(Note: the following comments provide generalized comment on Bankruptcy law and procedure in Colorado and may not apply in all fact situations. They are not a substitute for consultation with an experienced attorney.)
There is much erroneous information circulating about the changes to bankruptcy laws that make people reluctant to use this important right to take control of financial lives and obtain a “fresh start”. These bankruptcy myths and misconceptions should be dispelled, so that you may allow us to assist you in considering whether bankruptcy is the right course of action for you in seeking debt relief.
The 2005 bankruptcy law changes prevent people from eliminating their credit card debt.
Fact: While an intent of the new law was to push many people into a chapter 13 repayment plan, the majority of people can still avail themselves of the simpler Chapter 7 form of bankruptcy and discharge their debts if their current income is not too high. Credit card debt relief is still available.
Filing a bankruptcy case will involve multiple court appearances and humiliating questions by my creditors.
Fact: To the contrary. About 30 days after filing the bankruptcy petition, you will have to attend a procedure known as the First Meeting of Creditors. The bankruptcy trustee will preside over this meeting and you will normally never appear before a judge. At the meeting, the trustee will inquire about assets, debts and other matters. While creditors will also be permitted to ask questions, they rarely attend and are usually limited to just a few. Your attorney will assist and guide you in this proceeding and assure that you are treated with respect and dignity. After this proceeding you normally will not need to return to court.
Employers or governmental agencies can discriminate against persons who file bankruptcy.
Fact: No, it is illegal for either private or governmental employers to discriminate against a person for filing a bankruptcy petition. This also applies to governmental units with respect to issuance of licenses (including drivers license), permits, student loans and similar grants.
You will never be able to obtain a Mortgage to purchase a home or get another car loan or lease if you file bankruptcy.
Fact: Not true. Most mortgage lenders will consider you for financing within 2 years after your bankruptcy case is closed, so long as you are otherwise qualified. Most auto lenders will grant you credit, but most likely at a higher interest rate. There is absolutely nothing in the bankruptcy laws which prohibit you from obtaining new credit after your case is concluded, either secured or unsecured.
If you file bankruptcy you will lose all of the money you have in your 401(k), IRA, or employer provided pension plan.
Fact: Both federal and state law protect 100% of the funds in any pension plan, which is qualified and exempt from taxation under the Internal Revenue Code. Be careful about choosing to withdraw funds from your retirement accounts prematurely, as you may create a substantial tax liability and penalties that are not dischargeable in bankruptcy.
A credit counselor or debt consolidation agency can reduce or eliminate your debts without the necessity of a bankruptcy.
Fact: Not always. Most credit counselors are really working for your creditors, not you. While they may be able to reduce your monthly payments or principal balance, they never can completely eliminate the debt and your creditors are under no obligation to work with them. Only bankruptcy can completely eliminate your unsecured debts and it does not require the consent of cooperation of credits.
I don’t need to file for bankruptcy since I have lost my job, my house is in foreclosure and I have few assets.
Fact: While you now may be unemployed, once you return to work your creditors will be able to garnish your salary of bank accounts. Further, if a return to work increases your family income above the local median income, you may be required to file a chapter 13 Bankruptcy requiring payments to the creditors for the next 3-5 years. So timing can be very important when considering bankruptcy.
If I’m already in foreclosure or have been sued for collection, its too late to file for bankruptcy.
Fact: Absolutely Not. Filing a bankruptcy case will stop all foreclosure and collection cases. Chapter 13 may give you the opportunity to catch up your missed mortgage and car loan payments over as much as 60 months. Only experienced and knowledgeable bankruptcy lawyer can determine if this is possible in your situation.
If I file for bankruptcy, all of my neighbors, friends and family will find out.
Fact: Unless you are a celebrity or public figure that’s highly unlikely. While it is true that a bankruptcy is a public court proceeding, it is rare that anyone other than your creditors, their attorneys and the Court appointed Trustee will find out about it. There are no signs on your lawn, no one visits your home or workplace and there are so many filed that most newspapers don’t even take the time to publish them.
If I file, I will never get credit again.
Fact: it is possible to rebuild your credit within months of filing bankruptcy. In many cases, clients report having an easier time obtaining credit after the bankruptcy freed them from so much debt.
If I file, I will lose my house, car, pension, IRA, or 401(k).
Fact: Because of several exemptions built into the bankruptcy law, most people who file for bankruptcy protection do not lose any property at all. In Colorado, these assets are generally exempt.
My debts are uncollectible because I am unemployed.
Fact: In Colorado, your creditor can sue you for up to six years and collect against you for another twenty years after that. An individual who is thirty years old will have to deal with the creditors until he or she is fifty-five years old. That is a long time. You have alternatives. Consider what filing Chapter 7 bankruptcy would do for you.
If I file, I will lose my job or not get a new job.
Fact: In most cases, employers will not find out about the bankruptcy unless you choose to tell them. Either way, employers are not allowed to fire or refuse to hire someone (or take other adverse action) for filing bankruptcy.
Myth: My bankruptcy will hurt my spouse’s credit.
Fact: When one spouse files for bankruptcy protection, his or her spouse’s credit is not affected.
Bankruptcy will not help me because I owe taxes.
Fact: While it is true that some taxes can not be discharged, other can be depending upon the type of tax and the amount of time that has passed since the taxes were filed and assessed. There are many rules that we will explain to you.
For further information regarding the bankruptcy process, click on any of the links on this page. Or contact us to arrange a free consultation with an experienced attorney, without cost or obligation on your part.
Considering filing for Bankruptcy or looking for Bankruptcy alternatives?
Contact our office to discuss your case, without cost or obligation at: 303-797-3311
Serving the entire south Denver, Colorado (CO) Metropolitan area, including Littleton, Englewood, Centennial & Aurora in Arapahoe County, Highlands Ranch and Castle Rock in Douglas County, Denver and south Jefferson County, Colorado. Evening and weekend appointments are available.