An individual may file under Chapter 7, Chapter 11, or Chapter 13 of the bankruptcy code. An individual (debtor) files a petition in bankruptcy court under one of the bankruptcy code chapters and the case is then administered under the supervision of a bankruptcy judge. As a practical matter, most cases are delegated to a bankruptcy trustee who oversees either (1) the administration and liquidation of non-exempt assets in a Chapter 7 bankruptcy, or (2) the repayment plan under Chapter 13.
A debtor will usually have little interaction with the judge or even the creditors as the trustee handles most aspects of the petition and case. There are other chapters of the bankruptcy code such as Chapter 11 (reorganization) or Chapter 12 (farmers and fishermen), but the focus of this blog will be on Chapters 7 and 13.
Property Under Chapter 7
A Chapter 7 bankruptcy is entitled “Liquidation,” and it involves a discharge of the debtor’s debts in a short time-frame and a liquidation of the non-exempt debtor’s assets. A Chapter 7 case is a complex measure, and should be considered carefully with the guidance of highly experienced legal counsel. The Chapter 7 trustee will oversee a sale of non-exempt assets and distribution of all monies to the creditors and the bankruptcy judge will enter a discharge order of the creditor’s claims. It is important to have experienced legal counsel who can assist in pre-bankruptcy planning and converting non-exempt assets into exempt assets.
Colorado observes an “opt-out” provision meaning that debtor’s must use the state’s exemptions in a Chapter 7 case in lieu of federal bankruptcy exemptions. Some common Colorado exemptions under Chapter 7 are:
- Homestead (you may keep a portion of the equity in your home, or a certain amount of the proceeds of the sale)
- Reasonable amounts for alimony, support, and maintenance
- Pension and retirement benefits
- Insurance benefits to some degree
- Motor vehicle (your motor vehicle may be exempt if the equity is less than or equal to the exemption amount)
There are many other exemptions under Colorado law. Filing the petition, properly listing exempt property, and following the strict procedural guidelines is a complex process which is best approached with an experienced bankruptcy attorney. Legal counsel should be retained if contemplating a bankruptcy to protect your rights as a debtor in the proceedings.
Property Under Chapter 13
A Chapter 13 bankruptcy is also known as a wage earner’s plan and is available for individuals within a set income bracket. Under Chapter 13, an individual may be able to save their homes from foreclosure by “catching-up” on payments. Upon filing a Chapter 13 petition, a legal procedure known as an automatic stay takes effect. This stay prevents creditors from continuing collection actions against the debtor, including an upcoming foreclosure. However, debtors should be aware that if a bank completes the foreclosure proceedings before filing a petition then the stay will not stop the foreclosure; a debtor must file the petition before the foreclosure sale. A debtor may be able to keep some or most of their property in a Chapter 13 bankruptcy and the trustee will consolidate the creditor’s claims and disburse payments from the debtor to them under a repayment plan over the course of three to five years.
Contact a Centennial Bankruptcy Attorney
As a former trustee for the U.S. Bankruptcy Court, with over thirty years’ experience, Bankrupcy Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Centennial, Colorado. We also serve Aurora, Loveland, Highlands Ranch, Denver, Littleton, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, contact the Law Office Of Long & Long P.C. for a free initial consultation at (303) 832-2655.