What are the different types of Personal Bankruptcy?

There are three different types of personal bankruptcy that you can file in Colorado; Chapter 12, Chapter 13, and Chapter 7. A Chapter 12 bankruptcy is used exclusively by family farmers. A Chapter 13 bankruptcy requires you to pay back some or all of your debts through a debt repayment plan. A chapter 7 bankruptcy discharges most of your unsecured debts in the fastest possible manner.

What are the requirements to file a chapter 7 bankruptcy?

In order to file a chapter 7 bankruptcy you have to pass the “means test.” The means test looks at your income, debts, and expenses, to determine whether or not you can afford to pay back your creditors. If the test finds that you are able to pay back some of your creditors you will be required to file a chapter 13.

How does the “Means Test” Work?

The first part of the means test compares your current monthly income to the median income of other Colorado households of your size. If your income is less than the median, you may file Chapter 7 bankruptcy. Currently in Colorado the median income for a single individual is $55,858; the median income for a family of two is $72,037; the median income for a family of three is $81,496; and the median income for a family of four is $95,117. However, if you make more than the median income, all is not lost, it may still be possible to file a chapter 7, but more calculations must be made.

What if I make more than the median income?

If your monthly income exceeds Colorado’s median income you must determine whether your family would have enough disposable income left, after subtracting allowed expenses, to pay off some of your unsecured debts. Unsecured debt includes personal loans, credit cards, payday loans, medical bills, etc. If your disposable income is equal to or more than a minimum amount set by law, you will not be allowed to use Chapter 7.

How do I take the Means Test?

The means test can be very complicated as you not only impute your income, but also use state and national standards for food, housing, and other expenses to determine if you qualify for a chapter 7 bankruptcy. If you are considering filing a chapter 7 bankruptcy, it is always recommended that you contact a qualified Colorado bankruptcy attorney. Your attorney will be able to determine if you “pass” the means test. Should you earn too much they can also advise you on other bankruptcy options.

Can someone help me with the Means Test?

There are qualified bankruptcy attorneys throughout Colorado including: Denver, Aurora, Centennial, Littleton, Lakewood, Westminster, Broomfield, Thornton, and Commerce City. Many of these attorneys offer free consultations and payment plans based on your income.