Rentals & Bankruptcy

One of the most important concerns many of our clients have is how bankruptcy will impact their lease on an apartment of home.  This concern arises in one of two scenarios: (1) the client-debtor has arrearages and is filing bankruptcy, at least in part, to avoid paying the past-due rent and perhaps avoid immediate eviction; 0r (2) the client-debtor is current and wants stay in the property. We’ll address each scenario in this article.

I Want to Stay in the rental property

If you want to stay in the rental property, you will have that choice in filing bankruptcy. When your bankruptcy papers are filled out you will indicate whether you want to reject the ongoing obligations of the lease or assume the lease. If you indicate that you want to assume the lease, then the lease terms remains intact and you will be able to remain the property by completing your obligations under the lease i.e. pay rent.

If you have arrearages (past due amounts) and want to stay in the property things get a bit tricky. When you file for bankruptcy, the moment the case is filed with the bankruptcy court, a line is drawn in the sand. All debts that are owed at that moment are subject to the bankruptcy court’s automatic stay. Any debts that arise after the case is filed, however, are not subject to the automatic stay. The automatic stay applies to the pre-petition arrearages, but the landlord can (1) file a motion for relief of the automatic stay and ask the court for permission to evict you unless you bring the arrearages current. If you have arrearages, even if they arose prior to filing for bankruptcy, the court will grant the landlord permission and you will be evicted. That’s because bankruptcy only prevents collection of a debt, but it doesn’t ensure that you remain in the property. In other words bankruptcy doesn’t allow you stay in the property and not pay. The rule of thumb is that if you want to stay in the property, you need to be current or be prepared to bring it current and keep it current.

I Want to Reject the rental property and leave

If you want to reject the rental property and leave you will simply indicate that is your intention when filling out the bankruptcy paperwork. In that case you are not obligated to repay any pre-petition arreraages.

When Will I Have to Leave?

Usually the first question asked after it is established that the client wants to leave the property is when will they be required to leave the property. The simple answer is as soon as possible, but certainly before the next rent payment is due. If you do not vacate the property before the next rent payment is due, you are responsible for the rent payment and that payment will NOT be discharged in your bankruptcy. If you don’t vacate the property the landlord is free to evict you. Under Utah law if the landlord evicts you, you are responsible for triple damages. Again, if that happens, the bankruptcy will not discharge that debt because the obligation arose after filing the bankruptcy case. Because of the substantial damages, you need to be very careful with post-petition rents not being paid.

Schedule a Free Bankruptcy consultation to get individual advice on how bankruptcy will impact your situation.

When Can I Buy A Home After Bankruptcy

When Can I Buy A Home After Bankruptcy and Foreclosure?

I was speaking with a friend the other day who about a year ago short sold a home following a job loss and related struggles. She had a short-sale and wanted to know when she could buy a home after bankruptcy and foreclosure or a short sale. Her situation is very common. She short sold her home following a job loss and nearly two years of negotiations with her mortgage lender. During negotiations of the short sale the loan was transferred (which led to the first buyer walking away) and numerous lost documents by the lender. Eventually after a monumental effort negotiating with her lender the sale was finally approved. She was successful…so she thought. She could have taken the easy road and allowed the home to be foreclosed or filed for bankruptcy. But in her mind a short sale was certainly better than filing for bankruptcy or allowing the home to be foreclosed because it showed a greater sense of responsibility. It showed she was thoughtful and took her responsibilities as a borrower seriously…so she thought. Fast forward to a year later. Now she had stabilized her income and was trying to get pre-qualified for a new mortgage. She had worked hard to improve her credit score since the short sale and while her score wasn’t great, it was in the mid 600s and she felt confident that she could now get a new mortgage with all the advertisements that tout mortgages with credit scores of 500 or better. What a shock and surprise for her to learn that in most cases there is a 3 year waiting period after a short sale! That is the minimum for virtually every underwriter including Fanny Mae, Freddy Mac, & FHA. In fact some are even longer!

How Long After Bankruptcy Do You Have to Wait to Buy a Home?

