Bankruptcy FAQ

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.

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.

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”)

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.

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.