In a Chapter 7 Bankruptcy Case, all of a Debtor’s non-exempt property becomes the property of the bankruptcy estate and may be sold by the bankruptcy trustee. The sale proceeds are then distributed among the Debtor’s creditors.
Under Federal and State exemption laws, certain assets are protected from collection by Creditors and from a Bankruptcy Trustee in a Chapter 7 case. In addition, exempt property is relevant in formulating a Chapter 13 Plan and calculating the required return to your unsecured Creditors.
WHICH EXEMPTIONS APPLY TO YOUR CASE?
An initial inquiry for all individuals contemplating bankruptcy is “Which State’s exemptions apply to my case?” Exemptions which apply to a Debtor’s case are based on the law of the State where the debtor was domiciled for the 730 days (2 years) prior to the date of filing the bankruptcy case. If you did not reside in a single State during the two years prior to filing, the exemptions are determined by the State where you were domiciled for the majority of the 180 days that preceded the 730-day period. Section 522(b). Section 522(b) also provides that if the effect of the domiciliary requirement is to render the debtor ineligible for any exemption, the Federal exemptions would apply.
WHAT PROPERTY IS EXEMPT IN UTAH?
The value of any real estate you own is relevant in evaluating your bankruptcy options. Evaluation of your home equity differs quite significantly between Chapters 7 and 13.
HOMESTEAD EXEMPTION – The Homestead laws in the State of Utah are presently very favorable to Debtors. Individuals can claim a homestead exemption in their primary residence in the amount of $30,000 and $5,000 if the property is not the primary residence of the individual. The homestead exemption is applied to home equity. Home equity is computed by deducting from the fair market value of the real property, the amounts of all outstanding mortgages and loans against such real property.
EXAMPLE: Your home is worth $100,000.00 and you have a first mortgage against your home in the amount of $40,000.00, and a home equity line of credit with a balance of $20,000.00. You, therefore, have $40,000.00 of equity in your home. If you are an individual debtor, your equity would not be fully exempt, and a Chapter 7 Bankruptcy Trustee could sell your property and distribute the sale proceeds among your Creditors. In this case, you should file Chapter 13. If you are filing jointly with your spouse, the full $40,000.00 equity in your home would be exempt and you may file Chapter 7 without losing your home.
The balance of the text of the Utah homestead exemption laws is set forth at Utah Code Section 78-23-3 and is as follows:
EFFECTIVE: 5/10/2016 78B-5-505. PROPERTY EXEMPT FROM EXECUTION.
An individual is entitled to exemption of the following property:
a burial plot for the individual and the individual’s family;
health aids reasonably necessary to enable the individual or a dependent to work or sustain health;
benefits the individual or the individual’s dependent have received or are entitled to receive from any source because of:
benefits paid or payable for medical, surgical, or hospital care to the extent they are used by an individual or the individual’s dependent to pay for that care;
money or property received, and rights to receive money or property for child support;
money or property received, and rights to receive money or property for alimony or separate maintenance, to the extent reasonably necessary for the support of the individual and the individual’s dependents;
clothes washer and dryer;
microwave oven; and
all carpets in use;
provisions sufficient for 12 months actually provided for individual or family use;
all wearing apparel of every individual and dependent, not including jewelry or furs; and
all beds and bedding for every individual or dependent;
except for works of art held by the debtor as part of a trade or business, works of art:
depicting the debtor or the debtor and his resident family; or
produced by the debtor or the debtor and his resident family;
proceeds of insurance, a judgment, or a settlement, or other rights accruing as a result of bodily injury of the individual or of the wrongful death or bodily injury of another individual of whom the individual was or is a dependent to the extent that those proceeds are compensatory;
