July 14, 2023
In Colorado, bankruptcy can be a promising option for a person, family, or business that is facing financial instability. It is certainly possible to pursue—and achieve—debt relief and a fresh financial start. However, many misconceptions surround the bankruptcy process, including eligibility requirements and the types of property that may be affected during bankruptcy. It’s important to seek out the facts.
At Kinnaird Law Firm, we're dedicated to helping clients understand bankruptcy and how it might help them move forward. Our experienced Colorado bankruptcy attorneys are available to discuss your personal situation and guide you through the complex procedures involved in bankruptcy. We're proud to answer questions for clients across Colorado Springs, El Paso County, Douglas County, and the rest of Colorado.
Frequently Asked Questions About Bankruptcy
1. How do the different chapters of bankruptcy differ?
Chapter 7, Chapter 11, and Chapter 13 bankruptcy are common bankruptcy options for individuals and business owners in Colorado.
Chapter 7 bankruptcy helps consumers eliminate most of their general unsecured debts and achieve a financial fresh start. A court-appointed trustee will collect and sell your non-exempt assets, with the net proceeds used to pay your debtors. Qualifying for Chapter 7 requires passing the bankruptcy "means test,” demonstrating that your income is less than the median income for your household size in Colorado.
Chapter 11 bankruptcy, on the other hand, allows businesses to reorganize their affairs, debts, and assets. It requires proposing a reorganization plan that will state how you want to settle your debts using your future earnings.
Chapter 13 bankruptcy is available to consumers who earn a reasonable income but are overburdened with debts. In Chapter 13, the debtor proposes a repayment plan, structured over three to five years, to repay their outstanding debts.
2. Can I keep my house and car if I file for bankruptcy?
Depending on the bankruptcy chapter you're filing for, you may be entitled to keep your property. Filing for bankruptcy will eliminate some of your general unsecured debts. With this, you can pay back your home loan, car loan, or mortgage.
Additionally, the Colorado homestead exemption allows you to protect up to $250,000 ($350,000 for adults 60 years or older) on the equity of your primary home. Provided you do not default on your home loan, you may be able to keep your home in bankruptcy.
Bankruptcy petitioners in Colorado, furthermore, may be entitled to exempt up to $15,000 in the combined equity of up to two motor vehicles.
3. Will I lose my retirement accounts if I file for bankruptcy?
Generally speaking, no. While you may lose your unnecessary luxury items upon filing your bankruptcy petition, your ERISA-qualified retirement accounts—including 401(k), pension plans, and IRAs up to $1.3 million—will be protected in your bankruptcy case.
4. Does bankruptcy stop creditor calls?
Yes. Filing for bankruptcy can help stop continuous creditor calls and creditor harassment. When you file for bankruptcy, an automatic stay order will go into effect. This order prohibits creditors from contacting you, harassing you, or taking further legal steps to recover outstanding debts.
5. How long does bankruptcy appear on a credit report?
Your bankruptcy petition will stay on your credit report for between 7 and 10 years, depending on the chapter you're filing.
Chapter 13 Bankruptcy: If you file for Chapter 13, it will typically remain on your credit report for 7 years.
Chapter 7 Bankruptcy: If you file for Chapter 7, it will typically stay on your credit report for up to 10 years.
6. Can filing for bankruptcy stop a foreclosure?
Absolutely. Filing for bankruptcy can help delay or stop a foreclosure on your home. When you file your bankruptcy petition, an automatic stay order will go into effect. Among other prohibited actions, this will prevent the creditor from foreclosing on or repossessing your home.
7. What if creditors aren't respecting my bankruptcy discharge?
At the end of your case, the bankruptcy court will discharge all qualifying or dischargeable debts—including past-due utility bills, medical debts, credit card balances, and personal loans. Your creditors will receive a copy of the final order of discharge and are under a legal obligation to respect it.
If a creditor keeps contacting you after your bankruptcy discharge, document the creditor's actions and their contact information. Report them to your attorney as soon as possible. Your bankruptcy lawyer can help protect your rights and take necessary legal action against the disobedient creditor.
8. Can I file for bankruptcy more than once?
You can certainly file for bankruptcy multiple times. However, you must wait for a specific period after one filing before you can file the next. Here's the waiting period to refile, depending on the chapter:
Chapter 7 to Chapter 7: If you first filed under Chapter 7, you must wait for at least eight years to refile under the same chapter.
Chapter 13 to Chapter 13: If you first filed under Chapter 13, you only need to wait for at least two years to refile under the same chapter.
Chapter 7 to Chapter 13: If you first filed under Chapter 7, you will need to wait for at least four years to file for another bankruptcy under Chapter 13.
Chapter 13 to Chapter 7: If you first filed under Chapter 13, you must wait for six years to file for another bankruptcy under Chapter 7. However, you may file Chapter 7 after one year if you have fully paid all your unsecured creditors or at least 70% of unsecured claims.
9. Do I really need a bankruptcy attorney?
It might be tempting to try filing for bankruptcy all on your own. But keep this in mind: filing for bankruptcy involves complex procedures and intricate documentation. To ensure a smooth and successful petition, it’s vital to work with an experienced bankruptcy attorney. An attorney can help you navigate the bankruptcy process, help file your petition, and submit all required documentation. At the end of the day, your lawyer’s job is to guide you toward the financial future you deserve.
Take Your Next Steps Toward Financial Freedom
Are you facing financial instability? Take your next steps toward financial freedom today by understanding your debt relief options. Contact Kinnaird Law Firm today to schedule a no-obligation consultation with our team of bankruptcy attorneys. We're proud to serve clients across Colorado, including Colorado Springs, El Paso County, and Douglas County.