How Does Bankruptcy Work?

How Does Bankruptcy Work?



If you are considering filing bankruptcy just know that the ultimate goal in filing  a personal bankruptcy is getting fresh start or discharge. A discharge is basically a forgiveness of the unsecured debt you have and a reaffirmation of secured debt you want to retain.  A discharge can happen pretty quickly through a Chapter 7.  However, if you have to receive your discharge through a Chapter 13,  plan on making payments to some if not all of your creditors .  The payment you make will depend on a number of factors we can discuss when we meet.  A Chapter 13 plan can only go for between 36 and 60 months, so the payment amount you think you can afford takes more than 60 months the court will not confirm your plan.   In that case, you will have to find a way to make a larger payment (i.e., usually means giving something up).  No matter which Chapter you are able to qualify for, Chapter 7 or 13,  the end result is still the same, you unsecured debt is gone.

The Means Test Determines Which Chapter You Will File in Most Cases

You must pass the means test in order to file a Chapter 7.  However, you may pass the means test and still choose to file a Chapter 13 case, for several reasons.  We have a better explanation of the means test here on our site so for all of the details go there.

Click here for mean test explanation

After Your Discharge Be Sure NO Lien’s Remain on Unsecured Debt

When you receive your discharge your unsecured debt will be forgiven, but you should be aware that any valid lien will remain in full force unless it is proven to be unenforceable.  That means if you have secured debt you must make a decision about how you want to handle that debt.  For example, your home or your car and oftentimes furniture and jewelry have loans on them.  If that is the case those debts have to be paid for in full (oftentimes with interest) regardless of which chapter you file.  Any secured creditor can object to your discharge and move to enforce its lien and recover the property if you fail to make timely payments. They may recover the property, however they cannot recover any deficiency left after they sell the property, as long as you receive your discharge.

Utah Bankruptcy Law Advocates PC (Who We Are)

Utah Bankruptcy Law Advocates PC is a dba of Linda D. Smith & Associates,  PC. We represent clients who seek bankruptcy advice and are looking to discharge debt through Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Bankruptcy law can be somewhat complicated but we have the answers you need to get through the process painlessly and more important successfully.

A quick checklist about how the process works is:

  • We will have to have gather your pay stubs (6 months) and some tax returns (last two years).
  • We want to make sure you have a driver’s license (or other picture ID).
  • We also make sure you have a Social Security Card or original W2 (because if not you will want to order a new one).
  • You will have to take two credit courses, one before you file and one after you file.
  • You need to provide information about all of your assets, liabilities, income & expenses.
  • We prepare your petition, statements and schedules and file them with the court.
  • Once your petition is filed  the “automatic stay” takes effect and any collection efforts by your creditors must cease immediately.
  • With either a Chapter 7 or Chapter 13 you will be attending a meeting of creditors called the 341 hearing.  But not to worry we are with you every step of the way.
  • In a Chapter 13 case you may also have to attend a Confirmation Hearing, but that depends upon how responsive you are to us when we ask for information and documents, so if you would rather skip that hearing stay on top of your case and our requests.
  • In a Chapter 7 case you may have to turn over your tax refunds for the next year (or part thereof). (Ask us how & why).
  • In a Chapter 13 case you will begin making payments before your 341 hearing and then by the 25 of each month until completed.
  • Chapter 7 discharge is usually within 6 months.
  • Chapter 13 discharge will be within a few months after your final payment.

Celebrate Becoming Debt Free in the Months Ahead

Contact Us Today

Contact Us now we can help you immediately. We will guide you personally through an otherwise difficult process conveniently and compassionately. If you already have a judgment, garnishment or pending foreclosure we can file your case within hours if needed. Do not let one more unnecessary garnishment come out of your paycheck.  Call today 801-485-3717.