Colorado Chapter 7 Bankruptcy: Answers To Your Bankruptcy Questions

Getting a Fresh Financial Start, One Step At a Time

Are you struggling with a significant amount of debt? Do you not know if you will be able to repay your debt? If you answered yes to the two previous questions, you may want to consider filing for Chapter 7 bankruptcy. Filing for bankruptcy may allow you to eliminate the majority of your debts and live life without constant financial worry and unnecessary stress.

There are many different aspects of Chapter 7 bankruptcy, and you should understand them before filing. Here are six commonly asked questions about Chapter 7 bankruptcy in Colorado.

1. What Are the Advantages of Filing Chapter 7 Bankruptcy?

There are a number of benefits of filing for Chapter 7 bankruptcy, especially when you consider other bankruptcy options, such as Chapter 13. Chapter 7 can give you a fresh start by eliminating personal loans, credit card debt, and even medical bills. Some of the advantages of Chapter 7 bankruptcy include:

Benefit From the Quick Chapter 7 Filing Process

Unlike Chapter 13 bankruptcy, which can be a years-long process, filing for Chapter 7 bankruptcy can be done fairly quickly. The majority of cases are resolved in a few months after the initial filing. The process usually consists of:

1. A meeting with a bankruptcy attorney to review your financial situation to see if bankruptcy is a smart option.

2. Collection of paperwork, such as paystubs, tax returns, bank statements, etc.

3. Completion of the first online financial education course.

4. Reviewing the petition with your bankruptcy attorney.

5. Filing of the petition.

6. A meeting with the bankruptcy trustee.

7. Completion of the second online financial education course

8. A discharge from the court.

Discharges are issued around 100 days after your case was filed. Chapter 7’s shorter timeline can help you financially recover more quickly and put your mind at ease than a Chapter 13. Within just a few months, you can start to benefit from the positive advantages of filing for Chapter 7.

Wipe Out Debt

The primary advantage of filing Chapter 7 is that you can get rid of all or most of your debt. Once your debt is eliminated (discharged) under Chapter 7, you will no longer be legally obligated to pay it. Creditors receive whatever they receive, and you no longer need to pay them anything. Unlike with Chapter 13, you do not have to commit to a repayment plan for an extended period. With Chapter 7, you have the right to all your future income, which typically results in filers having significant financial freedom.

Stop Phone Calls, Repossessions, Garnishments, and Foreclosures

If you are behind on payments, anyone you owe money to can contact you at any time. These frequent harassing phone calls can be frustrating and discouraging, especially when they don’t seem to stop. Filing for bankruptcy stops these calls and communications. When you file Chapter 7, your creditors must immediately cease contact, legal proceedings, and enforcement actions. This stay requires your creditors to stop:

• Writing, calling, or contacting you in any way.

• Attempting to repossess or foreclose on your property.

• Attempting to levy your bank account or garnish wages.

Keep Exempt Property

Many people file for Chapter 7 because they are on the brink of losing their property. Chapter 7, which is frequently referred to as “liquidation” bankruptcy, allows bankruptcy trustees to sell certain types of property to pay off your debts. Fortunately, when you file, you may not have to sell your home, vehicle, or other properties that are exempt under Colorado state law. Exempt property may include:

• Home equity

• A primary vehicle for transportation

• Certain household goods

• Previously earned wages you need to support yourself

• Most retirement accounts

An experienced bankruptcy attorney can help you evaluate your circumstances and make the most of your exemptions.

Get a Fresh Financial Start

By eliminating your debt, you can get a fresh start financially. Since you are no longer required to commit money toward these debts, you will have more spending cash for you and your family. You may even see an increase in your credit score briefly after filing. Chapter 7 bankruptcy does stay on your credit report for ten years, but as time progresses, it will have less of an impact on your score.

It is also important to note that if you have secured debt that was not integrated into your bankruptcy, you may still have to make payments to keep your property.

Apply for Loans and Credit Again

If you are filing for Chapter 7, you have probably missed several payments, which have severely impacted your ability to get credit. Each missed payment has a detrimental effect on your credit score, but when you file for bankruptcy, you may be able to prove to lenders that you are a better credit risk. Since you are no longer suffocated by debt, you will have more money to pay down any loans you take out. Many people even start back receiving loan and credit offers shortly after filing.

2. Will I Be Able To Own Property After Chapter 7 Bankruptcy?

One of the most common misconceptions about Chapter 7 bankruptcy is that you won’t be able to own property again after you file. This is completely unfounded and untrue, and there are many people who file for bankruptcy and obtain a mortgage a few years later.

Once your debts are discharged, you must wait a certain period before you can qualify for a home loan again. If you file Chapter 7, you will need to wait at least two years to qualify for a mortgage. Although bankruptcy negatively impacts your credit for several years, you may be able to qualify for a home loan if you remain debt-free and improve your credit over time.

3. Can I Keep My House and Car After Filing Chapter 7?

After filing Chapter 7, you may wonder how to keep your most important property.

Keeping Your Car

You need your car for transportation, while your lender does not want the vehicle, only the money owed for it. No matter how much you owe on your vehicle, if you continue to make payments after bankruptcy, you can keep your car. Since you are no longer legally required to make payments on your car loan after filing Chapter 7, you can choose either to continue to make payments to keep the car, or to give the vehicle back without any consequences.

