My office is a debt relief agency governed by the bankruptcy code.  I assist individuals (single or couples) with filing personal bankruptcies.

Bankruptcy sometimes is the answer to an unfortunate change of financial circumstances.  Bankruptcy does not need to be a frightening process.  I have the experience to guide my clients through the bankruptcy process with dignity, and careful attention to detail, to ensure a smooth path to a new financial life.

Bankruptcy cases, even those that may seem to be routine, have become quite complicated under the new bankruptcy laws that took effect in late 2005.  There are numerous tests and traps in the law that can foul up even the most "simple" bankruptcy case, with expensive consequences.  

Please Call or Email me to set up your FREE 30-minute bankruptcy consultation.

The following is general information concerning bankruptcy law.  Exceptions run rampant in bankruptcy law,  and planning for bankruptcy can be complicated; so I recommend that you obtain legal advice if you are considering bankruptcy.

Bankruptcy laws provide people in need of debt relief (“debtors”) with a single, legal process to stop creditors and collection agencies from taking any action to collect most debts.    The U.S. Constitution authorized bankruptcy laws, which have protected debtors continuously since 1898.  For nearly all consumers, there are two types of bankruptcies available, Chapter 7 and Chapter 13. 

In a Chapter 7 bankruptcy, the debtor keeps all post-bankruptcy income, and in most (but not all) cases keeps all assets as well.  In 2009, 85% of bankruptcy filings were under Chapter 7.  

In a Chapter 13 case, the debtor generally pays some portion of the debtor’s income for up to five years to the Chapter 13 trustee, who allocates that money among the creditors. The Chapter 13 case operates like a private debt consolidation with one big benefit:  a Chapter 13 case is court-ordered and all creditors must participate.  In 2009, 15% of cases in Colorado were Chapter 13.

Bankruptcy is common, especially during an economic downturn.  For example, over 25,000 cases were filed in Colorado alone during 2009, for many different reasons.  Some debtors can’t make their credit card payments after interest rates are hiked.  A large amount may be owed on a mortgage following foreclosure due to the decline of real estate values.  A debtor or a loved one may unexpectedly die or become ill, a job may be lost, etc.

There are numerous qualifications for filing bankruptcy, and financial circumstances obviously impact the availability and impact of bankruptcy for each person.  Any adult legally in the country can file bankruptcy, with proper proof  of identity and a social security number.  Specific bankruptcy counseling must be obtained from an authorized agency prior to filing a bankruptcy case in order to file the case, and again during the bankruptcy case in order to obtain the goal of bankruptcy: the discharge of one’s debts.  Generally, a debtor who has filed bankruptcy before is prohibited from filing again for a period of time which can be as long as eight years.  A debtor must have filed all required tax returns, even if all taxes were not paid.

A debtor keeps all “exempt” property, which is determined under Colorado law, or sometimes federal law.  In practice, most property is exempt, meaning a debtor keeps all assets, but there are limits. A single person or married couple in Colorado can retain $60,000, or sometimes $90,000, of equity in a residence.  Each debtor is entitled to keep $5,000.00 (or sometimes $10,000) of equity in an automobile, and $3,000.00 of household goods. Retirement accounts are exempt up to one million dollars.  Earnings are 75% exempt.   Tax refunds and bank accounts can be partially exempt, or wholly unprotected, depending on the specifics of each case.  There are many other exemptions as well, common and uncommon, complicated and simple. 

It is critical to know that a Chapter 7 debtor must be current on all house or car payments in order to keep the house or car.  A Chapter 13 debtor, if behind on these payments, must be able to propose a plan to catch up on the back payments, but this can be done over the course of a year or even more.

A debtor is not required to keep property.  If you cannot afford the payments on a car or home, you can give up the property even during or after the bankruptcy and get rid of the debt attached to that property.  Sometimes you will have ongoing obligations related to a property you want to give up, for example, homeowners’ association dues may still be collectible for some time.

In bankruptcy, most unsecured debts, such as credit cards balances, mortgage or automobile “deficiencies”, overdraft balances, medical bills can be “discharged” with no further obligation to pay.  However, there are many exceptions, including child support or spousal support debts, debts incurred in a divorce settlement or order, student loans, certain taxes, criminal fines, damages caused in a DUI incident, etc. 

One key aspect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is that a debtor must meet certain income and budget guidelines before being allowed to file  a Chapter 7 bankruptcy.  The goal of the law is to push more debtors to file a Chapter 13 bankruptcy.  The laws have had some effect:  in Colorado, the proportion of cases filed under Chapter 13 rose from 7% to 15% from 2004 to 2009.

The income limits are adjusted each year, and final qualification can depend on some of the actual expenses of the particular debtor. 

It is important to know that income is defined in a different manner than for tax purpose; income can be narrower, or broader.  The amount of income earned over the six months preceding the month of filing is used to determine eligibility for Chapter 7 bankruptcy.  Even help from family can be counted toward “income.”     Generally, a single debtor whose gross six month income (when doubled to get an annual estimate) is less than $47,253 can file Chapter 7 bankruptcy (as of January, 2010).  A debtor with a family of four can do so if income is less than $81,644. These income limits do not apply to debtors whose debts are primarily business-related.  In some cases, consumer debtors can file a Chapter 7, based on certain allowable monthly expenses.

Having a business does not necessarily mean that bankruptcy is unavailable, or more complicated.   Many debtors with a “small” business can keep and continue their business with no interruption.

The filing of a bankruptcy will immediately “stay” (stop) all garnishments, foreclosures, telephone calls, correspondence, and any other communications or actions to collect on a debt.  Traditional debt consolidations don't have this powerful effect.  Once the bankruptcy is completed, most debts are “discharged” forever, although there are many exceptions (student loans, certain taxes, etc.).

In a Chapter 7 case, the process for the client is to provide a full financial picture, with backup documentation, to the attorney.  The attorney prepares the paperwork for the client to sign, then files the paperwork with the court.  The preparation stage can be a week in a rush case, a month, or sometimes much longer.  Once filed, the debtor and attorney are required to meet with the bankruptcy trustee 3-4 weeks after the case is filed.  In all but the rarest cases, there is no trial or meeting with a judge, nor any contested hearing.  In a Chapter 7 case, a discharge is issued about 4 months after the case is filed, ending the case for the debtor in most cases.  Some debtors have an ongoing obligation to pay some money to the trustee or assist with sale of unprotected assets.

Bankruptcy can be very complicated.  One mistake in reporting information, timing the bankruptcy, following procedures, can be catastrophic.  I do recommend that anyone considering bankruptcy should contact an attorney for full representation in the process.  Among other things, the attorney can be a good buffer between the client and the creditors and trustee, allowing the client to focus on rebuilding a financial life.   Nobody has the goal of filing bankruptcy, but sometimes it is the only way for good people to move on from financial distress, for the benefit of themselves, and their family.