Frequently Asked Questions About Bankruptcy
At George T. Carlson & Associates, we believe it is important for our clients to understand their bankruptcy options so they can make informed decisions. Below are some common questions about bankruptcy and our brief answers. Contact us to schedule a free initial consultation with an experienced bankruptcy attorney.
Why File Bankruptcy?
Bankruptcy is designed to assist debtors who are unable to pay their debts as they become due. By seeking the protection of the bankruptcy court, individuals and businesses can avoid having to pay some or all of their debts and obtain a "fresh start" free from the burdens of such debts.
Will Filing Bankruptcy Stop Debt Collection Activities?
The filing of a bankruptcy petition immediately stays or halts foreclosures, repossessions, wage garnishments, lawsuits and all other actions to collect debts or property, with some exceptions, such as actions to establish, modify or collect alimony, maintenance or support; to prosecute criminal actions; to perfect purchase money security interests; to evict tenants when a lease has expired; and to collect from guarantors or co-signers.
Will I Lose My Property?
Filing bankruptcy requires debtors to disclose all assets. However, certain property is protected by exemptions. When properly claimed, the debtor removes exempt property from the bankruptcy estate and keeps it. Therefore, the trustee may not sell the exempt asset without compensating the debtor for the exempt portion.
If you wish to keep an asset that secures a debt (e.g., a house or car), then you must keep current on your payments and keep the property insured. In order to keep a car or other personal property that secures a debt, you will have to reaffirm the debt or redeem the collateral.
Will I Have to Appear in Court?
The debtor must appear at a § 341 meeting of creditors and submit to examination under oath by the trustee and by any creditors appearing at the meeting. Most creditors, however, do not show up at the meeting to ask questions. The trustee holds the meeting of creditors approximately 30 to 40 days after filing.
At a Chapter 7 meeting, the trustee must orally examine the debtor to ensure that the debtor is aware of the consequences of seeking a discharge. The debtor must be made aware of the effect of bankruptcy on credit history, the ability to file under a different chapter, the effect of receiving a discharge and the effect of reaffirming a debt.
How Long Does Bankruptcy Take?
In a Chapter 7 bankruptcy, creditors have 60 days after the meeting of creditors to object to the discharge of the debtor. Once this period expires, unless an objection or complaint is filed, the court will issue a discharge order. After administration of assets, the case will then be closed. In a Chapter 13 case, the duration of the Chapter 13 plan must be a minimum of 36 months, but in certain cases, it will be extended to a maximum of 60 months.
What Are the Effects of Filing Bankruptcy?
The filing of a bankruptcy can be reported on your credit report for up to 10 years. The law does not prohibit denial of new credit or further extensions of credit to the debtor.
The law prohibits government agencies and employers from discriminating against a debtor solely because the debtor filed bankruptcy and/or did not pay a discharged debt. Accordingly, an employer cannot fire a debtor because of filing bankruptcy, nor can a state agency refuse to renew, suspend, revoke or deny a license because the debtor did not pay a discharged debt.
What Happens in a Divorce?
The cloud of bankruptcy often hovers over the breakdown of a marriage. If a couple has been having difficulty making ends meet during the marriage, a divorce places a greater strain on their finances. One or both parties may then file bankruptcy before, during or after the dissolution of marriage. Timing of the bankruptcy is very important requiring careful coordination between the bankruptcy and divorce lawyer.
Common Bankruptcy Terms Defined
- Asset planning: The process of planning to optimize the beneficial use and retention of assets prior to filing bankruptcy
- Assets: Property and rights that are owned by the debtor
- Consumer debt: Debt that is incurred by an individual primarily for personal, family or household purposes
- Creditor: A person or company to whom money is owed (for example, a credit card or mortgage company)
- Debtor: One who owes money (for example, a person who files bankruptcy)
- Default: Failure to comply with a contract, such as failing to make a payment when due
- Discharge: In bankruptcy, a discharge of debt makes it unenforceable by the creditor
- Disposable income: Income minus reasonable living expenses
- Exemption: In bankruptcy, a law that protects an asset from the trustee
- Foreclosure: When a secured creditor exercises its right to sell real estate that is collateral, due to a default
- Fraud: A misrepresentation that is used to induce a creditor to lend money
- Garnishment: A court order to a person or company that owes money to a debtor to pay that money to the debtor's creditor (for example, an order to the debtor's employer to pay a portion of his or her wages to the creditor)
- Liabilities: Debts and other obligations owed by the debtor
- Means test: A mathematical formula used to determine whether there is disposable income to repay debt
- Personal property: Property that is not real estate
- Real estate: Land and the improvements located on the land
- Repossession: When a secured creditor exercises its right to take possession of personal property collateral due to a default
- Secured debt: Debt for which the creditor receives the right to repossess or foreclose upon collateral
- Trustee: In bankruptcy, a person appointed by the U.S. Justice Department to administer a bankruptcy; this person would be responsible for collecting nonexempt assets from the debtor, selling them and distributing the proceeds of those assets to creditors.
- Unsecured debt: Debt for which the creditor does not receive the right to repossess or foreclose upon collateral
Our bankruptcy lawyers are here to help you decide how best to proceed. Contact us today at our offices in Englewood, Colorado.
At George T. Carlson & Associates, based in Englewood, Colorado, we represent clients throughout Colorado, including Denver metro, and the cities of Aurora, Centennial, Denver, Greenwood Village, Highlands Ranch, Littleton and Lone Tree; and Adams County, Arapahoe County, Denver County, Douglas County, Elbert County and Jefferson County.
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