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
