This information is intended to prepare you to make the most from your initial consultation with a Denver Bankruptcy Attorney.
A chapter 7 bankruptcy is the chapter most debtors file under. There is no repayment plan. The debtor receives a discharge in 4 months from the date of filing. It is the least expensive and fastest route to debt relief. Not everyone qualifies. Some debtors may turn-over a limited amount of non-exempt property (tax refund, 25% of bank account balance) in return for a discharge of all their eligible debts.
It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to make any further attempts to collect. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
Assuming a debtor is eligible; the debtor obtains relief under chapter 7 by filing a bankruptcy petition, schedules and other related documents with the bankruptcy court. The debtor must take a credit counseling course and attend a meeting of creditors as well as comply with any instructions from the chapter 7 trustee assigned to the case.
So long as you reside or operate a business in the U.S. and you have not intentionally dismissed another case in the last 180 days, you may file a chapter 7 bankruptcy. Whether you will receive a discharge is another question. Sometimes a debtor may file a chapter 7 for temporary relief from their creditors knowing they will not receive a discharge. This is rare. To stay in a chapter 7, you must pass the means test. Otherwise your case will be dismissed shortly after filing. You are eligible to receive a discharge (so long as other requirements are met) so long as you have not received a discharge under chapter 7 in the last 8 years. More information about filing for Chapter 7 Bankruptcy in Denver Colorado can be found here.
In short, the means test is a form filed in every case which determines whether the debtor’s income exceeds a certain threshold for their household size and location. If the debtor’s income is higher than the median income, they may still qualify depending on the amount of their disposable income as determined by the form. The expenses used on the form to determine disposable income are not the debtor’s actual expenses but rather are taken from the IRS local standards. The only expenses which are based on the debtor’s actual expenses are for secured debt payments, child support, health care, and most payroll deductions.
It is advisable that you hire a Denver Colorado bankruptcy attorney for this process. The means test is not a straightforward form to complete. Most pro se debtors learn this only after their case is filed and dismissed. The form has many limitations which are not immediately discernible from the form itself. Since the form was first implemented in 2005, the expenses which may be deducted on the form have been limited by judicial decisions. Only by staying up to date with current case law is an attorney able to properly complete the form. Do not rely on online means test forms. These online forms allow a debtor to deduct all of their actual expenses. You cannot substitute the advice of counsel to complete the chapter 7 means test form.
Your attorney will immediately advise you whether you are eligible under the form 22(a) Means Test and provide counsel on how to proceed. It is not advisable for a debtor to proceed with a chapter 7 bankruptcy once their attorney has determined a presumption of abuse will arise in the case. There are certain exceptions to this for debtors who income from the last 6 months does not reflect their current situation. The form is based on the last 6 months of income and therefore the U.S. Trustee’s office may allow the case to proceed so long as the debtor provides substantial documentation to support their current situation.
If the presumption arises, your attorney should advise you of this before the case is filed. It is generally not advisable to proceed with a chapter 7 unless certain exceptions which your Denver Colorado bankruptcy attorney can explain are applicable to your case. If you decide to proceed with such a case, the U.S. Trustee’s office will file a motion to dismiss your case. You will not receive a discharge unless you successfully defeat the trustee’s motion after a bankruptcy court hearing.
Aside from the income requirements under the means test, you may not be eligible to maintain a chapter 7 case if:
All of your debts except the following are eligible for a chapter 7 discharge:
You should complete the required credit counseling course (we suggest 123debtor.com). This course is required before you can file bankruptcy.
The filing fee is $306.00 for either a single or a joint case and in most cases should be paid on the same date your case is filed.
The bankruptcy court of the state you have lived for the greater of the last 180 days has jurisdiction of your case. For example, if you have lived in Colorado for 91 days out of the last 180 days, you would file in the U.S. Bankruptcy Court for the State of Colorado.
Yes and there may be many good reasons to do so including: paying just court filing fee, attending one meeting of creditors, dealing with the same attorney and filing just one petition. There may also be reasons why a husband and wife may want to file separately. Seek counsel.
You are not responsible for your spouse’s debts which he/she incurred before you were married. If one spouse has maintained a low debt to income ratio, that spouse should not file bankruptcy even if their spouse has significant debt.
