What Does Bankruptcy Do?
Bankruptcy gives you a fresh start. Even though you sincerely promised to pay your debts, your medical bills and all your credit card charges, you no longer have the same job or money in the bank for a rainy day. Now you have barely enough to pay for the basics like food, clothing, and shelter. Collectors are calling you constantly, and there's no understanding -- just unreasonable, persistent, and rude demands for money that you don't have. How can filing bankruptcy help you?
Filing bankruptcy stops all the phone calls and threatening letters. It stops the lawsuits; it stops the garnishment of your wages. The foreclosure of your home stops and the repo man stops looking for your car. You can stop worrying about it all. Upon the filing of bankruptcy, a court order called the automatic stay stops all your creditors, their collection agents, and their attorneys. Filing bankruptcy gives you a debt relief order, which forces your creditors to stop and wait for the bankruptcy court to issue orders.
Upon filing for bankruptcy, you have to list all of your property and its value. You will also have to list all of your creditors, that is, all the people and companies to whom you owe money. You will have to list your friends and family too, if you owe them money. You have to list the IRS and Colorado Department of Revenue, if you owe taxes, even though those debts won't be discharged. You also have to list your student loans, although you'll still have to pay them.
When filing bankruptcy, you will also have to reveal what your income is now, and what it has been in the recent past. Other important recent financial transactions will have to be listed like what lawsuits have been filed; which creditors you have been paying; whether you have sold, given, or transferred property recently; where you have lived; and what names you have used.
After filing for bankruptcy, you will have to attend a creditors' meeting. At that meeting, the trustee will ask you questions to make sure you have properly identified yourself and that you are eligible for a bankruptcy discharge. Then the trustee will make sure that the information you have provided is accurate. In a chapter 7 bankruptcy, the trustee is mostly interested in finding non-exempt assets; that is, assets that are not protected, such as an unpaid tax refund from the IRS. In a chapter 13 bankruptcy, the trustee wants to know whether you will be paying all of your disposable income to your creditors.
At the end of the day, you will get a bankruptcy discharge of your debts. In chapter 7 bankruptcy, all debt will be discharged except taxes, student loans, divorce and family support debts, and debts arising from criminal cases. In chapter 13 bankruptcy, all non-dischargeable taxes and family support will be paid by you, other divorce related debt will be discharged, and all debt except student loans, criminal liabilities, and secured debt (unless you surrender the collateral to the lender) will be discharged.
Filing bankruptcy is the last resort, but bankruptcy is there when you need it. When you need it, it's worth the effort. You'll get a fresh start and have a life after bankruptcy.
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The statements of law made here are general statements of law, effective at the time published and subject to change from time to time. These statements are not intended, nor may they be construed, to be applicable to any particular set of factual circumstances nor to any particular person. I recommend that all readers seek the assistance and advice of an experienced bankruptcy lawyer for guidance in their particular circumstances.
© Copyright 2013 David C. Hoskins, licensed Colorado lawyer