FHA waiting period following chapter 7 bankruptcy is two years, unless you can demonstrate that “the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited a documented ability to manage his or her financial affairs in a responsible manner.” In chapter 13 a debtor can obtain a mortgage (with court permission) after 12 timely chapter 13 payments–while still in the plan. “Wait a minute! You mean to tell me that if I had filed for bankruptcy instead of spending hours and hours negotiating a short sale I could qualify for a loan, but since I tried to minimize the negative affect on me…and more importantly on the lender I’m being penalized?”, she asked. The mortgage lender said, “essentially, yes. That’s right.” Imagine her bewilderment! Isn’t that upside down, backwards or something? Well yes it is. It is counter-intuitive. There is clearly something wrong with the system when a person takes the extra effort to short sale a property to avoid foreclosure or bankruptcy and she is penalized. To be fair, foreclosure is no better than a short sale as far as waiting period to buy a home. You mean to tell me that a short sale is tantamount (the same as or equal to) a short sale relative to how long you have to wait to get a new mortgage. Yes! The system is what it is. It is simply easier and faster to recover from bankruptcy and buy a home than to recover from a short sale or a foreclosure.

Should I Sign A Reaffirmation Agreement

What Is a Reaffirmation Agreement?

A reaffirmation agreement is an agreement by which the debtor agrees to remain personally liable for a debt post-bankruptcy.   A reaffirmation agreement essentially eliminates the benefit of filing for bankruptcy for that one specific debt.  Because reaffirming a debt undermines the most basic benefit of filing for bankruptcy, we generally discourage our clients from signing a reaffirmation agreement, unless required to do so by the lender to keep the property. If you are inclined to sign one, you should seek counsel from an experienced bankruptcy lawyer before entering into a reaffirmation agreement. 

What is Required to Sign a Reaffirmation Agreement?

If you are represented in your bankruptcy case by a chapter 7 bankruptcy lawyer, the lawyer must review your financial position following bankruptcy and certify to the bankruptcy court that entering into the reaffirmation agreement will not cause an undue financial hardship. If the bankruptcy attorney cannot or will not make that representation to the court, your attorney may need to withdraw from your case (in some jurisdictions like Utah), so that you can represent yourself in the reaffirmation.

Once the agreement is filed with the court, the bankruptcy judge must also approve the agreement.

Why Do We Discourage Reaffirmation Agreements?

As a Salt Lake Bankruptcy lawyer, it is difficult to predict a person’s financial future.  Therefore, our experienced bankruptcy lawyers generally discourage our clients from entering into a reaffirmation agreement…unless absolutely necessary. Most secured creditors with whom a reaffirmation agreement would arise arise—automobile lenders—generally allow you to keep the secure property (automobile) without entering into a formal reaffirmation agreement, so long as you keep your payments current.  We call this the “pay and retain” method.  While a creditor is not legally obligated, our experience is that most secured creditors will agree to the pay and retain method, although more and more creditors are moving away from this option in recent times. While the pay and retain method works well with most secured creditors, there are a minority of creditors who take the extreme position to repossess the secured property even if you are current.  America First Credit Union is one of these creditors.  In cases that deal with AFCU or other creditors who take the same position, it may be necessary to enter into the reaffirmation agreement in order to retain possession of the secured asset. As mentioned, the best way to ensure that your rights and best interest is protected is to consult with an experienced Salt Lake bankruptcy lawyer.

What About My Mortgage?

We do not see many mortgage companies sending a reaffirmation agreement for consideration. In our experience, we have not dealt with a mortgage company that threatened to foreclose if a reaffirmation agreement was not signed. Judges in our district and in other jurisdictions have indicated that it would be malpractice for an attorney to sign a reaffirmation agreement. As a result, our office will never certify a reaffirmation agreement with a mortgage lender. If your mortgage lender is requiring it to avoid foreclosure (even if you are current), then we will have to take the necessary steps to allow you to proceed pro se.

Are Reaffirmation Agreements Covered by a Flat-Fee Engagement?

