According to the District Attorney of Jefferson and Gilpin County website:

There are several types of bankruptcies. Three chapters are as follows:

  • Chapter 7: A portion of the debtor’s assets are liquidated and distributed among creditors by a court-appointed trustee.
  • Chapter 11: Reorganization plan for businesses. Business may continue operating under a repayment plan outlined by the court.
  • Chapter 13: Debt-protection action for individuals who need to repay their debts from current assets and income.

Chapter 7

Chapter 7 bankruptcy can provide the fastest way to a fresh start. It gets rids of debt like credit card, student loans, and medical bills, the most common types of debt [1].
Chapter 7 provides “liquidation” of these debts. In other words, it wipes the slate clean and allows for a restart.

Things to note about a Chapter 7 filing.

“If the debtor’s “current monthly income” (1) is more than the state median, the Bankruptcy Code requires application of a “means test” to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor’s aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $7,700. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor’s consent) or will be dismissed. 11 U.S.C. § 707(b)(1).” [2]

Chapter 13

In a Chapter 13 you are requesting debt protection while you pay back what is owed with your current assets. There is no immediate discharge of your debts. That is not to say that your debts will not be discharged at all but that the court is allowing for pay back, usually about 3-5 years and then a reassessment will be instituted and a discharge or remaining debts may occur.

Chapter 13 is for those who have assets that could possibly pay of what is owed. The court will take into account your “disposable income”, assess your living situation, living expenses, and calculate a number that will offset the debt.

 Common Concerns of Filing for Bankruptcy

The fear of losing everything is a common fear when considering filing for bankruptcy. However, Colorado law has implemented several bankruptcy exemptions to protect the person that is filing for bankruptcy. These exemptions allow bankruptcy filers to hold on to their personal property so that it is not a complete life altering event. In addition, you may also use some of the federal exemptions [3].

Here are the Colorado Bankruptcy Exemptions:

ASSET EXEMPTION DESCRIPTION LAW SECTION
HOMESTEAD Real property, mobile home or manufactured home you occupy to $60,000 or $90,000 if occupied by an elderly (60+) or disabled debtor or spouse. 38-41-201, 38-41-201.6,

38-41-203, 38-41-207
Spouse or child of deceased owner may claim homestead exemption 38-41-204
House trailer or coach used as residence to $3,500 13-54-102(1)(o)(I)
Mobile home used as residence to $6,000 13-54-102(1)(o)(II)
INSURANCE Disability benefits to $200 per month; if receive lump sum, entire amount exempt 10-8-114
Fraternal benefit society benefits 10-14-122
Group life insurance policy or proceeds 10-7-205
Homeowners’ insurance proceeds for 1 year after received, to homestead exemption amount 38-41-209
Life insurance 10-7-106; 13-54-102(1)(l)(B)
Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors 10-7-106
Life insurance – cash surrender value for writs issued against the insured – 25,000/50,000 13-54-102(1)(l)(A)
MISC. Child support if recipient does not mix with other money or deposits into separate account for the benefit of the child 13-54-102.5
Property of business partnership 7-60-125
PENSIONS ERISA-qualified benefits, including IRAs 13-54-102(1)(s)
Firefighters 31-10-412, 31-30-518
Police officers 31-30-313, 31-31-616
Public Employees 24-51-212
Teachers 22-64-120
Veterans 13-54-102(1)(h), 13-54-104
PERSONAL PROPERTY 1 burial plot per person 13-54-102(1)(d)
Clothing to $1500 13-54-102(1)(a)
Food and Fuel to $600 13-54-102(1)(f)
Health aids 13-54-102(1)(p)
Household goods to $3,000 total 13-54-102(1)(e)
Jewelry and articles of adornment to $1000 total 13-54-102(1)(b)
Motor vehicles used for work to $3,000 ; to $6,000 to get medical care, if elderly or disabled 13-54-102(j)(I), (II)
Personal injury recoveries, unless debt related to injury 13-54-102(1)(n)
Pictures and books to $1500 13-54-102(1)(c)
Proceeds for damaged exempt property 13-54-102(1)(m)
Security deposit 13-54-102(1)(r)
The full amount of any federal or state earned income tax credit refund 13-54-102(1)(o)
Professionally prescribed health aids for the debtor or a dependent of the debtor 13-54-102(1)(p)
PUBLIC BENEFITS Aid to blind, aged, disabled, AFDC 26-2-131
Crime victims’ compensation 13-54-102(1)(q), 24-4.1-114
Unemployment compensation 8-80-103
Veterans’ benefits for veteran, spouse or child if veteran served in war 13-54-102(1)(h)
Workers’ compensation 8-42-124
TOOLS OF TRADE Horses, mules, wagons, carts, machinery, harness and tools of farmer to $25,000 total (same $25,000 limit for debtor or debtor plus spouse) 13-54-102 (1)(g)
Library of professional to $3,000 or stock in trade, supplies, fixtures, machines, tools, maps, equipment, books and business materials to
$10,000 total		 13-54-102 (1)(i), (k)
Livestock and poultry of farmer to $3,000 13-54-102 (1)(g)
WAGES Minimum 75% of earned but unpaid wages, pension payments 13-54-104
WILDCARD NONE

 Do You Need a Bankruptcy Attorney?

You can file bankruptcy on your own but it is not recommended. There is a great deal of paper work involved. If there is an error in that paper work, you may lose out on exemptions you did not know you had, or put your bankruptcy process further behind. An attorney can hasten the process and get you back to your life.

A qualified Denver bankruptcy attorney can guide you through every step of the Chapter 7 or Chapter 13 process. Bankruptcy can be a long process in general and depending on your situation but with an attorney handling everything for you, the process will be far less difficult.

[1} http://protectingconsumerrights.com/debt-collection-problems/types-of-debt/

[2] http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

[3] http://www.nolo.com/legal-encyclopedia/federal-bankruptcy-exemptions-property.html