Many Utah residents are dissuaded from filing bankruptcy for the simple reason that they believe they will lose valuable assets such as a home or automobile. They seem convinced that these perceived losses will cause their dependents to lack important necessities such as shelter and transportation. They are understandably panicked by the thought that precious loved ones might suffer a substantial decrease in quality of life.
However, the underlying public policy of bankruptcy law suggests quite the opposite. Bankruptcy aims to give Americans a fresh start, which necessitates the retention of essential property, both real and personal.
This is the primary basis for exemptions, which allow Utah residents and bankruptcy debtors to keep important assets necessary for a fresh start. Utah law provides a set or system of exemptions for Utah residents who file bankruptcy.
It is important to note that exemptions exist under both state law and federal law. Utah law expressly requires that Utah bankruptcy debtors use the Utah state exemptions rather than the federal exemptions, which are available in some jurisdictions.
Each state uses its own definition of a “homestead” and other related terms. The rules that are based on domicile for the homestead exemption require debtors to have acquired their home in the state where they presently reside more than 40 months before filing bankruptcy.
For debtors to use the Utah bankruptcy exemptions, they must be a Utah resident for at least 730 days (two years) before filing their bankruptcy petition. If not, they must use the exemptions of the state in which they resided for most of the 180 days before the two-year period that immediately preceded the bankruptcy filing.
There are numerous exemptions available under Utah law. Bankruptcy courts typically construe exemptions liberally to protect the debtor, and the debtor’s family, from excessive hardship. Courts are especially vigilant in protecting the right of a debtor to use the homestead exemption, which relates to a debtor’s primary residence.
The Utah homestead exemption allows Utah homeowners to exempt or exclude a personal residence from the reach of creditors or a bankruptcy trustee. A Utah bankruptcy debtor may exclude up to $30,000 in home equity during bankruptcy if the home is used by the debtor as a “primary personal residence” whether such residence is a traditional dwelling or mobile home. If not, the exemption amount available is reduced to $5,000.
Many homeowners are married couples. A bankruptcy case filed by joint debtors has a unique advantage. If a home is jointly owned, each owner is permitted to use the homestead exemption, thus doubling the exemption amount to $60,000 if the home is a primary residence and $10,000 otherwise. When only one spouse has ownership rights in the property, this amount may not be doubled.
Thus, the Utah homestead exemption is a crucial tool for ensuring that families maintain the important necessities of shelter and well-being.
The assistance of Theron Morrison and his team of attorneys at the Morrison Law Group may be both invaluable and indispensable to debtors who need to estimate their prospective exemptions in a bankruptcy case correctly. 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.