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THE
NEW AND IMPROVED
UTAH BANKRUPTCY LAW HANDBOOK
SAVE YOUR HOME
PROTECT YOUR EQUITY
CHAPTER 13 BANKRUPTCY CAN HELP
YOU SAVE YOUR HOME
Chapter 13 Bankruptcy offers significant protection for Debtors who have
fallen behind on their home mortgage payments. Under the Bankruptcy Code,
Debtors are permitted to catch up on all delinquent payments on mortgages and
home equity loans against their primary residence over a three to five year period under the terms of a
Chapter 13 Plan.
Provided the Debtors remain current on all payments against
their home following the commencement of the Chapter 13 case, and make
all Chapter 13 plan payments in a timely manner, the Creditor on a home loan is required
to accept repayment of all mortgage arrearages through a Chapter 13 plan.
This means that once you file a chapter 13 case, you must keep
making your regular monthly mortgage payments and the chapter 13
plan payment in order to keep your home.
Chapter 13 is similar to a debt consolidation. The Debtors pay one single
monthly payment to the Bankruptcy Trustee assigned to their case (in Utah, the
only Chapter 13 Trustee is Kevin R. Anderson), and the
Trustee distributes the funds among all of the Debtors'
Creditors as set forth in the Debtors'
Chapter 13 Plan. The best thing about the Chapter 13 Plan is that the Debtors and their bankruptcy attorney
make the plan. A
portion of the single monthly payment is applied to the mortgage arrearages over
the three to five year plan period.
Under Utah law, a home lender holding a Deed of Trust recorded against a
Debtor's home can complete foreclosure
proceedings within about 60 days after submitting proper notice. The filing of a
Chapter 13 case stops a foreclosure sale immediately upon filing. This is true even
if a Debtor files a Chapter 13 bankruptcy one hour before a foreclosure sale.
The Debtor will then proceed to formulate a plan to re-pay their Creditors and
catch up on all delinquent payments on the home to save the home.
IN SOME CASES, FILING
A CHAPTER 7 BANKRUPTCY CASE CAN PRESERVE THE EQUITY IN
YOUR HOME.
Debtors who are seriously in debt and are contemplating debt consolidation by
borrowing against their homes
should seriously consider bankruptcy options available to them under Chapter 7
before jumping into a debt consolidation plan.
Incurring long-term indebtedness against the Debtors'
primary residence often results in excessively high payments which the Debtors
are unable to sustain over the duration of the loan. If the Debtors are forced
to incur additional debt after borrowing against their homes, or if they are
unable to borrow sufficient funds against their homes to consolidate all of
their debt, they are vulnerable to losing their homes upon any change in their
financial situation.
The Homestead Laws in the State of Utah were amended in 1999. The present Homestead exemption for a primary
residence is $20,000.00
per individual and $40,000.00 per couple. Instead of borrowing against their
homes, Debtors who are current in payments on all loans against their homes, can
file Chapter 7 bankruptcy, eliminate most of their other debt, and emerge from
Chapter 7 with the equity in their homes intact by claiming up to $20,000.00 to
$40,000.00 of the equity in their homes exempt.
If the Debtors' home equity exceeds
the limits of the Homestead described above, a Chapter 7 option would not be
available to them as their homes could be taken and sold by the Bankruptcy
Trustee. Debtors with equity exceeding $20,000 per individual or $40,000 per
couple should consider filing Chapter 13 to resolve their financial
difficulties.
DISCLAIMER
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 EVELAND &
ASSOCIATES OR ANY OF ITS ATTORNEYS.
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