How Bankruptcy Works by State

Numbers of local consumers newly uncomfortable with their accumulated debt loads are beginning to worry over the economic problems affecting Colorado and the nation as a whole. These consumers tend to flock toward bankruptcy attorneys to see whether or not Chapter 7 or Chapter 13 bankruptcy protection would better their situation, and, after the changes to the bankruptcy code following the 2005 legislation, whether or not they would even qualify for Chapter 7 debt elimination bankruptcy in their state of residence. While virtually all the citizens of Coloradan that we have spoken with maintain some knowledge of bankruptcy processes – after all, growing up in the United States of America, even children recognize that bankruptcy is meant to offer a fresh start to debtors who have gotten in over their head with bills they’re unable to pay – most ordinary consumers are unaware of the actual specifics regarding bankruptcy declaration and eventual discharge.

While we can’t pretend that the totality of knowledge floating about the potential repercussions and intrinsic loopholes of bankruptcy should be able to be glossed over in an article such as this, there is information every Coloradan debtor should be aware of before taking another step. It seems, from our correspondence, that almost no Coloradan not already working in the financial services industry has more than a cursory understanding of how their local statutes will protect their assets in the event that they do decide to go through with bankruptcy declaration. For instance, every state holds personal exemptions that borrowers can choose to invoke rather than taking advantage of the (generally far harsher) federal exemptions, and these may change greatly depending on the borrowers’ location around the country. Any consumer seriously interested in bankruptcy should first do their own research on how bankruptcy (and, especially, bankruptcy in Colorado) could help their own financial scenario before paying the ever more expensive costs that comes along from even a consultation with experienced bankruptcy attorney firms. These lawyers charge by the hour, after all, and there is no reason to ask questions that could be easily answered for free should the borrowers have sufficient interest.

Once again, virtually everyone your authors have spoken with in Colorado knows the most basic information about bankruptcy protection – consumers with sufficient debt balances (provided they’re the right sort of unsecured loans) will be considered for a Chapter 7 debt elimination program (provided they have not earned too much money in the preceding years) that could liquidate their credit card bills and similar burdens under the full protection of federal and Colorado state law. The bankruptcy process was originally legislated to offer a new hope for borrowers that have bitten off more than they could chew. To a large degree, for debtors sufficiently desperate and who have suffered genuine calamities necessitating governmental assistance, this can still be true, but, sadly, only a minority of people living in Colorado would actually qualify under current conditions. Fortunately, even as the official protections continue to dissipate, a number of new debt relief and debt management companies have come into existence which attempt to help debtors in Colorado and across the United States erase their more problematic high interest loans and learn proper household budgets and correct spending behaviors to preclude a return to similar situations. Since the discrepancies between debt consolidation and debt settlement and Consumer Credit Counseling are significant and each solution may be different for different sorts of Coloradan families, it should certainly be a priority for every borrower to learn all that they can about these debt maneuvers prior to helplessly concluding that bankruptcy would be the only solution available.

To be sure, however difficult it may now be for Colorado borrowers to avail themselves of bankruptcy protection, it is nonetheless a federally sanctioned legal right to at least file a petition declaring your intentions, and the very act of bankruptcy declaration prevents your accounts from debtor harassment or attempts at collection. Once any borrower files for Chapter 7 or Chapter 13 bankruptcy protection in the state of Colorado, the various lenders – and whichever bill collectors the lenders may have been working with – are legally required to end all forms of communication. Unless the lenders can prove that they will lose money by waiting for the trustee chosen by the Colorado courts to render a judgment on the borrowers eligibility for bankruptcy through depreciation of collateral or other means (this rarely happen), the filer should at the least be granted a sudden peace of mind just after declaration. This does not, of course, guarantee the Coloradan borrower shall qualify for bankruptcy nor that the Chapter 7 debt elimination proceedings would be advantageous once all the drawbacks were taken into consideration. Like virtually all elements of consumer finance, no strategies should be entered into blindly or chosen without time for reflection and sufficient amounts of research and self education that would allow all due deliberation. In this article, we would primarily like to go over the reasons each Colorado borrower may invoke when first thinking about bankruptcy, the various processes and statutes borrowers should be aware of before filing (as well as those alterations and exemptions specific to Colorado), and the other debt relief techniques that have become popular in recent years.

