Chapter 7 Bankruptcy
Understanding Chapter 7 Bankruptcy in Colorado
There are 2 types of bankruptcies for the average person. Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is the wham bam, thank you, mam, quickest, least expensive, no payment option that is over in months instead of years bankruptcy.
It is a type of bankruptcy that allows individuals and businesses to liquidate their assets in order to pay off their debts. It is often referred to as a "fresh start" bankruptcy because it allows the debtor to discharge certain types of unsecured debts, such as credit card debt, medical bills, and personal loans.
We always suggest it to our clients except in 2 situations:
You do not fit in a Chapter 7, or
A Chapter 13 Bankruptcy can do something wonderful for you.
Eligibility for a Chapter 7 Bankruptcy
While you can almost always file some sort of chapter 13 there are a few situations where you "do not fit" the parameters for chapter 7. Usually that means that
You have filed a Chapter 7 within the last 8 years. - You can only file a Chapter 7 once every 8 years based on the filing date.
You make too much money. Determining if you make too much money depends on many things but the more money you make the more this question comes into play.
You have an asset problem. Meaning, that you have an asset that may be lost durring a Chapter 7.
When we talk about a Chapter 13 doing something wonderful for you we are referring to the flexibility of a Chapter 13 than can be used to do several things.
Save a home from foreclosure and give yourself time to modify your loan or 5 years to catch up on payments
Allow you, in certain circumstances, to get rid of a second mortgage
Allow you, in certain circumstances, to “cram down”, only paying the value of a car or other secured item instead of what you currently owe.
Allow you to pay out over 5 years if you have an asset “problem”. This might mean ownership of certain real estate assets, a boat that you want to keep, or a million other asset questions that can only be resolved in a Chapter 13.
If you make a lot of money, it gives you a way to control the repayment of your creditors and to control expenses like interest, penalties, and costs.
Bankruptcy forces creditors to stop collection processes while bankruptcy does its magic.
Remember that in many cases, creditors are paid nothing, whether in a Chapter 7 or a Chapter 13. Chapter 13 means you make a monthly payment and that may be only $50 or $80 per month. It does not mean that you are necessarily paying anything to your creditors.)
Limitations of Chapter 7 Bankruptcy
One of the main limitations of Chapter 7 bankruptcy is that certain assets may be lost in the process. This includes property that is not protected by exemptions, such as a second home, vacant land, or a luxury vehicle. Additionally, individuals who make too much money or have filed for Chapter 7 within the last 8 years may not be eligible for this type of bankruptcy.
The Chapter 7 Bankruptcy Process
The Chapter 7 bankruptcy process begins with the debtor filing a petition with the bankruptcy court. The debtor must also attend a meeting of creditors, where they will be questioned about their assets and debts by the trustee assigned to their case.
Next, the debtor's assets are sold (liquidated) to pay off their creditors. Certain assets, such as a primary residence and personal property, may be protected under state and federal exemptions. The debtor may also be required to turn over any remaining assets to the trustee.
We never want any assets sold, but make sure you do not
transfer, sell, or give them away until you talk to your attorney.
There are ways to deal with assets, but if you do it wrong you may have 4 years before you can file another bankruptcy without risk. Once the assets have been liquidated and the creditors have been paid, the debtor's remaining unsecured debts are discharged, and they are no longer legally responsible for paying them.
The Impact of Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy can have a significant impact on an individual's credit score, and it will remain on their credit report for up to 10 years. However, many people find that their credit score improves after they have completed the Chapter 7 process and have resolved their debt issues.
It's important to note that certain debts, such as student loans, taxes, and child support, usually are not dischargeable in Chapter 7 bankruptcy.
If you are struggling with debt, The Cross Law Firm can provide you with the expertise and guidance needed to get back on track. As a Colorado Bankruptcy Attorney, we have more than 35 years of experience specializing in Chapter 7 bankruptcy. Our knowledgeable attorneys will provide you with the personalized attention and advice needed to make the best decisions for your financial future. We will provide you with a comprehensive evaluation of your financial situation and explain all of your available options.
Call us today and take the first step towards financial freedom. Tony Cross, our experienced bankruptcy attorney will be with you every step of the way, from filing your paperwork to ensuring you are taking the right steps towards a better financial future. Take action now and get the help you need to get back on track.
Many Chapter 7 bankruptcies as well as most chapter 13 bankruptcies involve payment of $0 dollars to creditors.