Many attorneys do not cover the review and certification of a reaffirmation agreement in their standard flat-fee engagement. Our office follows this practice as well. That’s because in the majority of cases a reaffirmation agreement is unnecessary. Rather than increasing our prices for everyone to cover that possibility, we keep the cost of filing lower and charge a nominal fee when it applies to the case at hand.

Schedule your Free Bankruptcy Consultation today.

Why Is Bankruptcy A Constitutional Principal?

Salt Lake Bankruptcy Attorney Russell B. WeekesThe United States constitution has only 4,400 words. It is the oldest and shortest written Constitution of any major government in the world. Article 1, Section 8 of the constitution grants Congress the power “To establish…uniform Laws on the subject of Bankruptcies throughout the United States.” The Preamble of the Constitution explains that the purpose of the Constitution is to “form a more perfect union, establish Justice, insure domestic Tranquility, provide for the common defence [sic], promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…” Considering the paramount import and brevity of the Constitution, it begs the important question: Why did the framers consider bankruptcy a fundamental principal of our union? Obviously the framers considered the method of dealing with debts so important that it addressed the general method (bankruptcy) in our foundational document. Consider, in contrast that virtually every other aspect relating to the relationship of private citizens was left silent.  Why was it so important? What exactly does bankruptcy have to do with a more perfect union, justice, domestic tranquility, common defense, general welfare, or the blessings of liberty? The framers of our Constitution spent considerable time analyzing, debating, and comparing various forms of governments and laws from virtually every angle. Historically there are several alternatives from which the framers could draw. In ancient Greece and Rome debt bondage or bonded labor was historically the normal method of dealing with debtor’s inability to repay debts. In such a structure the person who was unable to repay their debts would, either voluntarily or involuntarily, pledge their labor or services as repayment of their debt. This often led to the debtor and the debtor’s family to become essentially temporary slaves to the creditor until the debt was repaid. The duration could be quit extensive depending on the amount of debt. Western Europe preferred debtor’s prison to deal with people who could not repay their debts. This method is rather commonsensical: the debtor would go to jail or prison for a period of time until the debt was considered repaid.  This debt method was prevalent through the mid 19th century in Western Europe. It still persists in countries such as United Arab Emirates, Hong Kong and Greece. See  Great Britain, from which the majority of the framers came, preferred debtor’s prisons.  With the exception of Louisiana, every other state’s common law is based on the English model. It is very curious, then, that the framers did not simply adopt the English method of dealing with debtors.  This further illustrates the importance the framers placed on dealing with debtors. The framers’ method of debt forgiveness is based on biblical methods of dealing with debts. The Old Testament book of Levitcus required complete debt forgiveness every fifty years. See Leviticus 25:10. More importantly, bankruptcy is the only option that is consistent with the kind of “blessings of liberty” sought by the framers.  I believe the blessings of liberty is the American Dream. The ideal that liberty includes the opportunity for prosperity and success, with upward mobility attainable through personal hard work and risk-taking. Debtor prison and debt bondage both discourage risk-taking and upward mobility.  They also contribute to the so-called invisible ceiling that ensures that the lower class does not or cannot increase their social status. In this light, bankruptcy is as essential to the American Dream as private property ownership. Without bankruptcy, very few would have the wherewithal to venture entrepreneurship. The import of bankruptcy to the American Dream encapsulated in the “blessings of liberty” explains why bankruptcy would so fundamental as to be included in the mere 4,400 words comprising our Constitution.   Russell B. Weekes, Esq. is a bankruptcy attorney in Salt Lake. His practice is focused on consumer chapter 7 and chapter 13 bankruptcy protection. This article is intended to provide general information is not to be construed as providing legal advise. Find out more at d

What Happens After You File Chapter 13? a chapter 13 bankruptcy case is filed, the automatic stay prevents creditors from legally foreclosing, garnishing, repossessing or collecting against the debtor or any individual joint debtors. As part of the chapter 13 filing, the debtor proposes a chapter 13 plan (“Plan”) to reorganize their finances.  The Plan will contain provisions to deal with repaying secured debts, taxes and other priority debt. It will also propose a plan to bring leases or secured accounts like car loans and mortgages current, removing judgment liens, and restructuring interest rates and amounts due on secured loans.  To ensure success of the Plan, the Debtor must comply with the Plan’s terms and remain current.

