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BANKRUPTCY IN DENVER

How Bankruptcy Works

Bankruptcy provides a safety net for people struggling to pay debt. Once filed, debt collectors and other creditors must stop sending harassing letters, making calls, and pursuing collection lawsuits. The bankruptcy process involves a review of the debtor’s financial situation, including income and property value, to determine whether creditors will receive some portion of what’s owed. Most bankruptcy cases end with the court issuing a debt discharge wiping out qualifying debt.

Types of Bankruptcies

Chapter 7

A Chapter 7 bankruptcy provides a fresh start by erasing credit card balances, medical bills, personal loans, and other qualifying debt. It’s quick—taking about four months to complete—and the filer doesn’t repay creditors through a repayment plan. Chapter 7 filers keep property needed to work and live, such as a modest car and household furnishings. The bankruptcy trustee sells nonessential property for the benefit of creditors.

Chapter 13

Wage earners with enough steady income to repay creditors some portion of what they owe file for Chapter 13. This chapter offers valuable benefits not available in Chapter 7, such as allowing filers to keep all of their property. Filers can also save a home from foreclosure or a car from repossession by catching up on missed payments through the repayment plan. Once complete, the debt discharge erases remaining balances on qualifying debt.

Chapter 11

Chapter 11 helps income-generating companies stay in business, as well as high-earning individuals whose debts are too high to qualify for Chapter 13. In Chapter 11, the filer and creditors create a restructured debt plan the company can afford by agreeing to new terms or reducing amounts owed. Many small businesses and individuals can take advantage of the relaxed, cost-saving Chapter 11, sub-V procedures created especially for them.

Cost of Bankruptcy

A Chapter 7 bankruptcy in Colorado tends to cost $1,500, but it might be more in large metro areas like Denver. The average Chapter 13 case costs $3,500.

Bankruptcy Pros and Cons

• Wiping out qualifying debt can help filers live within their means.
• Filers start rebuilding credit immediately after receiving a bankruptcy discharge.
• Filers can save a home from foreclosure or a car from repossession, and in some cases, wipe out an underwater residential junior mortgage or reduce secured debt to the value of the collateral.

• A business owner can restructure debt and save a failing business or, after a business closure, wipe out personal liability for business debt.

• A bankruptcy discharge doesn’t wipe out recently incurred tax balances, domestic support obligations, student loans, and other nondischargeable debts.

• The bankruptcy filing will impact the filer’s credit score temporarily and will remain on a credit report for up to ten years.
• Bankruptcy filers pay higher interest rates on most credit purchases after bankruptcy.
• Filers will find it difficult to lease property for a year or two after bankruptcy.

For more on bankruptcy in Colorado, and questions asked in Denver, see our free legal advice page.