When deciding on the necessity of bankruptcy, there are a few different aspects each Coloradan should consider fully before making a final decision – or, again, even spending dollar one on a discussion with the bankruptcy lawyer they would consider using. If the interest rates on any given loan are sufficiently high so that the borrowers cannot satisfy much more than the minimum payments each month, Chapter 7 or Chapter 13 protection should certainly have to be thought of as an option. In the same way – this almost always goes alongside the previous problem, as a matter of fact – borrowers whose collected unsecured debts have amassed to a degree that they would be virtually impossible to repay over the near future may genuinely need look into bankruptcy or any other debt solution available in Colorado. Further, as you should imagine, the regular threatening phone calls and mailings from lenders or collection agents working on their behalf should be a strong warning signal that something has to be done. Remember, as soon as you start working with a debt management firm or file a bankruptcy petition, Colorado state law guarantees that all collector harassment shall immediately cease. In the event that secured lenders have begun the proceedings to enact foreclosure of personal residences or the repossession of automobiles (or, even, the much less common but still effective civil court summons for potential forfeiture of property), you’ll have little choice other than to employ an attorney or debt professional to aid you with your financial burdens.

Essentially, Colorado borrowers must sit down with their families and struggle through the question of whether or not they can justifiably expect to pay back their worst bills (those debts either featuring high interest rates or adjustable interest rates bound to escalate plus loans which demand balloon payments or risk default) in a reasonable amount of time. What do your debts look like compared to the family financial situation of one year ago? Have they become progressively worse? Clearly, demonstrable headway that has been made in paying loans down should be seen as a sign that successive attempts at personal debt management may be enough to eliminate the majority of your problems while, in the same way, ever increasing debts are a reason to investigate bankruptcy or seek out professional assistance from your area of Colorado. Do you have any reason to believe that your income will greatly increase over the short term? Have you considered the overall financial free fall otherwise seen by most aspects of the Coloradan economy and the status of the American economy as a whole? If your motivation for believing the resolution of all debts shall come from some preyed upon inheritance or similar windfall, we strenuously counsel suspicion and a clear headed maintenance of resolve. You have no idea how many Colorado citizens we have corresponded with who let their debts fester while vainly waiting on a miracle only to end up declaring bankruptcy after their credit rating had been unnecessarily ruined (even worse than if they had gone bankrupt in the first place) and family morale irreparably harmed.

It’s easy enough to recognize your problems when you have bill collectors breathing down your neck and even the minimum payments seem beyond hope of remuneration. Once consumers realize that they can’t depend on their own incomes to better their own situation – no matter the attempts at controlling spending and hewing to a budget – it’s a simple step toward bankruptcy. However, for those Colorado borrowers who have not yet reached rock bottom, who still think they may be able to climb out of debt burdens on their own, it may be surprisingly difficult for consumers untutored in the complexities of finance to understand just how potentially dire their debt circumstances may be. Any Coloradan resident with unsecured debt obligations in the amount of ten thousand dollars or greater needs to give serious thought to employ some debt solution program, but, still and all, this is still not necessarily the time for bankruptcy. For this reason, your authors advise using one of the debt calculators online to attempt some more accurate estimation of your payment time lines and how much you would end up paying in compound interest over the duration of your various debts. Even then, if you still have trouble with the math (and credit card companies have little reason to simplify this process), you may wish to talk with one of the debt management or debt settlement companies that offer free consultations to see what they would suggest.

Once again, in many situations, these debt relief firms are likely to say that utilizing the bankruptcy protection of federal and Colorado law would be the most beneficial alternative. Successfully undertaken, Chapter 7 bankruptcies could liquidate all applicable revolving debts – credit card accounts primary among them – and your authors understand how very attractive that scenario must seem. Discharged obligations are the cherry on the cake of bankruptcy protection, but there are other benefits above and beyond the potential of dissolution of legal debts much as that aspect garners the headlines. In Colorado, as we have mentioned, merely filing the initial documents for Chapter 7 or Chapter 13 bankruptcy declaration will force all creditors to halt their attempts toward debt collection even if court actions had already been begun to garnish wages or repossess vehicles. Indeed, even those assets recently reclaimed by the collection agency will be (temporarily, depending on the Colorado trustee ruling) returned by the lender following a bankruptcy petition. In the same way, utilities that had been turned off because of faulty payments will be immediately restored, and foreclosure proceedings for residences will be suspended for the time being. For borrowers who believe their mortgage company or other lenders acted in poor faith or had even committed out and out fraud but were unaware of how to alert authorities or afford proper lawyers, this time and avenue toward the courts should alone be worth the bankruptcy proceedings. It’s especially difficult to fight multinational corporations when your power has been shut off, and the Colorado justice system will be allowed additional time to study and consider any borrower claims.

