How to File for Bankruptcy in Utah

In Utah, a party starts a bankruptcy case by filing a petition with the federal bankruptcy court that serves the area where they live permanently (are domiciled), reside or have a principal place of business.

There is only one bankruptcy court in Utah, located in downtown Salt Lake City.

A debtor may file a voluntary petition to start a bankruptcy case; a lender may file an involuntary petition if a debtor owes them money.

Filing for bankruptcy in Utah is beneficial if an individual has debt that can be discharged, meaning released. Some debts, such as alimony and child support, cannot be discharged.

A Chapter 11 bankruptcy is helpful for a business that seeks to remain open through the life of the bankruptcy case. Under this chapter of bankruptcy, a debtor can remain “in possession” of the business and continue operating the business.

With the permission of the court, the debtor can even borrow new money.

The characteristics that a party must have in order to be eligible for bankruptcy depends on the chapter of the Bankruptcy Code under which they are filing.

Typical bankruptcy chapters are:

• Chapter 7 liquidation bankruptcy,
• Chapter 11 reorganization bankruptcy
• Chapter 13 wage earner’s plan

An individual, a married couple or a business can file for Chapter 7 or Chapter 11 bankruptcy; only an individual can file for Chapter 13 bankruptcy.

An individual filing for Chapter 7 bankruptcy must have income that passes the means test, a calculation that takes into account their typical monthly income and the median income in their state or U.S. territory.

The state's median income is based on data from the most recent U.S. Census.

When a person’s income is less than the median, they can seek Chapter 7 bankruptcy. An individual who does not pass the means test can seek Chapter 13 bankruptcy. In a Chapter 7 case, a discharge is available only to individual debtors, not to partnerships or corporations.

There are no restrictions on debt and income for Chapter 11 bankruptcy; there are restrictions on debt and income for Chapter 13 bankruptcy. An individual is eligible for Chapter 13 if their combined secured debts (backed by collateral) and unsecured debts (not backed by collateral) debts are less than $2,750,000 on the date of filing.

The steps to file for bankruptcy vary depending on the chapter of the Bankruptcy Code under which the party files. After a party files a petition for bankruptcy, the court typically grants an automatic stay, which prevents creditors from beginning or continuing collection efforts.

The basic steps for Chapter 7 bankruptcy are:

1. Complete a pre-bankruptcy credit counseling course within 180 days before filing for bankruptcy.
2. File the required forms, together with the counseling course certificate and bankruptcy filing fee or request for fee waiver.
3. Provide the bankruptcy trustee, the administrator that the court appoints to monitor the case, with financial documents such as bank statements and tax returns.
4. Attend the 341 meeting of creditors where they verify the debtor’s information and ask questions about information in the petition for bankruptcy.
5. Complete a debtor’s education course and file the certificate with the court.
6. Court will discharge, or release, the debtor from debts incurred before filing for bankruptcy. This typically occurs four months into the case.
7. The court closes the bankruptcy case.

The average Chapter 7 case takes four to six months to close.

The basic steps for Chapter 11 bankruptcy:

1. Complete a pre-bankruptcy credit counseling course within 180 days before filing for bankruptcy.
2. File the required forms, together with the counseling course certificate and bankruptcy filing fee or request for fee waiver.
3. File a disclosure statement with the bankruptcy clerk. This should contain a schedule of assets and liabilities, debtor’s current income and list of expenditures, statement of the debtor’s financial affairs and list of creditors.
4. Court will appoint a committee to represent the interests of unsecured creditors.
5. File a reorganization plan within 120 days of filing for bankruptcy.
6. Court will vote on whether it will approve the disclosure statement.
7. Creditors will vote on the reorganization plan.
8. Court will hold hearings on whether it will confirm the reorganization plan.
   
9. Debtor begins to make payments according to the reorganization plan.
10. Court closes the bankruptcy case after the reorganization plan has been administered, or completed.

The average Chapter 11 case takes between six months and two years to close.

The basic steps for Chapter 13 bankruptcy:

1. Complete a pre-bankruptcy credit counseling course within 180 days before filing for bankruptcy.
2. File the required forms together with the counseling course certificate and bankruptcy filing fee or request for fee waiver. Propose a repayment plan as part of this process. A repayment plan will last between three and five years.
3. Provide the bankruptcy trustee, the administrator appointed by the court to monitor the case, with financial documents such as bank statements and tax returns.
4. Within 30 days after filing the petition, begin making payments according to the repayment plan.
5. Attend the 341 meeting of creditors. The creditors verify the debtor’s information and ask questions about the information in the petition for bankruptcy.
6. If a creditor objects to an aspect of the plan, the debtor can file a modified plan.
7. Court will hold a hearing to determine whether it will confirm the repayment plan.
8. Provide the trustee with annual statements showing yearly income and expenses.
9. Court grants the debtor a discharge and closes the case.

