Bankruptcy Relief: Frequently Asked Questions

What is Bankruptcy?

Bankruptcy is a federal law used by debtors to obtain debt relief and reorganize their financial affairs. Bankruptcies are a necessary part of our free enterprise system.

Should I file bankruptcy?

Filing bankruptcy is a serious step, not to be taken lightly. For instance, if debtors owe only a small amount to a few creditors, it might make more sense to pay them through a credit counseling service. Bankruptcy might be necessary however, under certain situations:

• Do you have large credit card balances, and cannot meet minimum installment payments?

• Is there a pending or threatened foreclosure, garnishment, or repossession?

• Are you borrowing from one credit card to pay another?

• Are you swamped by uninsured medical bills or judgments?

• Do you need a “fresh start” to relieve financial stress from divorce, layoff, medical problems?

What types of Bankruptcy are there?

Chapter 7 liquidation is the most common form of bankruptcy. It provides immediate debt relief, stops creditor harassment, garnishments, and collection lawsuits. In theory, your property is supposed to be sold by a trustee in a Chapter 7. However, this usually is avoided because debtors are entitled to exemptions, which protect most, if not all, of their property from liquidation. Under Chapter 7, no further payments are needed, unless you want to redeem certain secured or nonexempt property, or reaffirm a debt. However, the new law will require some debtors to use Chapter 13 rather than Chapter 7 to pay some of their debts, if they meet certain income requirements, known as the “Means Test”.
Chapter 13 repayment plans will stop foreclosures. The plan will give you a chance to catch up your mortgage and other debts which require repayment, such as child support or tax obligations. It also might lower the amount you have to pay on old auto or furniture loans. Under a Chapter 13 Plan, you agree to catch up, by paying a monthly amount you can afford, to a trustee, for a minimum of three years. If you have to file Chapter 13 because of the “Means Test”, repayments are for a minimum five years.
Chapter 11 is for business reorganizations.
Chapter 12 is for farmers. This firm does not provide assistance in Chapter 12.

Can I keep or surrender my home, car and other possessions?

Generally, debtors may keep their home, motor vehicles, and other possessions after filing bankruptcy, if they are current in their payments, and certain exemption levels are satisfied. If you are behind in your payments, there are still methods to help you keep these properties. In some instances, you might choose to surrender properties to your creditors or the trustee and avoid further liability to pay for these properties. Careful planning with an attorney will maximize the end result.

I own a small business. Can I keep it?

Generally a Debtor may continue to operate a small business after filing bankruptcy. Careful pre-filing planning with your attorney might be necessary.

Are there debts I can not discharge?

At the end of your case, a disharge is granted to release from your debts. However, certain obligations are automatically not discharged. These include spousal maintenance, child support, recent income taxes, student loans, criminal fines, injuries caused by DUIs, and in some cases, homeowners' association dues for up to six months after a foreclosure. Other debts are not discharged if a complaining creditor can show he or she meets certain criteria (such as fraud, recent excessive credit purchases) to justify a denial of discharge. Usually these issues can be anticipated by your attorney, and may require some pre-bankruptcy planning.

What is Pre-Bankruptcy Planning?

Sometimes debtors can arrange their affairs in a legal manner to ensure that after the bankruptcy is filed, they will emerge with the most financial well being possible. A good attorney should be able to recognize when such preliminary planning steps are beneficial.

How do I choose an attorney?

Most competent attorneys experienced in Bankruptcy can evaluate your situation and advise you as to the best solution. It is ethically and legally questionable whether attorneys may offer no cash down bankruptcies, so be wary of such attorneys. If personal service is important to you, ask whether a prospective attorney uses staff people to fill out schedules, or to return your phone calls, instead of handling your situation personally.

What are your qualifications?

Charles Lilley has more than 25 years bankruptcy experience. Our attorneys and staff will also work with you to provide you personal service. We understand how the system works and have positive relationships with the courts, the trustees, the tax collectors, and even the attorneys who represent your creditors. We also pride ourselves in our personal attention to your needs.

How soon can you file my bankruptcy?

You will need to receive a certificate of financial management from a court approved credit counseling company at least one day before we can file your case. To locate ones approved for Colorado, click here. Counselors are available online, by phone, and in person. We recommend you call us to make an appointment with an attorney and verify which documents you need to bring to that appointment. An emergency filing to stop a foreclosure or garnishment can be made the same day you meet with us, but normally a minimum of a few days is needed for you to obtain necessary information, and for us to review and input it. There are certain pre-bankruptcy planning strategies in which it is wiser to delay filing.

How long does the bankruptcy process take?

For Chapter 7s, once the filing is made, an “automatic stay” prevents further collection activity against you, with a few exceptions, such as child support proceedings. You will have a creditors meeting the following month, and you will get your discharge within three months of the creditors meeting. For Chapter 13s you will have a creditors' meeting and a plan confirmation meeting. Once your plan is confirmed, you will be required to make monthly payments to the Chapter 13 trustee for a minimum of three years, maximum five years, and receive your discharge upon completion of your payments.

For either chapter 7 and chapter 13 you will have to get a second certificate — known as a financial education or debtor education certificate — from one of the court approved credit counseling companies proving you took a class (online, by phone, or in person). We will file that certificate with the Court for you.

How will this affect my credit rating?

The filing will be reflected on your credit reports for ten years. If you maintain stable employment and credit after bankruptcy, you will see new credit opportunities within two years. Some car dealers have special programs for debtors, but you can expect to pay higher interest. FHA home loans are possible two years after your discharge.

Since the new law, some creditors are receiving new credit offers right after their creditors' meeting.  After your bankruptcy, you may need to notify the credit bureaus of your filing and monitor your credit reports to ensure that the creditors properly report your post-bankruptcy status. You can get one free copy of your credit reports annually here.

What will happen during my initial consultation?

We will provide you with certain required disclosures, if you have not received them yet. You will be asked about your financial circumstances, and we will explain your options. If you are husband and wife, we strongly encourage both of you to come to the initial consultation, even if only one of you plans to file. You will be provided with a checklist of documents and information to gather, and be directed to a credit counseling service, which is required under the new law.

What do I need to bring to my initial consultation?

You will need to produce a list of your creditors (name, address, amount owed, when was debt incurred, and for what purpose), which is useful, but not required for the first meeting. We will need to verify your list against your credit reports which you can download for FREE here. Also bring your last seven months of pay-stubs, and last four years tax returns. It is usually helpful to determine a value for your motor vehicle(s) and bring a print out of the value. Also review the list of the requirements under the new law.

How much are your fees?

Due to the changes in the Bankruptcy laws, fees are more variable, based upon individual circumstances. There is an initial consultation charge of $100.00, which will be applied to the entire fee if you decide to retain us. We will explain our fee structure during this initial consultation, and probably will be able to anticipate a flat fee, and it will be determined after we review your documentation.

What about the new bankruptcy law?

Read this to learn more.

I want to get started. What next?

To make an appointment with Charles Lilley & Associates call us at 303-293-9800.

Under the new law, Attorneys may not give any debt relief advice over the phone to anyone without first providing certain written disclosures. If you would like to receive those disclosures, call 303-293-9800 or e-mail us here. If we e-mail the disclosures, you will be required to send us a receipt before we can answer questions over the phone.

The general information contained herein may or may not be appropriate for you, and laws sometimes change. Before applying anything you read to your personal or business situation you should contact an attorney.

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We can help you file for bankruptcy under the Bankruptcy Code. All Rights Reserved.

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