There may be reasons to delay.
If you have ongoing medical expenses from an injury or illness, you should wait until all anticipated costs have been billed.
If you anticipate receiving an inheritance in the near future, you should seek legal counsel on how to proceed.
If you are waiting on a tax refund or you have a significant amount of money coming your way, you will need to turn-over that money to the trustee unless you spent it before you filed. Always seek the advice of counsel when it comes to disposing of assets or spending large quantities of money before filing bankruptcy. This type of conduct could have implications on your Denver bankruptcy case.
Yes, if a creditor has a judgment against you the next step is a wage garnishment and/or bank account garnishment. Many individuals wait until the garnishment goes into effect to seek bankruptcy protection. By then it may be too late because the garnishment eats of income that could have funded the bankruptcy costs.
Filing bankruptcy prevents creditors who have received a judgment from collecting on the judgment. Filing bankruptcy does not make the judgment disappear from your public records. The fact that a creditor received a judgment against you will remain on your credit. If you own a home and have a judgment on your record, you should seek legal counsel regarding removing the judgment lien against your home after filing bankruptcy.
Initially your credit score will go down. Filing bankruptcy also reduces your debt to income ratio so your credit score will eventually go up depending on how you manage it after filing. The effect of filing bankruptcy on your credit score will last for approximately 2-3 years. It is not unreasonable to anticipate a credit score in the high 600s after 2 years of getting a bankruptcy discharge. The credit score is just one of many factors a creditor will weigh in lending credit. Some creditors may not grant credit for several years after the bankruptcy discharge even though the individual may have a good credit score.
Unless they search the public records on PACER, it is unlikely anyone will find out you filed unless you tell them or listed them as a creditor.
No, it is rare for a trustee to contact your employer unless there is a reason to do so.
It is unlawful for an employer and government agencies to make any eligibility determinations based on the fact that you filed bankruptcy.
It is rare for a person to turn over significant property in a chapter 7 if any. Most individuals who file bankruptcy have nothing left except their exempted assets. Your attorney will go over your asset schedules and advise you on what to except.
Property which is exempted from levy by State law is also protected in a chapter 7 bankruptcy. Therefore, the laws of your State (not bankruptcy law) determines which property is exempted. In Colorado your belongings are protected up to a certain value. Some property is not entitled to any protection such as: recreational vehicles and expensive sport’s equipment, fire arms, stocks, bonds, cds. If you have significant valuable assets (expensive art for example) you may not want to file bankruptcy. Bankruptcy is intended as a last resort. See Colorado Revised Statute section 13-54-102 for a complete list of exempt property in Colorado.
In a chapter 7 case, the only appearance you can expect to appear for is the 341(a) meeting of creditors. The name aside, it is rare for creditors to appear for these meetings. The trustee assigned to your case will conduct the meeting. This person is not a judge. The trustee is a private individual (similar to a private contractor) to the U.S. Trustee’s office. The trustee is paid a fee to administer your case and ask questions during the meeting. The trustee collects a percentage of any assets received.
If you haven’t already taken the course in personal financial management, you should do so. Aside from that, the debtor should follow any directions provided by their attorney or the trustee assigned to the case. You are not relieved of your obligation to cooperate with the trustee even after your discharge is ordered. Any contact from the trustee should not come as a surprise. The trustee will briefly discuss which assets or information (if any) he/she wishes to pursue during the meeting.
The panel trustee has administrative duties in your case. In each case a certain set of questions must be asked in every case. The trustee must verify your picture ID and SSN card match the information in the record. The trustee may ask your attorney to clarify any discrepancies in the petition and may request your attorney to file any corrections or amendments as needed.
If you wish to receive a discharge, the short answer is yes. However, you are only entitled to comply with the trustee’s law demands. In some cases, the trustee may seek the turn-over of assets which, after a hearing, a bankruptcy judge deems are protected from turn-over. This is very rare and only comes up in cases when there is a grey area in the applicable. Most exemption statutes are well settled.
In some cases, the trustee may allow the debtor to purchase certain property back from the bankruptcy estate (guns for example). Otherwise, the property is liquidated and the funds used to pay down your debts. Any remaining balances are discharged.
