Colorado's Bankruptcy
& Family Law Firm

Bankruptcy law is a complicated and lengthy body of law that has been in the midst of developments and changes throughout the years. As with any body of law, it takes experts to truly grasp the ins-and-outs of what works and what doesn’t when it comes to getting the most out of what the field has to offer. Those experts are familiarly known as lawyers.

In the case of bankruptcy law, there are a slew of different obstacles that one may come across when attempting to file either a Chapter 7 or a Chapter 13. This is because the right to file for bankruptcy is provided by federal law, carrying with it a plethora of information and related jurisprudence that is sure make anybody’s head spin.

While the boundaries and confusion provided by all of these regulations, rules, and descriptions may be a hassle, these laws are in place to protect our system, our country’s credit, and our citizens. If you are looking into filing for bankruptcy, you should know a bit about the laws surrounding it and how these laws can impact your bankruptcy process.

Understanding the Basics: Chapter 7 and Chapter 13

Chapter 7 and Chapter 13 are the two most common types of bankruptcies, but they differ substantially when it comes to whether you will get a total forgiveness for all of your debts or whether you will have to repay a portion (or all) of your debts over a longer period of time. Before you file for bankruptcy, the first step is determining which form of bankruptcy is most appropriate for your situation.

Chapter 7 bankruptcy is popularly known as a liquidation bankruptcy. This type of bankruptcy is available for those who do not meet a certain income bracket, specifically, if your income is equal to or below the specified state median. If it is not, you will have to satisfy the state’s means test, which compares what you earn to how many members are residing in your household.

While Chapter 7 bankruptcy is more beneficial for those who are looking to completely eliminate debt, filing for a Chapter 7 bankruptcy may require you to lose some of your personal property in the process.

Alternatively, a Chapter 13 bankruptcy is available for those who do not fall below the income requirements for a Chapter 7 bankruptcy. While Chapter 13 bankruptcy does not completely eliminate all of your debt, it involves creation of a repayment plan based on your income, aiming to eliminate your debts within three to five years.

Chapter 13 bankruptcy may serve to be slightly better for your credit than Chapter 7, but it does require you to determine a future payment plan to satisfy the needs of your creditors over time.

Certain Property is Exempt from Repossession in Chapter 7 Bankruptcy

As discussed in the foregoing, Chapter 7 bankruptcy allows creditors and mortgage holders to take your property, such as your home, furniture, or car, to cover your debt. Each state, however, provides different protections to debtors and their property in order to ensure that debtors are kept safe.

Colorado, for example, exempts various important property. The homestead exemption protects up to $75,000 of equity in a home or other property covered by the exemption. This amount goes up if the homeowner is dependent, disabled, or is elderly.

Credit Counseling Requirement

Colorado law requires that those filing for bankruptcy receive credit counseling within the first 180-days before you begin the process of filing for bankruptcy. Upon your completion of the required credit counseling sessions, you will receive a certification. This certification must be filed with the court alongside your initial bankruptcy application. While the class may seem like another obstacle, it is important that learning more about how to maintain your credit is part of your financial fresh start.

There are various credit counseling agencies approved by the state that are available to provide credit counseling and make sure you receive your certification. If you are facing extreme hardship or, for example, you are incapacitated, disabled, or are on active military duty, you may be able to get a fee waiver for the cost of the credit counseling session.

Conclusion

With so many laws on the books, it’s hard for us to go through every single one. There is so much more that you should know about the laws regarding your rights and privileges as someone filing for bankruptcy. If you are looking into filing for bankruptcy and you want to know about what you can do to get the most out of the process, contact our bankruptcy specialists today to schedule a consultation or just to learn more.

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