CHAPTER 7 COLORADO BANKRUPTCY
Chapter 7 Bankruptcy is usually called “liquidation” bankruptcy. It is the most used chapter of bankruptcy and is usually over quickly, often within five to six months of filing your case. In Chapter 7 you must meet the income qualifications set out for your State and family size, called the “means test”. You will keep all property that is “exempt” and if you have “non-exempt” property it can be liquidated for the benefit of your creditors. Hiring a bankruptcy attorney, such as Wink & Wink, can help minimize your non-exempt property and ensure the process goes smoothly and that you lose little to no property at all.
Some of the current exemption amounts & categories in colorado
- – $75,000 equity in your home, $105,000 if you are over 60 or disabled.
- – $7,500 equity in your motor vehicles (per spouse for a joint filing), $12,500 each if over 60 or disabled.
- – $3,500 of household goods (per spouse for a joint filing), $2,500 of jewelry (per spouse for a joint filing), and $2,000 clothing (again, per spouse for a joint filing).
- – Any amount in a retirement plan.
- – $30,000 of “tools of the trade” used for business/gainful employment that is your primary source of income; but only $10,000 of “tools of the trade” used for business/gainful employment that is not your primary source of income.
At Wink & Wink we will provide you with pre-bankruptcy planning in order to maximize your exemptions under Chapter 7. There are many ways to protect your assets under the law and keep them even after filing bankruptcy.
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WHAT DEBTS ARE DISCHARGEABLE UNDER CHAPTER 7?
The following debts can be wiped out by a Chapter 7 bankruptcy:
- Personal loans
- Credit cards
- Repossession deficiencies (i.e. the amount you owe on your car after a repossession)
- Auto accident claims against you, except for claims resulting from driving while intoxicated
- Medical bills
- Many Judgments
- Business debts
- Negligence claims
- Certain tax debts
WHAT DEBTS ARE NOT DISCHARGEABLE UNDER CHAPTER 7?
The following debts cannot be wiped out by Chapter 7 bankruptcy:
- Debts incurred by fraud or false pretenses;
- Debts incurred by a false statement in writing (such as false credit application);
- Debts incurred by embezzlement or larceny;
- Spousal support or child support obligations;
- Debts incurred by willful and malicious injury;
- Debts resulting from death or personal injury by debtor operating a motor vehicle while intoxicated;
- Criminal fines and restitution;
- Income taxes for tax years less than 3 years ago and other “priority taxes” (i.e. taxes first due within three years of the bankruptcy filing and taxes assessed within 240 days of the bankruptcy, or which are unassessed but assessable when the case is filed, are priority claims which are not (subject to discharge.);
- Fines and penalties owed to a governmental unit;
- Student Loans
HOW ARE SECURED DEBTS IN CHAPTER 7 HANDLED?
A “secured debt” is one that gives a creditor the right to take a specific item of property if you don’t pay the debt, such as a home loan or auto loan. Under Chapter 7 bankruptcy, your personal liability towards the property may be discharged, but the lien on the property held by the creditor passes through the bankruptcy unchanged.
You have choices as to how to deal with your secured debts in Chapter 7 bankruptcy. First, you can “redeem” the asset. This means that you agree to pay the creditor the present value of the asset and you then keep the asset free from any further claims. Second, you can “reaffirm” the debt. Under this option, you agree to waive the discharge as to that specific debt, and you re-commit to continue to pay the creditor on the terms of the original agreement. Last, you can agree to “surrender” the asset to the creditor, freeing you of all responsibility for that debt.
At Wink & Wink, we can advise you on which option would be best for your specific secured debts, and help you in reaching any agreements with the creditors.
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WHO CAN FILE CHAPTER 7?
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which created a means test to determine who can take advantage of the protections of Chapter 7 bankruptcy. The means test applies only to individuals with mainly consumer, not business, debt.
You will qualify for Chapter 7 if your average income for the six months prior to filing (called your Current Monthly Income) is less than the median income for Colorado for a comparably sized family. If your income is above that amount, you may still be eligible subject to a complex formula determined using IRS guidelines and your personal financial information. Wink & Wink will help you to evaluate whether you qualify for Chapter 7 bankruptcy relief and will offer advice and strategies for you if you are “above median”.
If you have any further questions about Chapter 7 bankruptcy in Colorado, please contact Wink & Wink, P.C. today for a free consultation.