Plan Payment

The Debtor’s preeminent responsibility under the Plan is to make the monthly Plan payment to the chapter 13 trustee. The first Plan payment is due by the first regularly scheduled section 341 creditor meeting. In Utah, the trustee does not accept payments at the 341 meeting like in other jurisdictions. Instead, the Debtor must tender the payment in advance of the meeting. If the 341 meeting is continued (rescheduled) the payment is still due by the original 341 meeting date.

Getting Information on My Case

The Utah chapter 13 trustee has a website to access information relating to your case. The website’s address is If you have questions about accessing this site, you MUST contact the trustee’s office directly. You can call them at (801) 596-2884 or email We, or your attorney, will not have information regarding your payments made, amounts past due and the like. You need to access that information directly from the trustee’s website.

Mortgage, Car Payments & Secured Debts

Debts that are secured (collateral that is attached to the debt) can be either paid directly to the creditor or included in the plan, with the exception of mortgages which are always outside of the Plan. If the secured debt is included in the Plan, the trustee will make those payments upon confirmation of your Plan.  If the Plan indicates that you will make payments directly to the creditor, you must begin making the regular payment the first calendar month after filing your case.  Failure to make the regular monthly payments directly after proposing to do so, is grounds for dismissing your case.

What About Tax Refunds?

Tax returns and a portion of all refunds for the first three years (if the Plan is for more than 3 years) must be provided to the trustee. In Utah, the court allows the Debtor to retain the first $1,000 of these tax refunds. If the Debtor receives an Earned Income Tax Credit or a Child Tax Credit, the Debtor may keep those funds unto an additional $1,000. Thus, the Debtor may in some circumstances be able to keep up to $2,000 of tax refunds for each of the 3 years. All other refunds must be paid into the Plan. Failure to timely provide state and federal tax returns and/or pay the trustee the refund (withholding the amounts above) is cause for dismissal of your case.

What If My Income Changes During My Plan?

Once a Plan is confirmed by the court, you will continue following the Plan’s terms until completion of the case. In Utah, if your income increased during the Plan, the chapter 13 trustee may file a motion with the court to increase the Plan payment.  In our experience and according to prior comments made the Utah chapter 13 trustee, that is unlikely. His perspective has been that the Debtor benefits from an increase of income. If there is a decrease of income that makes making your Plan payment while maintaining household expenses, it is often possible to modify the Plan. This is not always true due to minimum requirements of the Plan. If you experience a significant decrease of income, speak directly with us or your attorney to assess the situation.

What If I Need a New Car During My Plan?

During the Plan, the Debtor may not incur new debt without the court’s permission. Court’s routinely approve debt for things that are reasonably necessary for the support of the Debtor and the Debtor’s dependents. If a car is totaled or stops working and needs to be replaced, the court will generally approve of debt to replace the vehicle. The court will need information regarding the new debt, so it is advisable to seek out the replacement vehicle and identify the terms of the new loan. We or your attorney will then need to seek court approval by filing a motion to incur debt.

Russell B. Weekes is an experienced Salt Lake Chapter 13 bankruptcy attorney. This article is for general information and is not intended to provide specific legal advise. Schedule a free bankruptcy evaluation, or call (801) 657-5074

What Is a Section 341 Meeting of Creditors?

Many of our clients are initially somewhat concerned about the meeting of creditors.  The meeting of creditors need not cause substantial concern. Frequently after the meeting our clients will comment that “it wasn’t as bad as I thought”.

Who Will Be At the Meeting?

With limited exception in every bankruptcy case the trustee has a statutory responsibility to convent a meeting of creditors.  The meeting of creditors is an opportunity for the bankruptcy trustee to ask the debtor questions under oath.  Other creditors may also attend and ask the debtor questions, but rarely do so.  When a creditor does appear it is usually a secured creditor such as a lender on a car or furniture. These creditors want to determine your intentions regarding the asset (are you going to give it back or continue to pay for it).

