An Alternative To Bankruptcy In Colorado
Colorado’s debt per resident is approximately $1,953. According to the U.S. Courts, in 2020, there were a total of 7,803 bankruptcy filings in the District of Colorado. Out of these filings, 4,800 were Chapter 7 bankruptcies, 2,894 were Chapter 13 bankruptcies, and the remaining nine were Chapter 11 bankruptcies. In 2019, there were a total of 8,068 bankruptcy filings in the District of Colorado, including 4,980 Chapter 7 bankruptcies and 3,080 Chapter 13 bankruptcies.
Colorado’s Bankruptcy Laws
Bankruptcy laws in Colorado are governed by federal law, specifically, the Bankruptcy Code, which is part of the United States Code. However, Colorado has its own set of rules and procedures that apply to bankruptcy cases filed in the state. Here are some key aspects of Colorado’s bankruptcy laws:
- Bankruptcy exemptions: In Colorado, debtors can choose between the federal bankruptcy exemptions and the Colorado state exemptions. Exemptions allow debtors to protect certain assets from being sold to pay off their debts in a bankruptcy case.
- Means test: Debtors in Colorado must pass a means test to qualify for Chapter 7 bankruptcy. The means test is a calculation that determines whether a debtor’s income is below the state median income for their household size. If the debtor’s income is below the median, they are eligible to file for Chapter 7. If their income is above the median, they may still qualify if they pass a more complex means test that takes into account their expenses.
- Credit counseling: Before filing for bankruptcy in Colorado, debtors must complete a credit counseling course from an approved provider.
- Automatic stay: When a bankruptcy case is filed in Colorado, an automatic stay goes into effect, which stops most creditor collection activities, such as lawsuits, wage garnishments, and foreclosure proceedings.
- Trustee: In a Chapter 7 bankruptcy case in Colorado, a bankruptcy trustee is appointed to review the debtor’s assets and determine which ones can be sold to pay off their debts. In a Chapter 13 case, a trustee is appointed to oversee the debtor’s repayment plan.
- Discharge: At the end of a bankruptcy case, eligible debts are discharged, which means the debtor is no longer legally obligated to pay them. However, some debts, such as student loans and certain tax debts, cannot be discharged in bankruptcy.
Personal Bankruptcy and Business Bankruptcy: Know The Types
There are two main types of bankruptcy available for individuals and businesses: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, is available for both individuals and businesses. In a Chapter 7 bankruptcy, the debtor’s non-exempt assets are sold to pay off their debts, and most unsecured debts (such as credit card debt and medical bills) are discharged. However, some types of debt, such as student loans and certain tax debts, cannot be discharged in Chapter 7 bankruptcy. Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, is only available for individuals. In a Chapter 13 bankruptcy, the debtor proposes a repayment plan to pay off their debts over a period of three to five years. The debtor is allowed to keep their assets, but must use their income to make monthly payments to their creditors under the repayment plan.
For businesses, there are two additional types of bankruptcy: Chapter 11 bankruptcy and Chapter 12 Bankruptcy. Chapter 11 bankruptcy is available for businesses and individuals with a large amount of debt. In a Chapter 11 bankruptcy, the debtor proposes a reorganization plan to restructure their debts and continue operating their business. The plan must be approved by the creditors and the bankruptcy court. Chapter 12 bankruptcy is specifically designed for family farmers and fishermen who have regular income. In a Chapter 12 bankruptcy, the debtor proposes a repayment plan to pay off their debts over a period of three to five years.
Bankruptcy Chapters 7, 13 and 11 – What You Need to Know
Considering Business Bankruptcy? Keep These Things In Mind
If you’re considering filing for business bankruptcy in Colorado, here are some important things to keep in mind:
- Explore all your options: Bankruptcy should be considered as a last resort, so it’s important to explore all your options before filing. This could include negotiating with your creditors to work out a payment plan, selling assets to pay off debts, or restructuring your business operations.
- Understand the types of bankruptcy: As mentioned earlier, there are different types of bankruptcy available for businesses. Depending on your situation, Chapter 7, Chapter 11, or Chapter 12 bankruptcy may be the best option for you.
