What does Bankruptcy entail?
Bankruptcy allows one unable to pay their bills to obtain a fresh start financially. The United States Bankruptcy Code allows for bankruptcy in many circumstances to be filed as a right, and all bankruptcy matters in Colorado are litigated in Denver Bankruptcy Court. A petition for bankruptcy in Denver Bankruptcy Court filed by an experienced Denver bankruptcy lawyer initiates a formal legal proceeding which immediately stops creditors from attempting to collect any debts as the Court considers your overall financial outlook and decides if bankruptcy relief is appropriate.
What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy allows a debtor with a regular source of income to create a repayment plan and regularly pay towards reducing a debt. At first glance, a Chapter 13 bankruptcy appears less desirable than a Chapter 7 filing because Chapter 13 requires ongoing payment into a plan whereas Chapter 7 simply eliminates dischargeable debts. Often, a Chapter 7 filing is more favorable. An experienced Denver Bankruptcy attorney will fully explain to you the differences between a Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Nonetheless, Chapter 13 has numerous benefits. These benefits are:
- Chapter 13 can prevent foreclosure, enabling you to pay down an outstanding mortgage or property tax debt over time when the lender demands that you pay the entire loan amount in a lump sum to prevent foreclosure.
- The cost of filing Chapter 13 is typically less than Chapter 7, particularly under the newer bankruptcy rules.
- Chapter 13 bankruptcy continues as a part of your credit report for seven (7) years versus ten (10) years for a Chapter 7 Bankruptcy.
- Property is not typically seized and later sold in a Chapter 13. Chapter 13 involves reorganization, not liquidation.
- Chapter 13 payments are usually very low, allowing a debtor to pay only a small percentage of the overall amount owed to unsecured creditors.
What is Chapter 7 Bankruptcy?
Chapter 7 deals entails a liquidation or the sale of non-exempt assets by a trustee appointed by the Denver Bankruptcy Court. The bankruptcy trustee uses to the sale proceeds to pay creditors. Most of a debtor’s unsecured debts are discharged, thereby releasing the debtor from the obligation to pay debts which can be discharged. Creditors are ordered to permanently stop attempting collecting the debts which have been discharged. After the discharge of a debt, a debtor is no longer has any continuing or future payment obligation on the debt. However, some debts cannot be discharged, including the following:
- Debts incurred by fraud or false pretenses
- Debts incurred by a false statement in writing (such as false credit application)
- Debts incurred by embezzlement or larceny
- Spousal support or child support obligations
- Debts incurred by willful and malicious injury
- Debts resulting from death or personal injury by debtor operating a motor vehicle while intoxicated
- Criminal fines and restitution
- Income taxes for tax years less than 3 years ago
- Fines and penalties owed to a governmental unit.
- Student Loans (unless you can prove “undue hardship”)
What are Property Exemptions?
Property Exemptions allow you to protect and retain some of the necessities of life from your creditors, even if a large amount of debt is owed. You can keep exempt property, even after your debts are discharged in bankruptcy.
Which state’s exemption laws apply to my assets?
For any bankruptcy petitions filed after October 17, 2005, the exemption laws of whatever State you were domiciled in for the last two years will control. If you lived in more than one State in the past 2 years, then the exemption laws of whatever State you lived in for the 180 period PRIOR to the start of the last 2 years and if you lived in more than one State during that 180 day period, then the State where you lived for the greater part of that 180 days will control.
What is the Means Test?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect on October 17, 2005, implemented a new “Means Test” for debtors to satisfy in order to successfully file for Chapter 7 Bankruptcy. The Means Test determines whether you are eligible to file for Chapter 7 Bankruptcy in Colorado. Under the Means Test in Colorado, a person must show inability to pay a minimum of $100.00 per month for 60 months to any unsecured creditors from disposable monthly income. If a person is able to pay $100.00 per month or more to unsecured creditors for 60 months, the Chapter 7 may be dismissed or converted to a Chapter 13.