This is not a court hearing and the judge cannot be present at the meeting. As a result, no rulings of law can be made. The best advise we can offer is to relax.

What Can I Expect At the Meeting?

The meeting usually starts with the first giving general instructions applicable to all the debtors appearing during the same session and then begin meeting individually with the debtors. The meeting is grouped with a number of case and in most cases are scheduled to last one hour for all of the cases on the docket. Debtors should plan on being at the meeting for approximately an hour, although the time you actually spend on your case will likely only last 5-10 minutes.

Under statute the meeting is designed to ensure that the debtor understands: (a) the effect of receiving a discharge of her debts; (b) the effect of reaffirming debt; (c) and the debtor’s ability to seek relief under a different chapter of bankruptcy.  In practice, the trustee usually asks the following questions:

1-      Did you file a petition, statements and schedules?

2-      Before filing the petition, statements and schedules did you review and sign them and is the signature your own?

3-      Have you listed all of your assets?

4-      Have you listed all of your debts?

5-      Are there any changes you need to make?

The US Trustee’s office has prepared a video example.  Click to View.

Is Attendance Mandatory?

The court schedules the 341 meeting and notice is sent to all your creditors, so that they can attend if they chose. Attendance is mandatory for all debtors in the case.  If one or both of the debtors does not attend, the case can be dismissed as to the debtor that doesn’t appear. It is therefore very important that each debtor attend the scheduled meeting.

Can the Date or Time of the 341 Meeting Be Changed?

In extreme case the meeting of creditors can be “continued” or rescheduled with court approval. Notice must be provided to each of your creditors in advance of the meeting and the meeting has to be rescheduled by the court.  There are almost always additional costs associated with continuing the meeting.  For these reasons, continuing the meeting should only be sought in extreme cases.

Are there Any Other Court Appearances?

In most chapter 7 cases, the meeting of creditors is the only appearance that is required. In chapter 13 cases there is an additional hearing before the judge called the confirmation meeting. Attorneys differ as to whether they want their clients to attend that hearing. We generally do not make our clients take additional time off to attend—unless there is a specific reason for attendance.

What Do I Need To Bring?

Unless told otherwise, you need to bring the following documents with you to the meeting:

  1. Social Security Card – If you DO NOT have a Social Security Card, call our office (or your attorney) IMMEDIATELY. If you fail to bring your Social Security Card to your meeting, you may be charged additional fees for and be required to attend a continued hearing.
  2. Driver’s License or other government issued picture ID.
  3. Bank Statements – For each of your accounts covering the date you filed for bankruptcy.
  4. Pay Stubs – Your most recent pay stub.
  5. Your most recent tax return.
  6. Your most recent county property tax notice (if you own your home).
  7. Any other information that the trustee or your attorney requested you to bring.

Are Federal or State Taxes Dischargeable in Bankruptcy?

One of the most frequently asked questions that we hear in our Utah bankruptcy practice is whether taxes can be discharged in bankruptcy. The answer to such a seemingly simple question is actually quite complicated. Some federal and state income taxes may be eligible for discharge under Chapter 7 or Chapter 13 of the bankruptcy code under certain circumstances.

Under section 523 of the bankruptcy code there are five rules that determine dischargeability of tax liabilities:

(1) The due date for filing the tax return is at least three years prior to the filing of the bankruptcy petition. This requirement includes any extensions. So, if you filed for an extension, the time period is calculated from the due date of the extension.

(2) The tax returned was “filed” at least two years prior to the filing of the bankruptcy petition. This requirement is met when a debtor participates in (provides information and documentation) or signs off on a return, pursuant to Internal Revenue Code section 6020(a). This requirement apparently does not include, however, a service-filed return pursuant to Internal Revenue Code section 6020(b) where the filing is not done with the debtor’s cooperation and is based on information obtained by the taxing authority on its own.

(3) The tax assessment is at least 240 days old (as of the date of filing the petition). This occurs when the taxing authority sends you a notice of assessment or the IRS issues a certificate of assessment.

