Bankruptcy is a legal process that allows you to get rid of debts that have spiraled out of control. The purpose of bankruptcy is to provide creditors with as much payment as possible and to give debtors a chance to start over. Despite the finality that’s implied in the word, bankruptcy does not have to mean the end of your financial future. In fact, many people can regain their economic footing if they follow a set of guidelines that can help prevent the problems that led to their bankruptcy. In addition, depending on the type of bankruptcy you choose, you can have a clean slate to begin rebuilding your assets. Most important is you have questions call our Colorado Springs bankruptcy lawyers to get your questions answered. We are proud to serve clients in Colorado Springs, Monument, and Pueblo.
You’ve probably heard the words Chapter 7 and Chapter 13 as it relates to bankruptcy, and you may even have heard of Chapter 11 as well, although that is a restructuring of debts for companies that want to remain in business as they repay their creditors.
But if you are not declaring bankruptcy through a business, you must choose between Chapter 7 and Chapter 13 bankruptcy, and the decision is not an easy one, because there are consequences and challenges with both types of bankruptcy.
Chapter 7 – This type of bankruptcy is also known as ‘liquidation bankruptcy,’ because all the property you own can be sold to pay some or all of your creditors. One of the main advantages of Chapter 7, however, is that any debts you have that are not secured by some type of collateral are wiped out. When you file Chapter 7, property such as furniture and any vehicles you own cannot be sold to pay your creditors. Unsecured debts – such as medical bills, credit card debt and bank loans – are all wiped out in a Chapter 7 bankruptcy. But debt such as child support, spousal support and unpaid taxes will not be wiped out when you file Chapter 7. Eligibility for Chapter 7 is based on several factors, but if you earn above a certain amount of money, you may have to declare Chapter 13 bankruptcy, which involves a repayment plan.
Chapter 13 – If you are still earning a steady source of income, you can file for Chapter 13, which requires that you create a repayment plan to satisfy all your creditors. In most instances, you will have to complete the repayment within three to five years, and the monthly payment amount is based on your income, the amount of your debt, and the amount of money the creditors of your unsecured loans would have received under a Chapter 7 filing. Chapter 13 bankruptcy is a good option for people who want to save their homes from foreclosure, or to pay for debts that cannot be discharged in a Chapter 7 bankruptcy. It is also a good option for people who don’t qualify for Chapter 7 protection, but would benefit from Chapter 13 relief. It’s important to remember, however, that to be eligible for Chapter 13, your debt must fall below the limits for filing. Your lawyer can tell you what the existing limits are for secured debt and unsecured debt. If your debts exceed these limits, your Chapter 13 bankruptcy petition may be denied.
Deciding to file for bankruptcy is a big step in taking charge of your debts, but before you make a decision, you should speak to a qualified Colorado Spring bankruptcy attorney such as the team at Kinnaird Law. Contact us today to schedule a free consultation.