Will filing for Bankruptcy prevent my creditors from trying to collect from me?
When you file for bankruptcy, an automatic stay immediately takes effect which prevents your creditors from taking further action against you to collect a debt, including going to court, wage garnishments and repossession. The bankruptcy filing will immediately stop your creditors from filing a lawsuit against you to appear in court to repay a debt.
Can I keep my existing credit cards accounts after bankruptcy?
Any credit card accounts which have a zero balance at the time a bankruptcy petition is filed generally do not need to be listed in your bankruptcy petition as the credit card company is not technically a creditor for this particular card. You may still be able to keep your account even if you have an outstanding balance at the time you file for bankruptcy.
To do this, your creditor will allow you to repay part or all of your outstanding balance when the bankruptcy petition is filed. If an agreement is reached, you and your creditor will create a Reaffirmation Agreement, subject to approval from the Denver Bankruptcy Court.
How do my creditors learn that I have filed for bankruptcy?
The Denver Bankruptcy Court, within 7-10 business days from the date the Bankruptcy petition is filed, mails a notice of the bankruptcy filing to the creditors named in your petition. A creditor must immediately stop all attempts to collect against you once notified of your bankruptcy filing.
How long will my bankruptcy case take?
A typical Chapter 7 case takes 4-6 months whereas a typical Chapter 13 case may last between 3-5 years.
Do I need to go to Denver Bankruptcy Court?
In a Chapter 7 Bankruptcy, you will most likely only need to appear once (anywhere from 20-45 days after the petition is filed) at your Meeting of Creditors before a Court appointed Trustee.
In a Chapter 13 matter, you need to appear with a Chapter 13 trustee at a Meeting of Creditors. Your may also need to appear at a Confirmation Hearing (anywhere from 3-6 months after the petition is filed) in which the Bankruptcy Court considers final approval of your repayment plan.
How often can I file for Chapter 7 bankruptcy?
Every eight years but this period does start on the date of the filing of the first petition, but instead from the date the court orders the bankruptcy discharge. If you have previously filed for Chapter 7 Bankruptcy, you can file a second petition if this eight year time period has elapsed since the issuance of the discharge in your prior case.
Are student loans dischargeable in bankruptcy?
Generally, student loans are generally not dischargeable in a bankruptcy proceeding unless payment of the loan will impose an undue hardship on the debtor and debtor’s dependents.
Will I be able to keep my assets, my car, my house if I file for bankruptcy?
Whether you are able to keep your property is a question which can only be answered after we review the facts of your particular situation, including your payment history, the amount of ownership interest or equity in your property, and other important factors. This aspect of the law is very complicated, so the decisions would be made after a thorough review of your situation by an experienced Denver Bankruptcy lawyer.
Can I be fired or denied employment because of a bankruptcy?
No. While an employer can often find some reason to fire an employee or not hire a potential employee, bankruptcy cannot be a basis for (not) doing so.
Can I choose who to list as a creditor in my bankruptcy case?
No. You are required to list of all your assets AND debts in any type of bankruptcy. You can voluntarily pay anybody you choose after the conclusion of your case (and are required to repay any debts which are not discharged), but you still need to list all your creditors.
Can I file for Bankruptcy with my husband/wife?
If you file for bankruptcy jointly with your spouse, there may be advantages or disadvantages. Based on the your debts and assets you wish to protect, we will help you decide whether a joint filing is right for you.
If I own a business, am I able to file for Bankruptcy protection?
Yes, however, it depends on how you own the business, the value of the business, and what you intentions are for the business. Your business may require protection, and as an individual, if you are a sole proprietor, or have guaranteed the debts of the business, you may need bankruptcy protection for yourself, as well.
After filing, will I still owe taxes?
Bankruptcy laws provide protection against some federal and state tax obligations. Whether a tax obligation can be discharged depends upon a number of factors, including the type of tax owed, the age of the tax obligation, and whether you filed a tax return.