The average Chapter 13 case takes between three and five years to close.

The costs to file for bankruptcy in Utah depends on the chapter of the Code under which the party files. As of November 2022, costs for a new petition are:

• $338 for a Chapter 7 voluntary or involuntary petition.
• $1,738 for a Chapter 11 voluntary or involuntary petition.
• $313 for a Chapter 13 voluntary petition.

The costs for a motion to reopen a closed case are:

• $260 for a Chapter 7 case.
• $1,167 for a Chapter 11 case.
• $235 for a Chapter 13 case.

There are costs for a motion to convert one type of case to another, such as a Chapter 7 case to a Chapter 11 case, as well as fees for a notice of conversion. These include:

• Motion to convert Chapter 11 to Chapter 7: $15.
• Motion to convert Chapter 13 to Chapter 7: $25.
• Motion to convert Chapter 7 to Chapter 11: $922.
• Motion to convert Chapter 13 to Chapter 11: $932.
• Notice of conversion of Chapter 13 to Chapter 7: $25.

There are also costs for other motions, initiating an adversary complaint (separate lawsuit within the bankruptcy case), and other services, such as certification of a document.

The forms required for a bankruptcy case depend on the chapter under which the party will file and whether the petition is voluntary or involuntary. An individual should typically begin by filing Form B101, the voluntary petition for individuals filing bankruptcy.

A creditor should start a case against an individual by filing form B105, involuntary petition against an individual.

A party must file additional forms for requests such as having a filing fee waived or seeking to pay the filing fee in installments. Some forms are local, or specific to the U.S. Bankruptcy Court, District of Utah, such as the monthly financial report for a Chapter 11 bankruptcy.

Exemptions determine what property a party filing for bankruptcy can protect. Some states, such as California, allow a resident to choose whether they will claim state-specific exemptions or federal exemptions. Utah does not allow a resident to choose between Utah-specific exemptions and federal exemptions.

Utah state law provides that a resident who has lived in the state for at least two years is required to apply Utah property exemptions in their federal bankruptcy case.

According to the Utah Exemptions Act in Utah Code, Utah’s bankruptcy exemptions include:

• Animals, books and musical instruments, up to $1,000 combined.
• Artwork made by a family member.
• Bed, bedding and carpets.
• Burial plot.
• Clothing, with the exception of furs and jewelry.
• Dining room furniture, up to $1,000 combined.
• One shotgun, one handgun and one shoulder arm, with 1,000 rounds of ammunition each.
• Food to last one year.
• Health aids such as hearing aids.
• Heirlooms, up to $1,000 combined.
• Personal injury and wrongful death settlements for the party or someone on which they depended, such as a spouse.
• Proceeds from sold, lost or damaged exempt property.
• Refrigerator, freezer, microwave, stove, sewing machine, washer and dryer.
• Sofa, chairs and other furniture, up to $1,000 total.
• Education savings plan up to $200,000.

Utah has a motor vehicle exemption allowing up to $3,000 of equity (the appraised value of a vehicle) in a motor vehicle. Utah has a homestead exemption for the primary residence of the debtor of $20,000 per individual and $40,000 if a person files for bankruptcy with a spouse.

Utah further exempts tax-exempt retirement accounts, including 401(k)s, SEPs and SIMPLE IRAs. In addition, it exempts IRAs and Roth IRAs to $1,512,350 per person, valid for bankruptcy cases filed between April 1, 2022 and April 1, 2025.

Other exempt property under Utah law includes unemployment benefits; workers' compensation; tools used in a trade or profession, up to $5,000; earnings to the lesser of 75 percent of disposable income or 37 times the federal minimum wage per week; disability or hospital benefits; and life insurance proceeds if the beneficiary is the insured party’s spouse or dependent and the proceeds are needed for support.

A party can find a Utah bankruptcy attorney by doing a web or phone directory search for local bankruptcy attorneys.

In addition, the Utah State Bar has a Licensed Lawyer attorney referral page. A prospective client should answer several questions to indicate the type of attorney they need.

The service then directs the party to a list of attorneys in that specific practice area. The correct field for a bankruptcy case is bankruptcy law. Unlike in other areas, local bar associations such as the Salt Lake County Bar Association may not provide referrals or recommendations for attorneys.

The cost of a bankruptcy attorney depends on the chapter under which a party files, the length of the case, and whether the case involves additional litigation or legal services. The attorney will charge more if the case involves adversary proceedings or a motion to reopen.

Attorney fees typically start at $850 and can range up to $3,000 per case.

The per case rate tends to be less expensive for individuals and more expensive for companies. Circumstances and rates differ depending on the complexity of the case and the amount of work the bankruptcy attorney needs to do.

A party can represent themselves and consult a bankruptcy attorney if they wish, but this is not recommended because bankruptcy cases are particularly complicated. A bankruptcy attorney’s hourly rate in Utah starts at $200 and can range up to $500 or more.