Another option is to file what is referred to as a “reaffirmation agreement.” A reaffirmation agreement basically asserts that even though you are no longer required to make payments on a car, you are choosing to remain liable for the debt owed on it. Unfortunately, if you sign a reaffirmation agreement and do have trouble making the payments in the future, your car can be repossessed and the lender can collect any amount of the loan that wasn’t paid off when they sold your car. On the other hand, if you continue to make payments, this may help improve your credit score.

Your last option is to immediately go to a dealer and finance a new vehicle in the wake of your bankruptcy. The new interest rate will probably be higher than the one on your old vehicle, but your payment may be lower in the long run, depending on the vehicle you choose. Some dealers even specialize in offering loans to individuals with bad credit and bankruptcies on their record.

Keeping Your House

When filing Chapter 7, you have several options for keeping your home. Your first option is to simply continue making payments. Under most state laws, a mortgage lender cannot foreclose on your home if you are current with your payments. This can prevent you from having to find a new place to live.

Your second option is to reaffirm the debt as you would with a car. As with a car, you will be liable for nonpayment if you choose this option, so if you still owe hundreds of thousands of dollars on your home, this may not be a great option. However, if you are confident you can make payments and have disposable income, it may be a reasonable choice. Keep in mind that a lender cannot force you to reaffirm a mortgage.

Third, you may be able to work with the mortgage lender to modify your loan during bankruptcy. This can lower future payments, and you will no longer be obligated to make those payments. If you need to find lower-cost housing, you can simply move out without having to worry about what your lender does afterward.

The final option is to let your home go into foreclosure. It can take more than a year (sometimes more) before a property is sold at auction, and during this time, you can save up to find a new residence. You should speak with your attorney if you prefer this option, since every state has different foreclosure laws.

4.  Should I Use an Attorney for My Chapter 7 Bankruptcy?

You do have the option to file Chapter 7 bankruptcy on your own, but because of its long-term legal and financial impact, this is not recommended by the federal government. Bankruptcy judges and court employees are not allowed to provide guidance or advice, and any mistakes you make could affect the outcome of your filing. An attorney can help you in the following ways:

• Advise you on which chapter to file.

• Advise you on whether you need to file for bankruptcy.

• Advise you on whether and how you will be able to keep your home, vehicle, or any other property.

• Advise you on which debts can be cleared.

• Explain bankruptcy procedures and laws to you.

• Fill out and file the required forms.

• Advise you on what payments you should continue to make.

• Assist you with other important aspects of your case.

Simply put, you do not want to file bankruptcy without an attorney on your side. There are many federal and state laws and procedures that you must follow, and if you do not know them, you could jeopardize your bankruptcy case and your personal belongings, including your home. Ideally, you will want to work with a lawyer who has a proven track record of helping individuals successfully file bankruptcy. The right lawyer will be sensitive to your needs and capable of providing excellent counsel at the right times.

5. How Will Bankruptcy Impact My Credit?

When calculating your credit score, credit reporting agencies factor in your payment history. After filing Chapter 7, you will no longer be required to pay your debts as you initially agreed. As a result, filing Chapter 7 can have a major negative impact on your credit score.

A Chapter 7 bankruptcy will remain on your credit report for 10 years after the official filing date. Lenders will notice the bankruptcy on your credit report, and more than likely it will impact their decision to give you credit. Many lenders will not extend credit to individuals with bankruptcies on their credit reports, so you may have a hard time getting approved for loans. If you are approved for a loan, you will probably face high interest rates and unfavorable repayment terms.

So, in the short term, bankruptcy will lower your credit score. However, most Chapter 7 bankruptcy filers will see a gradual increase in their credit score within a few months of filing. Most of our clients will see a credit score in the mid- to high-600s within 12 months of filing.

6. How Do I Know if I Am Eligible To File for Chapter 7 Bankruptcy?

To find out if you are eligible for Chapter 7, you will need to pass a “means test.” The test will determine if you have enough expendable income to repay your debts. If you earn less than your state’s median income for your family’s size, you automatically pass the test. If you earn more, you will need to deduct allowed monthly expenses from your monthly income to obtain your “disposable income.” If your disposable income is relatively high, you probably won’t qualify for Chapter 7. If you are a veteran, you may not be required to take the means test.

If you do not pass the means test, you may have other options besides Chapter 7. Depending on your income, you may be able to file for Chapter 13 or create a repayment plan with your creditors.

One of the biggest reasons to hire a Chapter 7 bankruptcy attorney is to help you navigate the means test to see if you qualify for a Chapter 7.

Are You Considering Filing for Colorado Chapter 7 Bankruptcy?

Are you tired of living with crushing debt? Do you want an end to the threatening phone calls and letters? If you are ready to live your life free of financial worry, contact Colorado Bankruptcy Law Group, LLC. We have extensive experience helping individuals understand and file for Colorado Chapter 7 bankruptcy, and we are more than confident we can help you. Our attorneys are sensitive to your needs and are always there to provide you with the legal guidance you need. Contact us today to get started on your journey to financial freedom.

Additional reading:

https://www.wslaw.com/blog/2019/september/am-i-able-to-own-property-after-filing-for-bankr/

https://ccadvising.com/articles/bankruptcy-keeping-your-house-and-car

https://www.experian.com/blogs/ask-experian/how-does-filing-bankruptcy-affect-your-credit/

https://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-means-test-eligibility-29907.html#:~:text=You%20can%20earn%20significant%20monthly,%2C%20taxes%2C%20and%20other%20expenses.