My office is a debt relief agency governed by the bankruptcy code. I assist individuals (single or couples) with filing personal bankruptcies, including clients with small businesses.
Bankruptcy sometimes is the answer to an unfortunate change of financial circumstances. Sometimes it is the only way for good people to move on from financial distress, for the benefit of themselves, and their family. 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 much more complicated under the bankruptcy laws that took effect in 2005. There are numerous tests and traps in the law that can foul up even the most "simple" bankruptcy case, with expensive consequences.
First, obtaining a discharge of your debts.
Second, minimizing what you are required to pay to your creditors via the trustee assigned to your case. This is the more difficult part of your case, and one that many of the cheaper or less experienced attorneys will not take the time to carefully analyze for you.
If you are on social security in Colorado, you may benefit from a special rule for social security recipients that allows you to spend your social security where you want, or even save it, without paying your creditors in a bankruptcy. Call me to discuss this beneficial court ruling and how it may impact your case.
There are two elemental pieces to any successful bankruptcy case:
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.
Bankruptcy is common, especially during an economic downturn. In 2018, over 11,000 cases were filed in Colorado alone. There are many different reasons for filing bankruptcy. 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.
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.).
How do I know if I can file for Bankruptcy?
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.
Are there different types of Bankruptcies?
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. Contrary to what you might hear, the large majority of bankruptcy filers still qualify for Chapter 7. Indeed 78% of bankruptcy filings in Colorado for 2018 were under Chapter 7.
In a Chapter 13 bankruptcy, 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 2018, 22% of cases in Colorado were filed under Chapter 13.
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.
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, from 2004 to 2018 the proportion of cases filed under Chapter 13 tripled from 7% to 22%. The income limits are adjusted each year, and final qualification can depend on some of the actual expenses of the particular debtor.
I have a small business, how does that affect me?
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.
Who should I go to?
It is not unusual for the attorney at a volume firm to meet you once to sign your "processed" paperwork and once to watch the trustee take your assets at your trustee meeting (when it is too late to change the result). As the sole attorney guiding you through every aspect of your case from beginning to end, I will help you keep as much money as possible in your pocket so you can maximize your fresh start in life.
Accordingly, I can only recommend that anyone contemplating consult an experienced bankruptcy lawyer, not a petition preparer. Petition preparers are barred from providing any advice whatsoever, and are only allowed act as a typing service filling out the forms. Proper strategy and timing are critical to achieve the best result in a bankruptcy.
What about filing more than once?
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.
How is my income determined?
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. The income figure used is a median income figure for households of the same size in Colorado. These figures are adjusted every six months.
Note that the income limits do not strictly apply to debtors whose debts are primarily business-related, but income remains a factor in business cases.
However, in many cases, consumer debtors can file a Chapter 7 even if their income exceeds the above median income figures, depending on their actual and allowable monthly expenses.
Do I get to keep my property?
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. As of April 7, 2022 a single person or married couple in Colorado can retain $250,000 in home equity, or for those disabled or over 60 years of age, $350,000, of equity in a residence. Each debtor is entitled to keep $15,000.00 of equity in an automobile, ($25,000 if over 62 or disabled) and $6,000.00 of household goods. Retirement accounts are exempt up to at least one million dollars. Net earnings from work are 80% exempt. You can keep $2,5000.00 of money through bankruptcy as well. There are many other exemptions as well, common and uncommon, simple and complicated.
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.
Exactly which debts can I get discharged?
In bankruptcy, most unsecured debts, such as credit card 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.
I'm wondering if filing for Bankruptcy is right for me, what's my next step?
Trust me - bankruptcy is very complicated! One mistake in reporting information, timing the bankruptcy, following procedures, can result in losing assets and/or having your case dismissed. I can only 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 rather than reliving past troubles.
What is the bankruptcy process?
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.
In a Chapter 13 case, the initial process is similar, but a discharge will not be entered until all payments required under the Chapter 13 Plan (3-5 years) are made. Preparation of the case, including the plan for repayment, is much more complicated than the filing of a Chapter 7 bankruptcy.
Any person considering bankruptcy needs a lawyer to advise and counsel you, at every step in your case, so you can decide:
Whether to file the bankruptcy at all (it is often not the best solution at the time)
The best time to file your bankruptcy (even a day can make a difference)
The best bankruptcy chapter (7 or 13) to use to obtain the best results for you
The best strategy to protect as many assets as possible
Quantity is not quality. Choosing a high volume law firm that spends thousands of dollars on expensive internet marketing campaigns, and hires salespeople and other staff to "process" your case, can be a big mistake that is not apparent until it is too late in your case.
The maxim "you get what you pay for" is especially true when trying to navigate the surprisingly complicated maze of the federal bankruptcy law. Timing and careful analysis is critical in bankruptcy cases to protect your assets, and ensure that you get the best possible result in your case. Filling the blanks without advice or strategy is NOT what you hire a lawyer to do. There is simply no substitute for the care and attention of an experienced lawyer devoted to getting you the best results.