Chapter 7

Chapter 7 is a liquidation form of Bankruptcy which usually allows for a complete discharge of unsecured debts within three to four months of filing and with little or no repayment plan to creditors. As an experienced Denver Bankruptcy lawyer, I can provide you with the fresh start offered by Chapter 7. The unsecured debts eliminated include credit cards, lines of credit, other bank loans, medical bills, deficiencies for a car repossession, small business debts and even court judgments. I also have expertise with IRS or State of Colorado tax debt which allows me to opine also as to dischargeability in Bankruptcy of older income taxes owed.

Chapter 7 is best for those who own little or no valuable non-exempt assets. The Colorado Homestead Exemption protects the first $75,000 of equity (fair market value minus mortgage payoff and realtor costs) in a primary residence and the vehicle exemption protects the first $7,500 of equity in a car or truck per person or spouse. The statutory limits are increased for any disabled or elderly (age 60 or older) debtors.

Of course, any mortgage or car payment would still need to be kept current (just like outside Bankruptcy) to keep these secured assets.

Household goods are protected up to $3,000 in value and clothing up to $2,000 is also protected. Bank account balances and wages owed as of the Bankruptcy Petition date are also exempt up to 75% (with the Bankruptcy Trustee able to make claim to the other 25% of these respective amounts if high enough for the Trustee to look at). 401K and other qualified retirement accounts are protected in full under Chapter 7. Any assets not protected can be used to pay creditors.

Over the past 13 years, the Law Office of David M. Serafin has filed countless numbers of Chapter 7 Bankruptcy cases all over the State of Colorado, including the Denver metro area, Fort Collins, Colorado Springs, Pueblo, Summit County and Eagle County, and the entire Western Slope. I will conduct with you a detailed intake of your entire financial situation, including an analysis of household income/expenses, assets/liabilities and other financial affairs leading up to the filing date of the Bankruptcy, and I will make sure that your legal rights with respect to creditor collections are fully protected. I’ve traditionally conducted an in person free initial consultation to discuss Bankruptcy options but, due to COVID-19, I am happy to also interview with you by phone or videoconference.

Within about a month after the Bankruptcy Petition date, your Bankruptcy Trustee will conduct a 341 Meeting of Creditors whereby you answer typically about 10-15 minutes of questions under oath. The Trustee serves by law as a fiduciary appointed to protect the best interest of the pool of unsecured creditors listed in your Bankruptcy Schedules. The Trustee can use any non-protected assets to pay creditors. Any creditors have the right to appear and ask you questions (although any creditor participation at the 341 hearing is highly unlikely absent any accusation of fraud or misconduct). The Chapter 7 Trustee will be highly interested in whether you expect to receive any large tax refunds, if you’ve transferred any cash or property to anybody without receiving anything in return and also if you’ve repaid any loans back to family or friends within the past year. Given the high prices of residential housing in much of Colorado, even three months into the COVID-19 pandemic when this article was written, the Trustee will also inquire as to any equity that may exceed the homestead exemption. (Chapter 7 does not protect business assets so Chapter 13 or Chapter 11 may be more appropriate to protect your small business.) As an experienced Colorado Bankruptcy attorney, I will prepare you fully for the 341 hearing.

Eligibility for Chapter 7 Bankruptcy in Colorado is restricted by a Means Test which looks at monthly household income (which includes even a non-Bankruptcy spouse), household expenses and household size. For instance, as of May 2020, the Median Family Income for a family of four in the Denver area is $107,867, meaning that you should automatically qualify for Chapter 7 if your gross family income for the preceding six months averages less than this threshold if most of your debt is consumer related. (No Means Test applies for Debtors with primarily business or non-consumer debt.)

The Bankruptcy Court for the District of Colorado will then issue the final discharge order 60-90 days after the 341 hearing (i.e. about 3-4 months after your case was filed). As an experienced Denver Bankruptcy lawyer, I will aggressively advocate for your interests with the goal of discharging the maximum amount of debt legally possible.