At the same point, much as Chapter 7 bankruptcy protection can do grand things for the lucky Colorado consumer, it’s certainly not the savior to every borrower. Even if you are accepted into the program, you will find that dollar one of many sorts of debts – for some individuals and families, perhaps even the majority of your debts – will not be affected in any way. Secured debts such as home mortgages and car loans, presuming you wish to maintain the possessions that these debts are attached to, will be essentially left alone although the consumers will be asked to reaffirm these obligations with the original lenders. Student loans, for these purposes, will be considered another sort of secured debt since legislation pushed through congress in the late 1980s ever after disallowed the discharge of all education loans in Colorado and throughout the country. Furthermore, borrowers should not expect any funds that are owed for familial debts like alimony or child support to be done away with, and, for that matter, all debts handed down by the government or courts (from penalties to taxes resulting from criminal misdeeds) of America or Colorado are similarly rendered invulnerable. As another element to consider, should the debts have been co-signed, the other party may be held liable for the entirety of the obligation. Considering the limited debt liquidation available even from successful Chapter 7 bankruptcies, one can’t presume the program shall best aid each consumer problem.

More to the point, there is also no guarantee that Chapter 7 protection will even be made available to every Colorado borrower that genuinely seeks an elimination of their burdens. Once a petition is filed for Chapter 7 debt liquidation, the court decides on whether or not the potential for unsecured loan discharge will be deserved. Should the Colorado court trustee decide otherwise, the borrower will be deemed eligible for Chapter 13 bankruptcy debt adjustment program which – while still forcing a temporary stay of collection that may be of sufficient help for truly needy consumers – demands a monthly payment to the trustees which the courts shall then distribute among the assembled lenders. Unlike the Chapter 7 program, even credit card bills will be largely satisfied by the original borrower under Chapter 13 protection, and the courts shall determine a budget (alongside the budgetary guidelines predetermined by the Internal Revenue Service according to their, shall we say, somewhat fantastical expectations about Colorado living expenses) that the household shall have to survive under for the sixty month period of repayment. In this way, aside from the temporary end to bill collector harassment, Chapter 13 will be not much more effective than any personal attempt at debt relief, but the programs legal restrictions could prove far more damaging should the court unfairly decrease your actual expenses or should your household earnings falter during the time of repayment.

There are other forms of bankruptcies, the different Chapter applicable under Colorado law range from those dealing with family farms to actual municipalities, but virtually every borrower shall only have to concern themselves with Chapter 7 or Chapter 13 protections. Really, since the Chapter 13 budgetary guidelines are so strict and the benefits so small, consumers in Colorado should only knowingly enter Chapter 13 when they have a tax obligations that they’re otherwise unable to resolve or secured (mortgage, auto loan, investment) loans that are in jeopardy of default but which they believe they should be able to repay given reaffirmed terms. As happens, most every borrower that goes into Chapter 13 protections only does so because the Colorado trustee – following the directives of the 2005 congressional alteration of the US bankruptcy code – finds the individual or couple declaring bankruptcy earns too much money. The recent code changes examine each bankruptcy petition in terms of the filers gross income as compared to the median income of their state of residence. For consumers filing in Colorado, this means that a single borrower must have less than forty two thousand in earnings according to recent census information. A Colorado household with two members would have to earn less than sixty thousand, three members would need less than sixty four thousand, four members would need less than seventy five thousand and so on. Understand, beyond simple tax records of earnings, that the formal stipulation does not allow the Colorado trustee to look at the filers’ debts but only their incomes, and borrowers who petition for bankruptcy without properly checking their figures against the median income of Colorado residents could be in for five desperate years.

The legislation of 2005 did more than simply make it more difficult to enter Chapter 7 debt elimination programs, of course. There is so much misinformation swirling around the recent changes that many of the Coloradan citizens we have spoken to are falsely convinced that bankruptcy protection which would liquidate credit card bills no longer even exists. As we have written, presuming borrowers pass the income regulations, Chapter 7 protection could be a salvation for the right filer, but, still and all, further hurdles have been erected. The documentation requested from all debtors upon finishing their petitions – from expense receipts to half a years worth of income evidence – has become far more challenging for ordinary citizens who have little time to go tracking down paperwork. Also, borrowers will be forced to take a credit counseling course before their bankruptcy will first be considered and, again, before their bankruptcy will be discharged. Not only will the interested consumers have to pay the not inconsiderable costs from their own pockets, they may have to travel some ways from their area of Colorado just to find a training course certified by the federal government. For many debtors, especially those who most need the assistance of bankruptcy protection, the time required by these various new obligations and the initial costs involved are more than they could easily bear. Frankly, once the charges for the courses are put together with the governmental fees and the truly significant funds demanded by the attorneys – more than ever, after the paperwork grew exponentially more difficult following code alterations, attorneys experienced in Colorado bankruptcy law are needed to ensure not only that borrowers find the best representation but also that they shield themselves from fraud charges following documents mishandled from laziness or neglect – personal bankruptcy could be out of reach just because consumers needed the protection too much.

