Frequently Asked Questions
When should I consider filing for bankruptcy?
You should consider filing for bankruptcy if you have been sued by a creditor, have been served a summons and complaint for debt collection, have had your wages garnished, have had your bank accounts garnished, or have accounts in collection. Further, if you are facing the foreclosure of your home and owe more on the home than it is worth, if your home was foreclosed and there was a deficiency balance on your mortgage(s), if you are experiencing (or have experienced) a business failure or loss of income, unemployment, unmanageable medical bills or other unforeseen expenses beyond your ability to pay, bankruptcy may be an option for you.
What are some of the benefits of filing for bankruptcy?
One of the benefits of filing for bankruptcy includes the automatic stay under the Bankruptcy Code, which generally stays collection efforts of your creditors, including wage garnishments, bank account garnishments, collections, lawsuits, and foreclosures. Some creditors in bankruptcy may obtain relief from the automatic stay, however. CR&L can advise you on your particular situation. Another benefit (and the goal of personal bankruptcy cases) is to obtain a discharge of your debts and a fresh start. Not all debts are dischargeable under the Bankruptcy Code. CR&L can review your debts and analyze which debts may not be dischargeable. Another practical benefit of filing for bankruptcy is you can answer your phone again! Some alternatives to filing for bankruptcy are debt management, debt consolidation, and out-of-bankruptcy workouts.
Will filing for bankruptcy affect my credit?
Yes, for up to ten years. However, many people who file for bankruptcy already have damaged credit. Filing for bankruptcy in these situations presents an opportunity to put a public burial to your debts, to obtain a fresh start with your finances, and to rebuild your credit. Others may have good credit going into bankruptcy, but due to looming judgments, loss of income, or other circumstances, they may need to file for bankruptcy anyway because they are insolvent going forward (unable to pay debts as they become due).
Can I keep my house in bankruptcy?
If there are consensual liens on your property, such as first mortgages, home equity lines (HELOC’s), and other consensual deeds of trust, these do not go away as a result of filing for bankruptcy. Provided you keep your payments timely and current, you might be able to keep your house in a Chapter 7 or Chapter 13, unless you have non-exempt equity in the house that would prompt a trustee to sell it (or you might have to account for that equity in a Chapter 13 plan). At CR&L, we can help you to figure out what your applicable homestead exemption is and provide you with the proper advice as to your residence. Non-consensual liens, such as judgment liens, can be avoided in a Chapter 7 or Chapter 13 case to the extent they impair your homestead exemption. CR&L will guide you through the numbers to see whether, and to what extent, you can eliminate judgment liens that may have attached to your home.
Certain junior liens may be “stripped” off your home in Chapter 13, and we help provide you with the necessary legal advice to determine whether it would be more appropriate to file a Chapter 13 case in Colorado for this reason, even if you qualify to file a Chapter 7 case.
In addition, if you are in arrears on your mortgage(s), Chapter 13 bankruptcy might be a good option to be able to “cure” the arrearage and keep the home.
Can I keep my car in bankruptcy?
If your car is not financed (you own it free and clear), you might be able to keep the car depending upon the applicable motor vehicle exemption that applies in your case. We help our clients figure out what the applicable exemption is, and whether it is feasible to keep the car or not. Under the Bankruptcy Code, the applicable exemption is not always easy to figure out. You may have moved from a different state to Colorado within the last couple of years. Different states have different exemption laws, and some have “opted out” of using the federal exemption laws provided in the Bankruptcy Code. CR&L will analyze your applicable exemptions so you know what to expect before the case is filed. Many people are able to keep their cars in Chapter 7 and Chapter 13. CR&L will also advise as to whether keeping the car is a good financial decision.
If your car is financed, in addition to any motor vehicle exemption issue, you might have an issue with your lender regarding reaffirming the debt on the car. Some lenders insist that you reaffirm the debt in order to keep the car. CR&L will explain to you the reaffirmation process.
In Chapter 13, many people can keep current on their car payments outside of the Chapter 13 plan. In addition, in some circumstances, depending on the timing of when you purchased your car, you might be able to “cram down” the secured lender’s debt to the value of the car. Chapter 13 might also provide a way for you to cure any arrearages if you were behind on your car payments going into the bankruptcy.
Does my small business need to file bankruptcy, or do I?
Many people call us thinking they need to file bankruptcy for their small businesses. Often a personal bankruptcy is more appropriate if the principal of the business has personally guaranteed the debts. CR&L will assess the situation and help you make that determination.
Do both my spouse and I have to file bankruptcy together?
No. We will help you figure out who needs to file bankruptcy if you are married. In some cases, it is better for only one spouse to file a bankruptcy case.