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No one wants to be stuck in a cycle of overwhelming debt.
For Aurora residents struggling with heavy debt burdens, Chapter 7 bankruptcy can be the quickest and most effective way to discharge debts and start over.
It can be confusing to distinguish between the different types of bankruptcy and to know when it’s appropriate to file for it.
If you’re still unsure whether you need to consider filing bankruptcy, here are some signs to look out for that could indicate whether or not you should seek the services of a bankruptcy attorney.
If any of these signs are true for you, it may be time to look into hiring an Aurora Chapter 7 bankruptcy lawyer.
We understand that most people considering bankruptcy fell into debt through no fault of their own. One visit to the hospital can lead to uncontrollable medical debt and often does. The point is that bankruptcy is not a sign of failure or something to be embarrassed by. Rather, it’s essential a program established by the federal government to give everyone a fresh financial start if they need it.
Before we explain Chapter 7 bankruptcy, it’s important that you understand that there are two different types of debt- secure and unsecure. As you go through the bankruptcy process, you may hear your Aurora area bankruptcy attorney refer to “secured” and “unsecured” debt, but not everyone knows what that means.
Secured debt is backed by some form of collateral, so the lender can recoup its losses if the debtor refuses to pay. A common example of secured debt is a mortgage. When you sign a contract with a mortgage lender, you are essentially using the house that you are buying as collateral for the debt. If you miss too many mortgage payments, your lender will then repossess (or foreclose on) your house for nonpayment. Interest rates on these types of loans are usually lower because the risk is lower for the lender.
Unsecured debt is not backed by collateral. Credit cards and medical bills are considered unsecured debt. For unsecured loans, lenders issue funds based solely on the borrower’s “credit worthiness” and the promise to repay. Because companies rely on late fees and interest payments to discourage defaults, they are taking on more risk and can charge higher interest rates.
Whether a debt is secured or unsecured is a big part of the discussion surrounding personal bankruptcy. And whether a bankruptcy petitioner in Aurora should file Chapter 7 or Chapter 13 bankruptcy will depend on how much secured or unsecured debt that petitioner needs to discharge.
Chapter 7 bankruptcy, the most commonly filed bankruptcy case in Colorado, is often referred to as liquidation or clean-slate bankruptcy because most unsecured debts can be eliminated (or discharged) if specific income thresholds are met. In short, medical bills, credit card balances, and other unsecured debts can be discharged relatively quickly. Most Chapter 7 bankruptcy cases last only 4 to 6 months from start to finish.
However, it’s important to note that student loans, alimony, child support payments, and some tax debts generally cannot be discharged during Chapter 7 bankruptcy. When you reach out to our experienced CO Chapter 7 bankruptcy attorneys, we will review your financial situation, determine if you qualify for Chapter 7 protection, and help you file a bankruptcy petition if it is in your best interests.
There are plenty of myths and negative stigmas surrounding bankruptcy, particularly Chapter 7. You may have heard that all of your possessions will be sold off to pay your debts. You may have also heard that your credit will be permanently damaged or that you’ll never qualify for a home or car loan if you file for bankruptcy. The fact is that there are numerous exemptions when filing for bankruptcy, and most people keep their homes, vehicles, and other personal property while simultaneously rebuilding their credit.
It’s important to remember that bankruptcy is a tool to help you get out of debt, not a punishment.
That’s not to say that filing for bankruptcy is easy. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which reformed the process for filing for bankruptcy. Before that, practically anyone, rich or poor, who wanted to could file for Chapter 7 bankruptcy, leading many unethical people to fraudulently file for bankruptcy to avoid paying a debt.
These days, thanks to BAPCPA, anyone who wants to declare bankruptcy under Chapter 7 must first complete and pass the Colorado means test, which determines whether a debtor’s monthly disposable income is too high to justify such an extreme debt relief measure. Once you’ve proven to the court that you lack the “means” to meet your obligations, you’ll pass the “means test” and may go ahead and file for Chapter 7 bankruptcy.
The means test factors include:
If you’re unsure whether or not you qualify for Chapter 7 bankruptcy, our Aurora Chapter 7 bankruptcy attorneys can go over your financial information and work with you to determine your eligibility during your free case consultation.
Whether it’s from an unexpected medical emergency, a loss of income, high-interest credit card debt, or the slow road to recovery from a natural disaster, financial hardship can overtake anyone in an instant without warning. If you can relate to any of the above, you may qualify for Chapter 7 bankruptcy.
Bankruptcy is a tough decision for anyone to make. You should know that you don’t have to make that choice alone. Our Colorado debt relief lawyers offer a free case consultation for any Aurora resident who is considering pursuing Chapter 7 or Chapter 13 bankruptcy as a debt relief option.
You have options available to you for debt relief. At our firm, our team of knowledgeable legal professionals is backed by decades of experience, and we are ready to help you determine which option is the right solution for you. Contact us today to begin pursuing financial freedom.