Life After Bankruptcy
Sept. 26, 2023
To many people, bankruptcy is a scary word, indicating a loss of everything and a plunge into a world where credit is unavailable, and one where your friends shun you because of your predicament. Despite these somber thoughts, bankruptcy is nothing like that.
First of all, you don’t lose everything, even if you choose the liquidation bankruptcy option. You still get to retain many possessions essential to your life that are exempted from being sold to satisfy creditors. And second, your friends, your employer, and your coworkers won’t even know you’re going through bankruptcy unless you choose to tell them (or you owe them money).
At the end of the bankruptcy process, you will have a fresh start, and you can continue pursuing your dreams once again with your debt burden behind you. Those considering bankruptcy should realize that it may appear on your credit report for years to come, but that doesn’t mean you can never establish credit again or purchase a car or a home. It may just require more patience and clear strategizing on your part—which won’t always be easy, but will be worth it.
If your debts are overwhelming you and you reside in Colorado Springs, Colorado (or anywhere in Douglas County or El Paso County), contact us at the Kinnaird Law Firm to discuss your filing options and how bankruptcy may impact your life. Depending on your debt load and your income, you will generally have the choice of two plans that can alleviate your debt problem and create a fresh financial start for you.
What Are Your Bankruptcy Options?
For individuals and families, there are basically two options in bankruptcy. One is known as a Chapter 13, or the wage-earner’s plan. Under Chapter 13 bankruptcy, you create a reorganization plan for your unsecured obligations, and then use your disposable income—what’s left after paying your living expenses—to repay creditors, generally at a much-reduced rate, over three to five years.
Any secured obligations you have, such as a car loan or a mortgage, will have to continue to be paid if you wish to retain those possessions. However, it is possible to include arrears amounts in the reorganization plan and then resume your monthly payments to avoid losing your car or home. At the end of the repayment period, you will be discharged from you unsecured obligations.
Chapter 7 bankruptcy (also known as liquidation bankruptcy) is the other option. It’s much quicker but also can involve the sale of assets and possessions that you have to satisfy creditors, at least partially. Colorado allows exemptions, as do all states. For instance, if you owe $75,000 or less on your home—$105,000 if you’re 60 or older or disabled—then your residence will not be subject to liquidation. The same holds true for up to $7,500 in equity in a motor vehicle. If you’re 60 or older or disabled, the equity rises to $12,500, and if married, to $15,000.
Both Chapter 13 and Chapter 7 filings result in what is called an automatic stay, which forbids creditors from contacting you or trying to collect on debts. Though secured debt holders for assets such as vehicles and residences can request a release from the stay, at least the stay gives you time to try to work out a new credit arrangement.
Life After Bankruptcy: Re-establishing Your Credit
With a Chapter 13 filing, it will stay on your credit report for seven years. For a Chapter 7, the filing will remain for 10 years. This is not the end of the world. There are ways to rebuild your credit. It may take a couple of years or more to be where you want, but there are many strategies to help you get there.
Upon your bankruptcy discharge, and even before while you’re still undergoing the bankruptcy process, credit card companies and even auto agencies will many times contact you via snail mail, email, or text to offer you deals. Most will have high interest rates and onerous late penalties, so you need to scrutinize them carefully. The last thing you want to do is jump into debt and recreate the habits that landed you in bankruptcy in the first place.
Two of the more established methods of regaining a solid credit rating are through a credit-builder loan or through a secured credit card. Many credit unions offer credit-builder loans. You borrow a small amount, say $1,000, with a fixed term of six to 24 months. When it’s paid off, the money is yours and your payment history goes toward rebuilding your credit score.
Contact Us for Experienced Legal Counsel
If your finances have fallen into disarray and creditors are hounding you, bankruptcy is the most efficient means to end the nightmare and get a fresh start in life. Let us guide you through the process and advise you on ways to rebuild your credit, so your post-filing life can be a path upward toward permanent financial security.
Reach out to us at the Kinnaird Law Firm with all your questions and concerns about bankruptcy if you’re in or around Colorado Springs, Colorado. Our attorneys are ready to help you find your best path forward.