What Are the Utah Bankruptcy Exemptions?

What are the Utah bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

If you’re thinking about filing for bankruptcy, you may be concerned that the Bankruptcy Court will sell your property to pay back your creditors. There is a lot of misinformation surrounding how personal property is treated during the Chapter 7 bankruptcy process. Yes, the trustee assigned to a Chapter 7 bankruptcy case is empowered to sell a filer’s nonexempt assets to repay debts. However, most or all of a filer’s property can be safeguarded from this risk through the bankruptcy law protection known as bankruptcy exemptions. When you prepare your bankruptcy petition, you’ll claim as many Utah bankruptcy exemptions as you can to protect your property from the risk of being sold. Unless your property is unusually valuable, chances are that you’ll be able to safeguard most or all of it.

Does Utah allow the use of federal bankruptcy exemptions?

Utah law does not allow residents to choose between claiming state-specific exemptions and federal exemptions. Instead, Utah Code specifies that residents who have lived in the state for at least two years must apply Utah exemptions to their property. While some states allow their residents to apply the federal structure of exemptions to their assets, Utah doesn’t, which makes the process of identifying exempt property and exemption values available to you more straightforward. All you need to remember is that to protect as much of your property as you can while you’re seeking debt relief and laying the groundwork for a fresh start, you’ll need to claim as many Utah exemptions to your property as are available and relevant to your situation.

Utah Bankruptcy Exemptions

Unless otherwise noted, Utah allows couples who are married, filing jointly, and are co-owners of the property being exempted to benefit from a “doubling” in value of the exemption values a single filer is eligible to claim. For example, single filers in Utah may exempt up to $1,000 in aggregate value for dining tables, kitchen tables, and chairs. As a result of the “doubling” calculus, married couples filing jointly can exempt up to $2,000 in aggregate value for these items. Note that this exemption value exception will not apply if the property in question is only owned by one spouse. Only jointly owned property may benefit from a doubled claim exemption value. Please keep this in mind as you’re reading through the information noted below if you and your spouse plan to file for bankruptcy jointly.

Real Property - the Utah Homestead Exemption

The Utah homestead exemption helps homeowners and owners of other real property exempt a significant amount of equity in those assets. In this context, equity means the value of the property that you’ve already paid for, not the value of your home loan or even the value of the home or real estate itself. For example, say that your home is worth $100,000 and you’ve paid $30,000 on your loan with $70,000 of the loan outstanding. The $30,000 you have already invested in paying off your home loan is your equity in your home.

As of 2019, the Utah Code updated the homestead exemption to become much more generous than it had been previously. At this time, a single filer may exempt up to $42,000 in equity in their primary residence. As is the case with most exemptions, filers married jointly can double this exemption amount to $84,000 as long as they are joint owners of the primary residence in question. It’s important to note that if you don’t own a home but you do own other real estate, you can use the homestead exemption to safeguard a limited amount of equity in that property. The exemption amounts available to landowners (who aren’t using the exemption to protect a residence, as you can’t take the exemption for both a residence and non-residential property) are $5,000 in equity for single filers and $10,000 in equity for real property owners who are married, filing jointly, and are co-owners of the property.

Personal Property Exemptions

One of the most common questions that bankruptcy filers have is, “Will I get to keep my car or truck?” Utah has two state exemptions that address motor vehicles. The first allows single filers to exempt $3,000 in equity in their primary vehicle, as long as that vehicle is not a recreational vehicle. Couples who are married and filing jointly can exempt up to $6,000 in equity value in a shared primary vehicle. The second exemption concerns a vehicle that may be considered a “tool of trade.” The Utah Code allows for a “tools of the trade” exemption “not exceeding $5,000 in aggregate value, of implements, professional books, or tools of the individual's trade, including motor vehicles to which no other exemption has been applied, and that are actually used by the individual in the individual's principal business, trade, or profession” (Sec. 78B-5-506(2)).