the proceeds or benefits of any life insurance contracts or policies paid or payable to the debtor or any trust of which the debtor is a beneficiary upon the death of the spouse or children of the debtor, provided that the contract or policy has been owned by the debtor for a continuous unexpired period of one year;
the proceeds or benefits of any life insurance contracts or policies paid or payable to the spouse or children of the debtor or any trust of which the spouse or children are beneficiaries upon the death of the debtor, provided that the contract or policy has been in existence for a continuous unexpired period of one year;
proceeds and avails of any un-matured life insurance contracts owned by the debtor or any revocable grantor trust created by the debtor, excluding any payments made on the contract during the one year immediately preceding a creditor’s levy or execution;
except as provided in Subsection (1)(b), any money or other assets held for or payable to the individual as a participant or beneficiary from or an interest of the individual as a participant or beneficiary in a retirement plan or arrangement that is described in Section 401(a), 401(h), 401(k), 403(a), 403(b), 408, 408A, 409, 414(d), 414(e), or 457, Internal Revenue Code;
the interest of or any money or other assets payable to an alternate payee under a qualified domestic relations order as those terms are defined in Section 414(p), Internal Revenue Code;
unpaid earnings of the household of the filing individual due as of the date of the filing of a bankruptcy petition in the amount of 1/24 of the Utah State annual median family income for the household size of the filing individual as determined by the Utah State Annual Median Family Income reported by the United States Census Bureau and as adjusted based upon the Consumer Price Index for All Urban Consumers for an individual whose unpaid earnings are paid more often than once a month or, if unpaid earnings are not paid more often than once a month, then in the amount of 1/12 of the Utah State annual median family income for the household size of the individual as determined by the Utah State Annual Median Family Income reported by the United States Census Bureau and as adjusted based upon the Consumer Price Index for All Urban Consumers; and
except for curio or relic firearms, as defined in Section 76-10-501, any three of the following:
one handgun and ammunition for the handgun not exceeding 1,000 rounds;
one shotgun and ammunition for the shotgun not exceeding 1,000 rounds; and
one shoulder arm and ammunition for the shoulder arm not exceeding 1,000 rounds.
The exemption granted by Subsection (1)(a)(xiv) does not apply to:
an alternate payee under a qualified domestic relations order, as those terms are defined in Section 414(p), Internal Revenue Code; or
amounts contributed or benefits accrued by or on behalf of a debtor within one year before the debtor files for bankruptcy. This may not include amounts directly rolled over from other funds which are exempt from attachment under this section.
The exemptions in Subsections (1)(a)(xi), (xii), and (xiii) do not apply to proceeds and avails of any matured or un-matured life insurance contract assigned or pledged as collateral for repayment of a loan or other legal obligation.
Disability benefits, as described in Subsection (1)(a)(iii)(A), and veterans benefits, as described in Subsection (1)(a)(v), may be garnished on behalf of a child victim if the person receiving the benefits has been convicted of a felony sex offense against a child and ordered by the convicting court to pay restitution to the victim. The exemption from execution under this section shall be reinstated upon payment of the restitution in full.
Exemptions under this section do not limit items that may be claimed as exempt under Section 78B-5-506.
APPLYING THE NUMEROUS EXEMPTIONS PERMITTED UNDER STATE AND/OR FEDERAL LAW TO YOUR SPECIFIC ASSETS CAN BE QUITE COMPLEX. YOU WOULD BE SAFER TO HAVE A BANKRUPTCY PROFESSIONAL ASSIST YOU IN THIS REGARD.
NO INFORMATION OR MATERIALS CONTAINED HEREIN ARE INTENDED TO CONSTITUTE LEGAL ADVICE, AND IS NOT APPLICABLE TO ANY SPECIFIC SET OF FACTS, ESPECIALLY AS TO ANY INDIVIDUAL’S PERSONAL SITUATION. THE INFORMATION CONTAINED HEREIN NOR THE PERUSAL OF IT DOES NOT ESTABLISH NOR CONSTITUTE AN ATTORNEY-CLIENT RELATIONSHIP WITH UTAH BANKRUPTCY PROFESSIONALS OR ANY OF ITS ATTORNEYS.
For more information on Property Retained In A Utah Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (801) 501-0100 today.