(4) The tax return was not fraudulent; and

(5) The taxpayer is not guilty of tax evasion.

If the five requirements listed above are met, the taxes may be dischargeable. In some cases it may be advantageous to wait to file the bankruptcy petition until the tax liabilities are dischargeable. In any event, the only way to discharge tax debt for certain is to file an adversary proceeding. An adversary proceeding is a separate case so to speak within your bankruptcy case. Courts in some jurisdictions also include additional requirements, so it is important you consult with a qualified bankruptcy lawyer.

To assess a particular situation and determine the dischargeability of tax debt, you should consult an experienced bankruptcy attorney.

Increases to Utah Bankruptcy Exemptions

Keep More Property in Bankruptcy

The Utah legislature amended the Utah bankruptcy exemptions  in 2013.  Bankruptcy exemptions are the laws that protect property from liquidation in bankruptcy.  Since Utah has opted out of the federal bankruptcy exemptions, the Utah amendments means that bankruptcy filers can now keep more property when filing in Utah.  The new exemptions take effect on May 14, 2013.

How Do The New Utah Bankruptcy Exemptions Impact Chapter 7 Bankruptcy in Utah?

In a chapter 7 bankruptcy, the debtor or debtors will inventory and appraise all of their assets.  Their assets will then be divided into two categories: exempt and non-exempt by applying the applicable exemption rules.  Exempt assets are assets that cannot be taken for liquidation; non-exempt assets may be liquidated by the bankruptcy trustee and the proceeds distributed to creditors.   Utah’s new exemption statutes increase the amount of property that is exempt and adds a couple of new exemptions. The new exemptions increase the exemption amount of the following property categories to $1,000:

  • Sofas, chairs and related furnishings
  • Dining and kitchen tables and chairs
  • Animals, books, and musical instruments
  • Heirlooms or other items of particular sentimental value

The amendment also now includes an exemption for firearms and ammunition.  The homestead exemption in Utah and the vehicle exemption were also increased.

How Do The New Exemptions Impact Chapter 13 Bankruptcy in Utah?

Since debtors typically retain possession of all their assets in a chapter 13 bankruptcy, the exemption changes are more readily apparent in chapter 7 cases.  The exemption amendments also impact chapter 13 bankruptcies, however.  In a chapter 13, the plan must, among other things, return to creditors the amount they would have received in a chapter 7 case.  Thus the exemption change can in some cases decrease the amount that chapter 13 debtors must pay into the plan over the course of its term.

How Do I Ensure That I Keep As Much Property As Possible When Filing Bankruptcy in Utah?

This article has only provided a general overview of the new Utah bankruptcy exemptions.  Application of bankruptcy exemptions requires in-depth understanding of the individual’s assets and the nuances of Utah’s bankruptcy statutes.  To ensure that you keep as much property as possible when filing bankruptcy in Utah, contact an experienced Utah bankruptcy attorney.

Russell B. Weekes is an experienced Salt Lake bankruptcy attorney.  This article only provides a broad generalization and is not intended to provide legal advice for any specific circumstance.  To schedule a free Salt Lake bankruptcy evaluation, call 801-783-1888 or complete our web form today!

Can I File Bankruptcy Without My Spouse?

Frequently clients need to file for bankruptcy, but want to do so without his or her spouse being affected.  That raises the questions: Can a married person file bankruptcy alone? How is the non-filing spouse impacted when their spouse files bankruptcy alone?

A person in a marriage can file bankruptcy without the spouse. While there may be advantages to filing alone, there may be disadvantages in some circumstances as well.  Here are a couple of things to consider.

Information From the Non-Filing Spouse May Be Needed

It most instances, income information regarding the non-filing spouse is necessary to file the bankruptcy petition.  Many clients initially are concerned that this means the non-filing spouse is “affected”.  That’s not the case.  Under the bankruptcy rules, the married spouses are in effect considered a single economic unit, so the financial information is simply necessary to determine qualification.  The debts and credit of the non-filing spouse should nevertheless remain in tact.

