Utah Chapter 7 Bankruptcy FAQ
What happens to the money in my bank account when I file Chapter 7?
Any money in your possession or bank account on the day your case is filed, including a tax refund due or coming due, becomes property of the bankruptcy trustee. It is not yours. The right approach is to spend that money before filing on regular monthly necessities such as rent or your house payment, utilities, food, and clothing, and to keep receipts showing how you spent it. Do not just pull the money out and hold cash, buy gift cards, or write checks that have not cleared. A pending payment doesn’t count. If you pay a bill with a money order, actually mail it before filing. And never use the money to pay back family or friends, because that creates a separate problem the trustee can unwind.
What happens to my tax refund in Chapter 7?
A tax refund belongs to your bankruptcy estate to the extent it comes from income you earned before filing. If you file partway through the year, the trustee can claim the share of that year’s refund you earned before filing, even though the check won’t arrive until the following spring. If you already received and spent a refund before filing, be ready to show the trustee how you spent it. Don’t take a refund anticipation loan, and don’t pay your tax preparer out of the refund, or you will end up reimbursing the trustee for the shortage. Never cash a tax refund check you receive during the bankruptcy without talking to your attorney first.
What happens if I miss the meeting of creditors (341 meeting)?
Your case will be dismissed, and re-filing requires a new court filing fee and an additional attorney fee. The meeting itself is easier than most people expect. Everything is held by Zoom now, and your ID and Social Security verification are handled through a secure upload before the meeting. You still have to attend, but attending means joining a video call.
Why did my online bill pay stop working after I filed?
Creditors often shut down portal access when you file so they can’t be accused of taking money from someone under bankruptcy protection. The fix is simple. Use your own bank’s bill pay to push the payment instead of having the creditor pull it.
Can I contact the bankruptcy trustee directly?
Please don’t. The trustee is not your advocate. The trustee’s job is to find assets for your creditors, and direct contact almost always does more harm than good. If something needs to reach the trustee, route it through our office.
What if I forgot to list a creditor?
Creditors can be added after filing by amendment. Our office charges a flat $100 per amendment, whether it adds one creditor or several, and that includes the court’s amendment fee.
How do I keep my car or home in Chapter 7?
By signing a reaffirmation agreement with that creditor. Tell your attorney which debts you want to keep. The agreement comes from the creditor, and often only after you contact your lender directly. Some creditors won’t reaffirm a delinquent loan, some charge a fee to prepare the agreement, and some won’t send one at all and may repossess even though you wanted to keep the property, so involve your attorney the moment a creditor sends you anything. Homeowners should also know that if you don’t sign a reaffirmation agreement with your mortgage company, it may stop reporting your payments to the credit bureaus, which can make refinancing harder later.
What is a cross-collateralization clause?
It is language in loan documents, common at credit unions, that stacks all of your debts at that institution, like credit cards and lines of credit, on top of your secured debt, such as a car loan. The result is that you may owe more on your car than you thought if you want to keep it. If you bank where you borrow, ask whether your loans are cross-collateralized and discuss it with your attorney.
What happens to secured property I don’t reaffirm?
A secured debt is one where you pledged property as collateral. If you don’t reaffirm with the creditor before the end of the case, you can lose the collateral, and the creditor may contact you to arrange pick-up of surrendered property.
Are co-signers protected by my bankruptcy?
No. A Chapter 7 discharge protects you, not your co-signer. The debt still has to be paid on time, or your co-signer’s credit will suffer and collection efforts against them will continue.
Can I use my credit cards after filing?
No. After filing you may not use any existing open credit lines, including credit cards, home equity lines, and bank overdrafts.
Will bankruptcy clean up my credit report?
Not automatically. Creditors are supposed to notify the bureaus that your debts were discharged, and they frequently fail to do it. Correcting your report afterward means disputing the inaccuracies directly with the credit bureaus, and that follow-through falls on you rather than the court.
What happens to my utilities?
You can include utility debts in your bankruptcy, but the utility can require a deposit within about twenty days after you file to keep your service going.
Which debts survive a Chapter 7 discharge?
Secured loans and lease-to-own contracts survive if you keep the property, along with most tax obligations, alimony and child support, debts from fraud, and fines and criminal penalties. Student loans have historically survived too, but a separate discharge proceeding is now available, so ask whether you qualify. Recent borrowing also gets scrutiny. A creditor may object to discharging credit card charges, cash advances, or payday loans taken shortly before filing, especially larger purchases that weren’t necessities, so tell your attorney about any recent charges. Some income tax debts can be discharged if the returns were due more than three years before filing. If a tax year is close to qualifying, it may be worth delaying your filing, so ask about that as well.
Should I open a new bank account before filing?
Usually yes, at a bank you don’t owe money to. If you bank where you owe, the money in your account can be frozen as security and the account closed. Stop payment on undeposited checks, cancel scheduled automatic payments, and switch your direct deposit to the new account. Bankruptcy doesn’t stop a creditor from depositing a check you already wrote, and automatic withdrawals take time to shut off. A brand-new account at a different bank is the clean solution.
How long does it take to get garnished money back?
Allow at least two weeks after filing to recover funds garnished after your bankruptcy, because the refund check takes time to arrive. Don’t budget around that money arriving quickly.
What is the financial management course? Didn’t I already do that?
No, there are two courses. The brief online counseling session you took before filing is the first one. To receive your discharge you must also complete a second financial management course after filing. If the certificate isn’t filed by the deadline, your case closes without a discharge and creditors can resume collecting. You will also get a pile of mail offering this second course at inflated prices. Ignore it, and take the second course through the same provider and login you used for the first.
I got a scary “deficiency notice” from the court. Is my case being dismissed?
Almost certainly not. A deficiency notice is routine when a case is opened with initial documents only. It just means the remaining schedules are due, and there is a window to file them. Your attorney receives copies of everything the bankruptcy court mails you. What matters on your end is signing the after-filing agreement and returning every document your attorney sends within days, because the court’s deadlines are short.
Can a bank or doctor refuse to serve me after I discharge their debt?
Yes. Anyone whose debt you discharge has the right to stop offering you services, so plan on finding another provider.
Is it hard to rent an apartment during an open Chapter 7?
Often, yes. Landlords see the open case on your credit report and worry that you’ll add the rent to it. Plan to stay put until the case closes. If you have to move, save up so you can offer a larger deposit than competing tenants.
Have a question that isn’t here?
Call or text us at (801) 388-0007. The consultation is free, and with true $0 down it costs nothing to get answers.