Millions of Americans file for bankruptcy each year, many of whom do so in Colorado. If you’re considering filing for bankruptcy, it’s essential to understand the process and what to expect.
In this blog post, we’ll outline the steps you need to take to file for bankruptcy in Colorado and the different types of bankruptcies available. So if you’re feeling overwhelmed by your debt and think bankruptcy might be the right solution for you, keep reading!
What Is Bankruptcy and How Does it Work?
Bankruptcy is a legal process that provides debt relief to individuals that are unable to repay their debts. When you file for bankruptcy, an automatic stay goes into effect, stopping creditors from taking any collection actions against you.
Signs You May Need to File for Bankruptcy
There are many signs to look out for to know when to declare bankruptcy. If you are constantly struggling to make ends meet, falling behind on your bills, or using credit cards to pay for necessities, then bankruptcy may be the right solution for you.
Other signs that you may need to file for bankruptcy include:
- Creditors are harassing you
- You are facing foreclosure
- You are struggling to make minimum payments on your debts
If you are experiencing any of these signs, then it is important to consult with a bankruptcy attorney to discuss your options.
Alternatives to Bankruptcy
Financial decisions should never be taken lightly, and filing for bankruptcy is no exception. Like with any important decision, it’s crucial to understand your options first.
Good alternatives to bankruptcy include debt settlement or credit counseling. However, you should always consult a financial advisor to pick the best option for you and your family.
You can also try consolidating your entire debt into a single monthly payment to save money on interest and pay it off faster.
Lastly, negotiating with creditors is always worth a shot. Though this can be a complex process, you can avoid bankruptcy if an agreement is reached at the end.
The Types of Bankruptcy
There are two types of bankruptcy that individuals can file: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This type of bankruptcy allows the court to discharge, or eliminate, certain types of debt. To qualify for Chapter 7 bankruptcy, the debtor must pass a means test. This test compares the debtor’s income to the median income in Colorado. If the debtor’s income is below the median, they will qualify for Chapter 7 bankruptcy.
Chapter 13 bankruptcy is also known as a reorganization bankruptcy. This type of bankruptcy allows the debtor to keep certain property types, such as a home or a car, and repay their debt over time. To qualify for Chapter 13 bankruptcy, the debtor must have a regular source of income, and their debt must be below a certain amount.
Filing for Bankruptcy in Colorado
If you are considering filing for bankruptcy in Colorado, you should always consult with a bankruptcy lawyer first to see if it’s the best option for you. In order to proceed, you will need to complete some paperwork and file it with the court. As part of the process, you will also be required to attend a mandatory credit counseling session and take a course on financial management.
If you wish to file for bankruptcy without an attorney, you can follow the steps below.
- Gather Your Colorado Bankruptcy Documents: You will need copies of your tax returns from the previous two years and your last 60-day pay stubs.
- Take a Credit Counseling Course: Learn more about the credit counseling course here.
- Fill Out the Bankruptcy Forms: You can download the forms free through USCOURTS.gov.
- Pay Your Filing Fee: Chapter 7 bankruptcy requires a court filing fee of $338. When your income does not exceed 150% of the poverty guidelines in Colorado, you can request a filing fee waiver.
- Print Your Bankruptcy Forms: Make sure to print all forms on regular, white 8.5″ x 11″ paper using black ink.
- File the Forms With the Colorado Bankruptcy Court: Here are your options for filing bankruptcy on your own in Colorado:
- Mail them to the court
- Submit them in person at the Denver courthouse
- File online using the I-File system
- Mail Documents to Your Trustee: You will be assigned a trustee after filing for bankruptcy.
- Take Another Course: Attend a debtor education course within 60 days of the 341 meeting.
- Attend Your 341 Meeting: Your creditors can attend this meeting to ask questions.
Bankruptcy & Its Effects on Your Credit
Unfortunately, filing for bankruptcy has consequences on your credit report as it stays on it for seven to ten years. This can make it challenging to get approved for loans and lines of credit in the future.
Rebuilding Your Credit Post Bankruptcy
However, bankruptcy doesn’t have to end your financial life. You can rebuild your credit by following the tips below:
- Apply for a secured credit card.
- Become an authorized user on someone else’s credit card.
- Apply for a small loan from a lending institution.
- Pay all bills on time.
- Check your credit report regularly to make sure there are no errors.
Sell Your House & Avoid Bankruptcy in Colorado
No one wants to be in a situation where they have to file for bankruptcy. However, should this be the case, we can help! Selling your house for cash can help you get back on your feet and avoid a hard hit on your credit.
At Favor Home Solutions, we buy houses as-is regardless of their condition. Our team will walk you through the entire process, ensuring we work under your preferred timeline so you can feel as comfortable as possible. We’ll provide you with a fair cash offer for your home so you can put money in your pocket as soon as possible. Contact us today!