- Work with a bankruptcy attorney: Bankruptcy laws can be complex, so it’s recommended to work with a qualified bankruptcy attorney who can help you navigate the process and understand your options. They can also help you prepare and file the necessary paperwork, and represent you in court if necessary.
- Be prepared to disclose financial information: When filing for bankruptcy, you will need to provide detailed financial information about your business, including your assets, debts, income, and expenses. This information will be used to determine which debts can be discharged and how your assets will be liquidated or restructured.
- Understand the impact on your credit: Filing for bankruptcy will have a negative impact on your credit score and can stay on your credit report for up to 10 years. This may make it more difficult to obtain credit or loans in the future.
- Consider the impact on your employees: If you have employees, filing for bankruptcy can have a significant impact on their job security and benefits. It’s important to communicate with your employees and provide them with as much notice as possible.
- Plan for the future: While bankruptcy can provide a fresh start for your business, it’s important to plan for the future and take steps to prevent similar financial issues from arising again in the future. This may include implementing new financial management practices or exploring new business opportunities.
Are All Debts Discharged With Bankruptcy?
While bankruptcy can help discharge many types of debts, there are certain debts that cannot be discharged. These include:
- Certain tax debts: Some tax debts, such as recent income tax debts, may be dischargeable in bankruptcy. However, other types of tax debts, such as payroll taxes, cannot be discharged.
- Student loans: Student loans are generally not dischargeable in bankruptcy unless the debtor can demonstrate that paying back the loans would cause an undue hardship.
- Domestic support obligations: Debts related to child support or spousal support are not dischargeable in bankruptcy.
- Debts incurred through fraud or illegal activity: Debts that were incurred through fraud, embezzlement, or other illegal activity are not dischargeable in bankruptcy.
- Fines and penalties: Fines and penalties imposed by government agencies, such as traffic tickets or criminal restitution, are not dischargeable in bankruptcy.
- Debts owed to certain creditors: Certain types of debts, such as debts owed to a pension fund, debts owed to a homeowner’s association, and debts owed to a governmental unit for fines or penalties, may not be dischargeable in bankruptcy.
Impact on Credit Score and Ability to Get Future Loans
Filing for bankruptcy in Colorado can have a significant impact on your credit score and ability to obtain future loans. The impact on your credit score can depend on several factors, including your current credit score, the type of bankruptcy you file, and how much debt is discharged. In general, a Chapter 7 bankruptcy will have a more severe impact on your credit score than a Chapter 13 bankruptcy. This is because a Chapter 7 bankruptcy involves the liquidation of assets to pay off debts, whereas a Chapter 13 bankruptcy involves a repayment plan to pay off debts over a period of three to five years. A bankruptcy filing will remain on your credit report for up to ten years from the date of filing. This can make it more difficult to obtain credit or loans in the future, and can also result in higher interest rates and less favorable loan terms.
Are Tax Debts Included in Bankruptcy?
Bankruptcy can have different effects on tax debts in Colorado depending on the type of tax debt and the type of bankruptcy being filed. In general, income tax debts that are more than three years old and meet certain other criteria may be dischargeable in bankruptcy under Chapter 7 or Chapter 13. This means that the debtor would no longer be legally obligated to pay those tax debts. However, certain types of tax debts, such as payroll taxes and trust fund taxes, are not dischargeable in bankruptcy. These types of tax debts are considered “priority debts” and must be paid in full as part of a repayment plan in Chapter 13 bankruptcy. Additionally, filing for bankruptcy can have an impact on a debtor’s ability to discharge tax debts in the future. For example, if a debtor files for bankruptcy and does not properly file tax returns or pay taxes in a timely manner in the future, any resulting tax debts may not be dischargeable in bankruptcy.
What Happens To Your Assets?
