One of the common points of confusion in Colorado bankruptcy law is the difference between insolvency and bankruptcy.
Because these two are similar concepts, they are often used together or interchangeably. Allow a Denver Bankruptcy Attorney to explain the proper definitions behind some of the terms involved is a first step toward turning your finances around, and starting to build your better future on a blank slate.
Definition of Insolvency
Unlike the legal proceedings involved in declaring bankruptcy, the term “insolvency” is a financial condition where your liabilities (debts) exceed the amount of money you use to pay them—your savings and income. In other words, insolvency describes the position you are in if you are unable to pay your bills, and fear falling further and further behind. The legal process of bankruptcy is the natural extension of being insolvent.
Definition of Bankruptcy
When one is insolvent, they may choose to initiate bankruptcy proceedings. While the types of bankruptcy for individuals varies somewhat due to your individual circumstances—Chapter 7 bankruptcy is considered liquidation bankruptcy while Chapter 13 bankruptcy is considered reorganization bankruptcy—the basic principles are the same. In effect, bankruptcy wipes your financial slate clean in order to get you back on your feet, and enables you to either satisfy or discharge your debts in a timely manner.
Unlike insolvency, bankruptcy describes an actual legal process which is initiated in federal district court. There is a small fee you need to submit with your bankruptcy petition, and numerous steps which include taking a detailed inventory of your financial obligations, attending mandatory credit counseling, cooperating with a court-appointed trustee, and participating in a meeting with your creditors in order to form a plan for going forward after the initial and automatic stay on collections.
The official bankruptcy court proceedings can seem complex and difficult at first, especially when you already feel over-burdened with financial obligations. However, the reality of bankruptcy proceedings may be more simple and straight-forward than you fear, and often leads to an enormous sense of relief, direction, and satisfaction for having confronted your problems head-on. Bankruptcy is not failure. It is a solution within reach, especially with the assistance of a Denver Bankruptcy attorney.
The tasks involved in initiating a bankruptcy proceeding in federal court are considerably easier if you have the help of an experienced Colorado bankruptcy lawyer. Your debt relief attorney will guide you through the process to ensure your paperwork is completed properly, you meet all applicable deadlines, and your legal rights are protected. Additionally, the fee you pay for these valuable legal services may be less than you fear.
For more information about what a Denver bankruptcy lawyer, or Colorado Debt Relief Attorney can do for you, call our offices today. We would be happy to talk with you during a no-charge initial consultation about your individual case, and discuss the possible alternatives that are open to you.