If you’ve been thinking about filing for bankruptcy, the law office of D. Mathew Blackburn can help you file the necessary paperwork and represent you in front of the bankruptcy courts. While bankruptcy is a pretty straight forward case, there are legal pitfalls that you can avoid by using an experienced attorney. Bankruptcy is not an easy decision and often can be a stressful situation. Here are some common questions you may have about filing for bankruptcy in the state of Colorado.
What exactly is Bankruptcy?
Bankruptcy is the legal process whereby an individual who cannot afford to pay his or her bills can obtain a “fresh” financial start. The right of every US citizen to file for bankruptcy is provided by federal law, and all cases are handled by the federal court. Filing for bankruptcy immediately stops creditors from collecting on any of your debts until the case is settled.
What does bankruptcy do for me?
Bankruptcy eliminates the legal obligation to pay most or all of your debts. This is called a “discharge” and is designed to give you a fresh financial start. Bankruptcy can also stop foreclosure on your dwelling and provides an opportunity to catch up on missed payments.
Bankruptcy can also prevent a repossession of your automobile and stop wage garnishment and other debt collection harassment.
What doesn’t bankruptcy do for me?
Bankruptcy does not solve every financial problem. In a Colorado bankruptcy, it is usually not possible to eliminate the rights of “secured” creditors to seize property used as a mortgage or lien. You may lose your car or your home if you refuse to continue payments on this property.
Also, some loans, criminal fines, some taxes and some divorce related debts (like child support or alimony) are not covered by the bankruptcy laws of Colorado.
How do I file?
Individuals in Colorado primarily have two types of filing status: Chapter 7 and Chapter 13 filing.
Chapter 7 is known as “straight” bankruptcy or “liquidation.” It allows for a complete discharge of your debt. However, it also requires a debtor to give up property which exceeds certain limits called “exemptions”, so the property can be sold to pay creditors. For example, if you purchased a flat screen TV a month before you declared bankruptcy, the courts may decide that you have to return the television in order to pay back the creditors.
Chapter 13 is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income. Chapter 13 will establish a payment plan with a third party to pay off all or part of the debt. Instead of paying your creditors separately, you would make one payment to the third party who then pay back your creditors.
Which Chapter is best for me?
Under a chapter 7 filing, you are asking the court to discharge all your debts. In a chapter 7 bankruptcy, you “wipe out” all your debts in exchange for your giving up property. Of course, the law allows for “exempt” property which you get to keep. In the best cases, all of your property will be exempt, but you will have to sell off your non-exempt property and give the money to your creditors. If you want to keep property like a home or a car and are behind on the payments on your mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt. If you owe more than your home or car is worth and you agree to continue making payments, you will most likely be able to keep your property. If your home or car is paid off, you may likely lose that property as it will be sold off to pay your debt.
Under a chapter 13 filing, you create a plan showing the court how you will pay off your debt over a three to five year period. This allows you to keep valuable property like your homes or cars while making a structured payment to your creditors. These payments are in one lump sum and are often a considerable chunk of you income. The courts allow for income to pay for your necessities, but most of your discretionary income will go to your creditors.
Do I have to go to court?
Yes. You will be required to attend a proceeding called the “meeting of creditors” where you will appear before a bankruptcy “trustee” and any and all creditors who appear to this meeting. Yes, your creditors may show up to this meeting and petition against the bankruptcy. While the meeting of creditors is usually quick and easy, complications can arise which is why retaining a quality bankruptcy attorney is beneficial for you and your assets.
You probably have many more questions about bankruptcy and this post has only addressed the basics. For more information or to schedule an appointment with an experienced bankruptcy attorney, please feel free to contact the Law Office of D. Mathew Blackburn. We are happy to answer all your questions and provide representation for you as you make your bankruptcy decisions.