The state of Colorado provides consumers with two types of bankruptcy options — Chapter 13 bankruptcy and Chapter 7 bankruptcy.
Chapter 7 bankruptcy is often called the “fresh start” solution to unmanageable debt problems. Some people also refer to it as “straight bankruptcy.” Under the right circumstances, Chapter 7 bankruptcy might be the best solution for individuals and businesses that simply cannot repay their debts.
How Colorado Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy is designed to eliminate most or all of your unsecured debts. Unsecured debts are debts like credit cards, vehicle loans, medical debts, mortgages and so forth. If you absolutely cannot pay these debts, then Chapter 7 bankruptcy may be an option for you.
With a Chapter 7 bankruptcy filing, you will not have to make any payments toward those debts and you will not be required to set up a repayment plan with a court trustee. This is different from Chapter 13 bankruptcy, in which a repayment plan is required. For these reasons, you can understand how Chapter 7 bankruptcy got it’s “fresh start” nickname.
However, you also must understand that Colorado Chapter 7 bankruptcy is considerably more complicated than Colorado Chapter 13 bankruptcy.
For starters, you will have to meet certain income qualifications in order to qualify for Chapter 7 bankruptcy. If your income is higher than what Colorado law allows, then Chapter 7 will not be an option for you.
Additionally, certain debts cannot be erased in a Chapter 7 bankruptcy filing. Debts such as child support and back taxes you owe to the IRS are examples. Even with Chapter 7, you will be required to continue to repay those types of debts.
With Colorado Chapter 7 bankruptcy, you may be required to surrender the property if the creditor has not already foreclosed or repossessed it.
Finally, if you do meet the Colorado’s Chapter 7 income requirements, the court will appoint a Chapter 7 trustee to your case. Your trustee will review your Chapter 7 paperwork and oversee the selling off of any nonexempt property you own. Proceeds from the sale of that property will be used to pay debts the court does not allow you to discharge.
For these reasons, it is critical that your Chapter 7 bankruptcy paperwork be correct and complete. If it’s not, your filing could be delayed or rejected.
Chapter 7 Colorado advantages over Chapter 13 Colorado
Chapter 7 bankruptcy can offer certain several advantages over a Chapter 13 filing. Over all, Chapter 7 is cheaper than Chapter 13. This is because Chapter 13 requires a monthly payment plan for a period of up to five years.
Chapter 7 is usually faster than Chapter 13. Colorado Chapter 7 usually takes approximately three-to-four months, and rarely takes more than a year. This fast timeline allows you to begin rebuilding your financial future more quickly than Chapter 13.
Filing fees are also less expensive with a Colorado Chapter 7 bankruptcy.
If you think you might qualify for a Chapter 7 bankruptcy filing and have no hope of repaying your debts, give me a call at 720-605-4347 or click here to schedule a FREE consultation with me. Together, we will look all of your debts, your income and repayment history, and discuss your best options.