There is still more elements to be considered for any Colorado borrower considering bankruptcy. Either form of debt protection thoroughly harms credit ratings and F.I.C.O scores for years afterwards, up to a decade in the worst possible case, and filers should expect interest rates approaching twenty percent for vehicle loans or whatever other credit accounts they could land. Even more troubling, Chapter 7 bankruptcies, even presuming the trustee should agree that the case should go forward (and presuming the debtor could afford to declare bankruptcy in the first place), essentially guarantees that the courts are now in charge of the filers personal possessions. As long as debt elimination bankruptcy has existed in the United States, the assets of those borrowers accepted into what became known as the Chapter 7 bankruptcy were subject to forfeiture by the courts and eventual auction with the funds to be handed over the lenders whose burdens would be defaulted upon. However, previously, the courts only looked at the potential resale value of the household items when deciding what and what was not an asset while, currently, borrowers must now worry about their lives possessions being prized as according to their replacement value which renders most everything up for grabs.

Colorado borrowers declaring Chapter 7 are considerably more fortunate than their fellow citizens in this matter. Under Colorado state exemptions – as opposed to federal ones – residents filing for bankruptcy may vouchsafe household furnishings up to three thousand dollars, tools of trade up to twenty thousand, and two thousand dollars worth of art, music, collectibles, or hobby equipment. Compared to the national exemptions, the Colorado bankruptcy statutes should be seen as exceedingly generous. Furthermore, under the Colorado homestead exemption, residents filing for bankruptcy may keep their homes provided there is not more than sixty thousand dollars of equity as would be proven by recent appraisal (which should not be much of a problem given the current real estate market slowdown), and they’re also able to keep their automobiles as long as there is not more than five thousand dollars of equity from blue book pricing (which, for most any vehicle, should not be an issue at all). Furthermore, aside from the homestead, all of these Colorado exemptions would be doubled for married couples filing jointly. Also, though this is true for most of the nation, retirement plans (social security benefits, I.R.A, and most any pension) won’t be touched as well as most forms of public assistance including unemployment compensation and veterans benefits no matter how large the eventual funds may be.

Even though debtors filing for bankruptcy protection in Colorado are demonstrably better off than their counterparts throughout America, any consumers who remain curious about the option should keep in mind how quickly – regardless of the exemptions Colorado grants – the values of household possessions could grow depending upon the wrong trustee at the wrong time. Again, depending upon circumstances, Chapter 7 or, even, Chapter 13 bankruptcy declaration could be the right choice for a certain sort of Colorado borrower, but other alternatives should not be ignored. Admittedly, the depressed property values in Colorado, particularly the Denver and Colorado Springs areas, should effectively preclude mortgage debt consolidation for any borrower that wants to keep their family residence. Also, the Consumer Credit Counseling approach has recently come into question after the income profile of most consumer credit counseling companies showed that they accepted as much if not more from the credit card companies they were supposedly fighting against as they did from their debtor clients. When speaking with Coloradan borrowers that managed to liquidate their accumulated burdens without braving the potential household destruction of bankruptcy protection, the industry that comes up time and again as a success story has been debt settlement.

After employing a certified and experienced debt settlement negotiator to use the very threat of Chapter 7 debt elimination against the lenders, these counselors regularly induce representatives of the credit card companies to cut the accounts owed by as much as fifty percent with minimal effects toward the borrowers’ credit ratings. Nothing comes for free, of course, and the debt settlement companies shall still insist upon an eventual repayment of the lingering unsecured balances in less than five years. Obviously, the debt settlement firms also have little assistance to offer with those loans attached to neither collateral nor any governmental protections. Nevertheless, considering the minimal upfront costs and the limited damage done to credit reports and F.I.C.O scores from a successful debt settlement negotiation (as well as the long list of satisfied Colorado debt settlement clients we have corresponded with over the past year), your authors would be remiss if we did not urge every potential filer for bankruptcy protection to at least have a chat with a local debt settlement professional. Even if your area of Colorado doesn’t have a debt settlement specialist easily obtainable in person, there is any number of relevant professionals available from internet sites throughout the web. So much of financial analysis ends up being conducted remotely, in any event, and, as long as the Coloradan client researches the online firm they wish to talk with, there should not be any more fear to web sites than from unfamiliar store fronts. It’s still likely, even probable, that bankruptcy protection will be the best possibility for you and your family, but, as long as debt settlement continues to thrive in Colorado, there is no reason not to explore other solutions.

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