Whether you will lose your home or car in bankruptcy in Colorado will depend on several factors, including the type of bankruptcy you file, the equity in your home or car, and your ability to continue making payments. In a Chapter 7 bankruptcy a trustee may sell non-exempt assets to pay off creditors. However, Colorado offers exemptions that may allow you to keep your home and car in a Chapter 7 bankruptcy. The amount of the exemption will depend on various factors, such as your age, your marital status, and the value of your property. If the equity in your home or car exceeds the exemption amount, the trustee may sell the property to pay off creditors. However, in most cases, you can keep your home and car by continuing to make payments on your mortgage and car loan. In a Chapter 13 bankruptcy you can keep your home and car by continuing to make payments on your mortgage and car loan through a court-approved repayment plan. The repayment plan will allow you to catch up on missed payments while continuing to make regular payments.
Statute of Limitations for Collections in Colorado
In Colorado, the statute of limitations for collections on most types of debt is six years from the date of the last payment or activity on the account. Once the statute of limitations has expired, a creditor cannot sue the debtor to collect the debt. It’s important to note that the statute of limitations may vary depending on the type of debt. For example, the statute of limitations for written contracts, such as credit card debt, is six years in Colorado. However, the statute of limitations for oral contracts, such as personal loans, is three years. Additionally, the statute of limitations may be extended in certain circumstances, such as if the debtor acknowledges the debt or makes a partial payment.
Cons of Bankruptcy in Colorado
While bankruptcy can be a useful tool for individuals and businesses struggling with debt, there are some potential downsides to consider. Here are some of the cons of bankruptcy in Colorado:
- Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score, which can make it more difficult to obtain credit in the future.
- Cost: Filing for bankruptcy can be expensive, and fees can vary depending on the type of bankruptcy you file and the complexity of your case.
- Public record: Bankruptcy filings are public record, which means that anyone can access information about your bankruptcy case.
- Loss of assets: In a Chapter 7 bankruptcy, you may be required to sell non-exempt assets to pay off creditors. This could include items such as property, vehicles, or other valuable possessions.
- Future borrowing: Even after your bankruptcy case is closed, it may be difficult to obtain credit or loans with favorable terms. Some lenders may view bankruptcy as a red flag and may be hesitant to extend credit.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Will You Regret Filing For Bankruptcy?
While bankruptcy can provide relief from overwhelming debt, some people may regret filing for bankruptcy for a variety of reasons. Here are some of the reasons why people may regret filing for bankruptcy:
- Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score, which can make it more difficult to obtain credit in the future.
- Stigma: Despite the fact that bankruptcy is a legal process, some people may feel ashamed or embarrassed about filing for bankruptcy, which can impact their self-esteem and overall well-being.
- Loss of assets: In a Chapter 7 bankruptcy, you may be required to sell non-exempt assets to pay off creditors. This could include items such as property, vehicles, or other valuable possessions.
- Future borrowing: Even after your bankruptcy case is closed, it may be difficult to obtain credit or loans with favorable terms. Some lenders may view bankruptcy as a red flag and may be hesitant to extend credit.
- Unforeseen circumstances: Sometimes, unforeseen circumstances can arise after filing for bankruptcy that make it difficult to maintain a fresh financial start. For example, job loss or unexpected medical expenses could put a strain on your finances and make it difficult to pay bills.
What Are Your Options If You Don’t Qualify For Bankruptcy?
If you do not qualify for bankruptcy in Colorado, you will need to consider alternative debt relief options, such as debt settlement. With debt settlement, a debt settlement firm negotiates with your creditors to reduce your debt and make it more manageable.
Learn more: What Are Your Options When You Don’t Qualify for Bankruptcy
Why Choose Debt Settlement?
Debt settlement involves negotiating with creditors to reduce the amount of debt that is owed, typically through a lump sum payment. One advantage of debt settlement is that it allows individuals to avoid the negative consequences of bankruptcy, such as a bankruptcy affected credit score, difficulty obtaining credit in the future, and the potential loss of assets. Debt settlement can also be less expensive and less time-consuming than bankruptcy.
It is important to note that bankruptcy can have serious and long-lasting consequences on your credit score and financial future.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt Is At Your Service
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328