Most people who file bankruptcy have nothing left of significant value. In such cases, the trustee closes the case out as a no-asset bankruptcy.
Unless the debtor files a reaffirmation agreement, car loans and mortgages are discharged in the bankruptcy. Even if the debtor does not sign a reaffirmation agreement, the debtor can still make mortgage payments on a house. Filing bankruptcy relieves the debtor from their personal obligation. Filing bankruptcy does NOT remove the creditor’s lien on the collateral. The creditor may still repossess or foreclose on their collateral after the bankruptcy is filed unless the debtor remains current. Most debtors can continue making car payments without signing a reaffirmation agreement. It depends on the lender’s policy.
Unless the creditor successfully objects to the discharge of the debt (very rare) the debt will be discharged in the bankruptcy which relieves the debtor of the obligation to repay the debt. The debt will show on the credit report as discharged. The creditor will never be able to collect the debt in the future. The debtor may voluntarily repay some debts (friends and family) after filing bankruptcy. If took our credit ($1000 or more) for purchases or cash advances in the last 6 months, contact your Denver Colorado bankruptcy attorney on how to proceed.
Your house is protected up to $60,000 in equity. If you have significantly more than $60,000 in equity you may want to proceed under a different chapter. Your vehicle is protected up to $5,000 in value (if paid-off) or in equity if a creditor has a loan against it. So long as you remain current on the loan and the value does not exceed the state exemptions, you will retain your house and cars.
If you have non-exempt assets at the time of filing bankruptcy, there is nothing you can do to prevent a liquidation. Before attempting to sell or transfer any assets of value prior to filing bankruptcy, you should seek legal counsel. Certain forms of pre-bankruptcy estate planning are permissible. For example, if you receive a large tax refund early in the year and spend the money on household goods and expenses throughout the year, the trustee will not question that. If you receive a large tax refund right before you file bankruptcy and use the money to pay back friends or family the trustee will take issue with such transactions. There are too many scenarios to cover here. If you have or anticipate having property of value and you need to file bankruptcy, seek advice of legal counsel before proceeding.
Your utilities will not be affected in Colorado unless you include the utility company in the bankruptcy. If you included the utility, you may only keep your service active after posting a deposit with the utility company after filing bankruptcy. If this applies to your situation, contact your utility company for the amount of deposit you must post. The amount is usually equal to the amount of your highest bill from the last 6 months.
Yes, you can move before or after your case is filed so long as you file in the state where you have lived for the greater of the last 180 days. You will be required to come back to Colorado to attend your meeting of creditors. You must keep your attorney, the trustee and the court aware of your current address so long as your case is open.
You will receive a letter in the mail entitled “Discharge of Debtor” which discharges you from the legal obligation to repay your listed debts. The letter will arrive approximately 2.5 months after your meeting of creditors. Be sure to keep the court up to date on your current mailing address.
Yes, some people wish to repay friends and family members and other personal lenders. You may also choose to sign a reaffirmation agreement on homes and cars. These debts would normally be discharged unless you sign such an agreement.
The answer depends on what you intend to do with the collateral after filing bankruptcy.
If you wish to Surrender the Collateral:
Vehicles: You are no longer obligated to make the monthly payment, however, you must make arrangements with the lender to surrender the collateral within 45 days after the filing of your bankruptcy petition. You will not be responsible for a deficiency balance.
Mortgages: You are no longer obligated to make the monthly payment if you do not intend to retain your home. The lender will eventually proceed with a foreclosure. You will not be responsible for any deficiency balance after filing bankruptcy even if the foreclosure process occurs several months, even years, after you file.
If you wish to Retain the Collateral:
You must continue to make payments on all “secured‟ debts if you intend to retain collateral such as a car or a house. When you file bankruptcy, all of your secured debts are listed in your petition as a required by law.
Mortgages: You are not required to sign a reaffirmation agreement on a mortgage loan and we advise against doing so. You may continue making payments on a mortgage loan without signing a reaffirmation agreement.
Vehicles: Most lenders will allow you to retain the vehicle without signing a reaffirmation agreement so long as you stay current on the loan. Contact your lender before filing bankruptcy to find out what their policy is on reaffirmation agreement.
