also help if you just want to talk about Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.