Advantages of Filing Bankruptcy Without Spouse

Some clients chose to have only one person in marriage file for bankruptcy to help preserve the credit of the non-filing spouse.  This can be useful when the couple wants or needs to qualify for a loan or to improve interest rates on future loans.  Filing alone may also be helpful when one spouse owns non-exempt property separately and the couple wants to keep the non-exempt property.  Filing individually can also sometimes dissuade the trustee from seeking liquidation of jointly held non-exempt property as well because it may be difficult or practically impossible for the trustee to liquidate non-exempt property.

Disadvantages of Filing Bankruptcy Without Spouse

It should go without saying that only the debts of the spouse filing will be discharged.  If the non-filing spouse is a joint debtor on any of the debts or has individual debts, they will remain liable for the debt and it may be advisable to file jointly to maximize the benefits in filing bankruptcy.   Some bankruptcy trustees are also concerned about one spouse filing bankruptcy and claiming that the non-filing spouse owns all the property.  This could lead to a more thorough investigation or verification of property ownership.

A married person can file bankruptcy individually without his or her spouse. Advantages include preserving the non-filing spouse’s credit, while disadvantages include no discharge of non-filing spouse’s debts.   As mentioned previously, deciding to file bankruptcy without one’s spouse should be done with care and with the help of an experienced bankruptcy attorney.

Russell B. Weekes is an experienced bankruptcy attorney in Draper, Utah.  This article only provides a broad generalization and is not intended to provide legal advice for any specific circumstance.  To schedule a free bankruptcy evaluation in Draper, call 801-657-5074 or complete our web form today!

Does Filing for Bankruptcy in Salt Lake mean You’re Dishonest or Unethical?

One of the most common concerns or misconceptions that clients express in one form or another is an insecurity that if they file bankruptcy that makes them somehow unethical or dishonest.  While there may be a small minority of people who intentionally abuse the bankruptcy system, it is my overwhelming experience that people filing bankruptcy are honest, hard-working and upstanding people.  The fact is that every society has some system to deal with honest and hard-working people who are experiencing extreme financial hardship.

In ancient Greece and other civilizations, when a debtor could not repay his debts, he and his family were forced into debt slavery until the creditor was repaid. Read more at Wikipedia.  In the Old Testament debts were automatically forgiven every 7 years and every 49 years.  Id.

The founding fathers of our great country (and all of us as a society) mutually agreed that the system to give good people they help they need through tough financial times to ethically and honestly deal the best way they can with their debts…is our federal bankruptcy relief system.  Do you believe the Constitution is dishonest or unethical?  If not, then you can not believe that bankruptcy is dishonest or unethical because bankruptcy as a system to protect debtors  is embodied in Article 1, Section 8 of the United States Constitution.  The fact that bankruptcy is the method chosen by the United States Constitution shows its importance and legitimacy.    Bankruptcy protection is an express or implied provision of every contract we enter into in the United States that protects good people from creditors who frequently are over-aggressive and abusive.

Many Honorable, Honest, and Hard-working People have Filed for Bankruptcy

While bankruptcy is a matter of public record.  The fact is that most people won’t know you filed for bankruptcy unless you tell them.  Because it is not widely publicized, you may be surprised to learn that president Abraham Lincoln (aka Honest Abe), Thomas Jefferson, and even Henry Ford have all filed bankruptcy? Read more here.  Many of our financial institutions

Bankruptcy Is NOT a Free Pass

Contrary to common belief and what creditors frequently intimate, bankruptcy is not a free pass. In every Salt Lake chapter 7 or Salt Lake chapter 13 the debtor is required to give something in exchange for a discharge of his or her debts. In chapter 7 cases, the debtor exchanges non-exempt property for a discharge. While it’s true that chapter 7 debtors frequently don’t have any non-exempt property, they nonetheless must be prepared to surrender such property. In chapter 13 cases, the debtor makes a monthly payment to repay debts over a limited period based on the debtor’s ability to pay. In either case, the debtor is not given a free pass.

Russell B. Weekes is an experienced bankruptcy attorney in Salt Lake City.  Get a Free Bankruptcy Evaluation in Salt Lake by Completing our webform .