How to get a reaffirmation agreement:
If you wish to reaffirm any loan, please contact your lender as soon as possible after filing bankruptcy to request a reaffirmation agreement. You have just 45 days after your meeting of creditors to return the reaffirmation agreement to the lender.
Are there benefits to signing a reaffirmation agreement?
Mortgages: There are two benefits you may want to consider. If you do not sign a reaffirmation agreement, the mortgage account will be reported as “discharged” in chapter 7 bankruptcy even if you keep the loan current after filing bankruptcy. Most lender will only report timely payments if the debtor signs a reaffirmation agreement. Another potential benefit is the ability to obtain a loan modification or refinance in the future. Many lenders are refusing to refinance loans unless a reaffirmation agreement was signed.
Auto Loans: Very few lenders (e.g. Ford Motor Credit) require the debtor to sign a reaffirmation agreement in order to retain the collateral. If your lender requires a reaffirmation agreement, you should consider other options before signing a reaffirmation. There are several auto lenders who work with people who have filed bankruptcy. Such a lender may be able to get you into a more affordable auto loan. In some cases redeeming the collateral may be a less expensive option. We can explain this latter option better in person.
Consequences of signing a reaffirmation
If you sign a reaffirmation agreement you will be personally responsible for repaying the loan after your bankruptcy discharge. You will not be able to file another chapter 7 for eight years. In the event of default, the lender will seek a deficiency judgment if the value of the collateral is insufficient to cover the amount of the loan. You could have your wages and bank accounts garnished.
Instructions for signing a reaffirmation agreement: If we receive a reaffirmation agreement, we will forward the reaffirmation agreement to you. Except in rare cases, we will not be able to assist in completing the agreement nor will we be able to sign or certify the agreement. Our Denver Colorado bankruptcy law office, as with most other Denver bankruptcy law firms, does not get involved with reaffirmation agreements.
If you execute a reaffirmation agreement, you will need to attend a Bankruptcy Court hearing either in person or over the phone. During the hearing a bankruptcy judge will determine whether the agreement poses an undue hardship on you. If the agreement poses an undue hardship, the Court will not approve the agreement.
You will need to complete several sections of the reaffirmation agreement completely and accurately or the Court will not consider the agreement.
When the form asks for “Income from Schedule I, line 16” please reference the electronic copy of the petition we provide to complete this section. On the left hand side of the PDF, you will notice several bookmarks, one of which is labeled “Schedule I – Current Income of Individual Debtor(s).” Click on this bookmark and use the amount listed on line 16 (bottom of the page) to complete the section labeled “Income from Schedule I, line 16” on the reaffirmation agreement.
When the form asks for “Current expenditures from Schedule J, line 18” click on the bookmark labeled “Schedule J Current Expenditures of Individual Debtor(s).” Use the amount listed on line 18. AVERAGE MONTHLY EXPENSES to complete the section labeled “Current expenditures from Schedule J, line 18” on the reaffirmation agreement.
Aside from the two sections referenced above, the rest of the form should be self-explanatory.
In some rare cases, and for good cause shown, we will assist, certify and sign a reaffirmation agreement on behalf of a client. We reserve the right to charge an extra fee for this service.
If there are no assets, the court will automatically close the case out in about 6 months from the date of filing. If the trustee is administering assets, your case will remain open for as long as the trustee needs to fully administer the case. Most asset cases are closed out in 12-24 months from the date of filing.
The debtor may file a complaint with the U.S. Bankruptcy Court against the creditor for willful violation of the discharge injunction. The debtor may be entitled to damages and reimbursement of costs. Seek legal counsel if this applies to you. Most creditors will stop bothering you if you assert knowledge of your rights.
The co-signor will remain liable. Your bankruptcy will relieve you of liability leaving the creditor to pursue your co-signor for payment.
The information provided on this website is for informational purposes only and is not to be taken as legal advice. Consult with your own bankruptcy counsel before proceeding to rely on the information taken from a website. Each case has its own unique issues which should be addressed by bankruptcy counsel.
If you have more questions about the best options for your current financial situation, call Consumer Law Pro today to speak with a Denver Colorado bankruptcy expert at (303) 297-7729.