Do you live in the Denver metro area and are currently thinking about possibly filing bankruptcy? While you may see advertisements on billboards or on TV, the real truth you won’t know if filing bankruptcy is the best option in your situation without talking to a Denver bankruptcy attorney who can give you professional advice.
For many people who are considering filing bankruptcy, there are 5 common questions that they need to fully understand answers. 5 popular questions people have when considering their options and one of them may be filing bankruptcy?
When is the best time to file bankruptcy?
The first overall test that many people have is whether or not they can juggle their monthly bills. When the time comes that there is more month than there is paycheck, the time has come to explore their possible bankruptcy options.
While the exact timing of filing bankruptcy will depend on your situation, for many people the decision to file is often a result of facing a foreclosure, a car repossession, or if your wages or bank account garnished by the IRS or a state agency such as the Colorado State Dept. of Revenue.
Are there different kinds of bankruptcy?
There are two main types of bankruptcy for individuals, Chapter 7 and Chapter 13.
Chapter 7 is sometimes called “liquidation” bankruptcy because if you file Chapter 7 you may lose some of your property, with some important exceptions. Chapter 7 is usually only available to individuals and businesses with little or no ability to repay debts in the future. So those who file Chapter 7 may lose non-exempt assets in exchange for having most of their debts erased.
Chapter 13 is sometimes called “reorganization” bankruptcy because it allows consumers to reorganize their debt and payment schedules. Anyone filing for Chapter 13 must also propose a repayment plan showing your income and how you will pay off some or all of your debts over 3 years or 5 years. Working with the court, your plan will determine how much you need to repay, based on your income, debt load, and the value of your property.
Will bankruptcy get rid of all of my debt?
Bankruptcy can help you get rid of some, but not all, kinds of debt. For instance, unsecured debt from credit cards and hospital bills may be eliminated in many cases. But child support, alimony and taxes may not be discharged. Student loans are not dischargeable unless the debtor can prove that repayment would cause an undue hardship (which is very difficult to prove). Also, creditors may argue that a given debt should not be discharged, subject to the bankruptcy judge’s approval. Secured debts (mortgage and car loans for example) are treated differently and if you want to keep the secured property you will have to reaffirm the debt and keep making the payments or the secured creditor may be allowed to repossess the collateral.
Which kind of bankruptcy will allow me to keep my property?
For those with a steady income that exceeds the Chapter 7 limitations, but who face unmanageable debts, Chapter 13 may be the best (if not only) option. One of the upsides of a Chapter 13 bankruptcy is that the debtor often retains much of their property. Under Chapter 7, various types of property may be subject to liquidation or sale, to repay creditors. State laws differ on the types of property considered eligible (nonexempt) or ineligible (exempt) for sale in a Chapter 7 case. You need to check with a bankruptcy attorney in your state to determine what exemptions apply in your situation.
Do I get to choose which kind of bankruptcy to file?
If you meet the eligibility requirements for both Chapter 7 and Chapter 13 bankruptcy, then you may choose which type to file. Otherwise, you may not have a choice.
Those with an income higher than the median income for a similarly sized family are not eligible for Chapter 7 if they would be able to repay some of their unsecured debt within five years. To be eligible for Chapter 13, you must not exceed a certain level of debt. If you don’t meet these requirements, then Chapter 13 bankruptcy is not available to you.
Usually, those who have a choice in the matter go with Chapter 7 bankruptcy, since they may be able to have all of their debts discharged (besides the debt covered by the proceeds of liquidated property). Chapter 7 also can be a much faster process than Chapter 13. However, Chapter 13 may be the best option for those who have adequate income and substantial assets.
In any event, make sure you do your homework before filing for bankruptcy and speak with a bankruptcy attorney in your area if you have additional questions or would like to start the process.
If you live in the Denver metro area and are thinking about possibly filing bankruptcy, be sure to take the time to get an expert opinion from someone who you can trust. Contact our local Denver bankruptcy experts today!
