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Bankruptcy in Utah: Navigating the state’s homestead exemption

The prospect of filing for bankruptcy can undoubtedly be a scary proposition for most, especially when the individuals in question know little about the intricacies of bankruptcy and the relief it can provide. For instance, some may shy away from bankruptcy merely because of their mistaken belief that the process will strip them of all of their assets - assets that they have work so hard to build throughout the years.

However, these individuals need to know that bankruptcy law expressly permits debtors to keep safe certain types of property following the bankruptcy process. Specifically, Utah has several bankruptcy "exemptions" that protect the property of those who file for bankruptcy relief. Most notably, Utah's homestead exemption protects a substantial portion of home equity for those who are forced to pursue a Utah bankruptcy due to overwhelming debt.

Background of Utah's homestead exemption

Although the federal bankruptcy code clearly delineates several exemptions available to debtors, it also permits each individual state to opt out of these exemptions and draft their own, which Utah has elected to do. In fact, Utah law expressly mandates that state residents may not use the federal exemptions, which consequently leaves the exemptions created by state lawmakers.

In the case of Utah's homestead exemption, state law dictates that an individual is entitled to protect up to $30,000 in home equity during bankruptcy if the home is used as a "primary personal residence," otherwise the exemption amount is only $5,000. Importantly, this exemption not only applies to traditional dwellings, but mobile homes as well.

Additionally, Utah law clearly states that if the home is jointly owned, each owner is permitted to use the homestead exemption. Essentially, this means that joint owners - for instance, married couples - can double the exemption amount to $60,000 if the home is their primary residence, and $10,000 in all other circumstances.

The importance of Utah's homestead exemptions cannot be overstated. In fact, courts interpreting state law have routinely recognized the exemption as a "right" used to protect its citizens and to "insure such persons' shelter and support free from fear of forced sale." Accordingly, exemptions are typically construed liberally in favor of the individual filing for bankruptcy as a way to protect the debtor, and his or her family, from extreme hardship.

Bankruptcy assistance is available if needed

Ultimately, the homestead exemption is simply one exemption of many in Utah, which is why it is often best to consult with an experienced bankruptcy attorney if you are looking for a fresh start and want to ensure you protect as many assets as possible. A skilled attorney can help explain the various exemptions and assist in creating a better financial future for both you and your family.