In addition to the motor vehicle and tools of the trade exemption amounts noted above, the Utah bankruptcy exemption scheme allows filers to protect many other kinds of personal property. Unless otherwise noted, the full value of the following types of personal property are exempt:

• Animals, books, and musical instruments held for reasonable use by filers and their dependents (up to $1,000 in aggregate value)

• Artwork produced by filer and resident family members

• Artwork depicting filer and/or resident family members

• Beds and bedding for filers and dependents

• Burial plots for the filer and their family

• Carpets (in use)

• Clothing (excluding furs and jewelry)

• Food provisions (to feed filer and family for one year)

• Freezer (one)

• Health aids

• Heirlooms and items of particular sentimental value to the filer (up to $1,000 in aggregate value)

• Household furnishings (excluding tables and chairs as noted below) reasonably necessary for one household (up to $1,000 in aggregate value)

• Guns (excluding curio or relic firearms):

  • one handgun and ammunition for the handgun not exceeding 1,000 rounds;

  • one shotgun and ammunition for the shotgun not exceeding 1,000 rounds; and

  • one shoulder arm and ammunition for the shoulder arm not exceeding 1,000 rounds

• Kitchen tables, dining tables, and chairs reasonably necessary for one household (up to $1,000 in aggregate value)

• Microwave oven (one)

• Refrigerator (one)

• Sewing machine (one)

• Stove (one)

• Washer and dryer (one set)

Money Benefits

The Utah Code also broadly protects a number of benefits that individuals may be eligible for due to physical challenges, family circumstances, and/or lack of employment. Exemptions available for insurance proceeds and other “money benefits” are generally more qualified and subject to caps or other exceptions. Unless otherwise noted, the following assets are fully exempt for Chapter 7 bankruptcy filers in Utah:

• Alimony or spousal support

• Child support

• Crime victims’ compensation

• Disability benefits

• ERISA-qualified benefits, IRAs, Roth IRA, if the benefits have accrued or the contributions were made at least 12 months before filing

• Fraternal benefit society benefits

• Illness-related benefits

• IRAs and Roth IRAs to current adjusted amount as outlined in 11 U.S.C. § 522(b)(3)(C)(n); §15-41-30(A)(13)

• Health and hospital benefits

• Higher education savings plans (not to exceed $200,000 aggregate and excluding payments made during the 18 months immediately before filing)

• Life insurance policy cash surrender value (excluding payments made on policy within 12 months before filing)

• Life insurance proceeds if the beneficiary is the insured’s spouse or dependent (if proceeds are necessary for support)

• Occupational disease disability benefits

• Personal injury recovery

• Public benefits and general assistance

• Public employee pensions

• Tax-exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans)

• Unemployment compensation

• Unmatured life insurance contract proceeds (excluding payments made on policy within 12 months before filing)

• Veterans’ benefits

• Workers’ compensation

• Wrongful death recovery (if the filer or filer’s dependent was a dependent of the deceased and damages are compensatory)

Finally, Utah allows filers to safeguard a specific amount of their earnings subject to two specific conditions:

• Earnings to the lesser of (1) 75% of disposable income, or (2) 37 times the federal minimum wage per week – per R. Civ. Proc., Rule 64D(a)

• Unpaid earnings due as of the bankruptcy filing in an amount equal to 1/24 of the median Utah annual income if the filer is paid more than once per month and 1/12 if the filer is paid monthly – per §78B-5-505(1)(a)(xvi)

Other Utah Exemptions

Unlike most other states, Utah does not offer a wildcard exemption. Generally, wildcard exemptions allow filers to safeguard property (up to a specific amount) that is not exempted by other provisions of the exemption scheme. As a result, if you can’t exempt your property using the rules noted above and you want to keep that property, you will probably have to pay your trustee the value of the nonexempt asset you wish to keep.

Filing Chapter 7 Bankruptcy? 

As you can see, it is very important to claim every exemption available to you to ensure that your personal property is safeguarded from sale by your bankruptcy trustee. If you’d like help with claiming exemptions or with any other aspect of the bankruptcy process, you can speak with a Utah bankruptcy attorney at any time. Most law firms offer free consultations, which you can take advantage of even if you’re unsure of whether you want to file Chapter 7 bankruptcy or Chapter 13 bankruptcy, or you simply want to seek legal advice about any debt relief options available to you. Upsolve can help you find a qualified bankruptcy attorney in your area. If you don’t think you can afford an attorney’s services, know that Upsolve may be able to help you file for Chapter 7 bankruptcy for free. Even if you don’t qualify for personalized assistance, you can access many free bankruptcy-related resources on the Upsolve website at any time.