Numbers of local consumers newly uncomfortable with their
accumulated debt loads are beginning to worry over the economic problems
affecting Colorado and the nation as a whole. These consumers tend to
flock toward bankruptcy attorneys to see whether or not Chapter 7 or
Chapter 13 bankruptcy protection would better their situation, and,
after the changes to the bankruptcy code following the 2005 legislation,
whether or not they would even qualify for Chapter 7 debt elimination
bankruptcy in their state of residence. While virtually all the citizens
of Coloradan that we have spoken with maintain some knowledge of
bankruptcy processes – after all, growing up in the United States of
America, even children recognize that bankruptcy is meant to offer a
fresh start to debtors who have gotten in over their head with bills
they’re unable to pay – most ordinary consumers are unaware of the
actual specifics regarding bankruptcy declaration and eventual
discharge.
While we can’t pretend that the totality of knowledge
floating about the potential repercussions and intrinsic loopholes of
bankruptcy should be able to be glossed over in an article such as this,
there is information every Coloradan debtor should be aware of before
taking another step. It seems, from our correspondence, that almost no
Coloradan not already working in the financial services industry has
more than a cursory understanding of how their local statutes will
protect their assets in the event that they do decide to go through with
bankruptcy declaration. For instance, every state holds personal
exemptions that borrowers can choose to invoke rather than taking
advantage of the (generally far harsher) federal exemptions, and these
may change greatly depending on the borrowers’ location around the
country. Any consumer seriously interested in bankruptcy should first do
their own research on how bankruptcy (and, especially, bankruptcy in
Colorado) could help their own financial scenario before paying the ever
more expensive costs that comes along from even a consultation with
experienced bankruptcy attorney firms. These lawyers charge by the hour,
after all, and there is no reason to ask questions that could be easily
answered for free should the borrowers have sufficient interest.
Once
again, virtually everyone your authors have spoken with in Colorado
knows the most basic information about bankruptcy protection – consumers
with sufficient debt balances (provided they’re the right sort of
unsecured loans) will be considered for a Chapter 7 debt elimination
program (provided they have not earned too much money in the preceding
years) that could liquidate their credit card bills and similar burdens
under the full protection of federal and Colorado state law. The
bankruptcy process was originally legislated to offer a new hope for
borrowers that have bitten off more than they could chew. To a large
degree, for debtors sufficiently desperate and who have suffered genuine
calamities necessitating governmental assistance, this can still be
true, but, sadly, only a minority of people living in Colorado would
actually qualify under current conditions. Fortunately, even as the
official protections continue to dissipate, a number of new debt relief
and debt management companies have come into existence which attempt to
help debtors in Colorado and across the United States erase their more
problematic high interest loans and learn proper household budgets and
correct spending behaviors to preclude a return to similar situations.
Since the discrepancies between debt consolidation and debt settlement
and Consumer Credit Counseling are significant and each solution may be
different for different sorts of Coloradan families, it should certainly
be a priority for every borrower to learn all that they can about these
debt maneuvers prior to helplessly concluding that bankruptcy would be
the only solution available.
To be sure, however difficult it may
now be for Colorado borrowers to avail themselves of bankruptcy
protection, it is nonetheless a federally sanctioned legal right to at
least file a petition declaring your intentions, and the very act of
bankruptcy declaration prevents your accounts from debtor harassment or
attempts at collection. Once any borrower files for Chapter 7 or Chapter
13 bankruptcy protection in the state of Colorado, the various lenders -
and whichever bill collectors the lenders may have been working with –
are legally required to end all forms of communication. Unless the
lenders can prove that they will lose money by waiting for the trustee
chosen by the Colorado courts to render a judgment on the borrowers
eligibility for bankruptcy through depreciation of collateral or other
means (this rarely happen), the filer should at the least be granted a
sudden peace of mind just after declaration. This does not, of course,
guarantee the Coloradan borrower shall qualify for bankruptcy nor that
the Chapter 7 debt elimination proceedings would be advantageous once
all the drawbacks were taken into consideration. Like virtually all
elements of consumer finance, no strategies should be entered into
blindly or chosen without time for reflection and sufficient amounts of
research and self education that would allow all due deliberation. In
this article, we would primarily like to go over the reasons each
Colorado borrower may invoke when first thinking about bankruptcy, the
various processes and statutes borrowers should be aware of before
filing (as well as those alterations and exemptions specific to
Colorado), and the other debt relief techniques that have become popular
in recent years.
When deciding on the necessity of bankruptcy,
there are a few different aspects each Coloradan should consider fully
before making a final decision – or, again, even spending dollar one on a
discussion with the bankruptcy lawyer they would consider using. If the
interest rates on any given loan are sufficiently high so that the
borrowers cannot satisfy much more than the minimum payments each month,
Chapter 7 or Chapter 13 protection should certainly have to be thought
of as an option. In the same way – this almost always goes alongside the
previous problem, as a matter of fact – borrowers whose collected
unsecured debts have amassed to a degree that they would be virtually
impossible to repay over the near future may genuinely need look into
bankruptcy or any other debt solution available in Colorado. Further, as
you should imagine, the regular threatening phone calls and mailings
from lenders or collection agents working on their behalf should be a
strong warning signal that something has to be done. Remember, as soon
as you start working with a debt management firm or file a bankruptcy
petition, Colorado state law guarantees that all collector harassment
shall immediately cease. In the event that secured lenders have begun
the proceedings to enact foreclosure of personal residences or the
repossession of automobiles (or, even, the much less common but still
effective civil court summons for potential forfeiture of property),
you’ll have little choice other than to employ an attorney or debt
professional to aid you with your financial burdens.
Essentially,
Colorado borrowers must sit down with their families and struggle
through the question of whether or not they can justifiably expect to
pay back their worst bills (those debts either featuring high interest
rates or adjustable interest rates bound to escalate plus loans which
demand balloon payments or risk default) in a reasonable amount of time.
What do your debts look like compared to the family financial situation
of one year ago? Have they become progressively worse? Clearly,
demonstrable headway that has been made in paying loans down should be
seen as a sign that successive attempts at personal debt management may
be enough to eliminate the majority of your problems while, in the same
way, ever increasing debts are a reason to investigate bankruptcy or
seek out professional assistance from your area of Colorado. Do you have
any reason to believe that your income will greatly increase over the
short term? Have you considered the overall financial free fall
otherwise seen by most aspects of the Coloradan economy and the status
of the American economy as a whole? If your motivation for believing the
resolution of all debts shall come from some preyed upon inheritance or
similar windfall, we strenuously counsel suspicion and a clear headed
maintenance of resolve. You have no idea how many Colorado citizens we
have corresponded with who let their debts fester while vainly waiting
on a miracle only to end up declaring bankruptcy after their credit
rating had been unnecessarily ruined (even worse than if they had gone
bankrupt in the first place) and family morale irreparably harmed.
It’s
easy enough to recognize your problems when you have bill collectors
breathing down your neck and even the minimum payments seem beyond hope
of remuneration. Once consumers realize that they can’t depend on their
own incomes to better their own situation – no matter the attempts at
controlling spending and hewing to a budget – it’s a simple step toward
bankruptcy. However, for those Colorado borrowers who have not yet
reached rock bottom, who still think they may be able to climb out of
debt burdens on their own, it may be surprisingly difficult for
consumers untutored in the complexities of finance to understand just
how potentially dire their debt circumstances may be. Any Coloradan
resident with unsecured debt obligations in the amount of ten thousand
dollars or greater needs to give serious thought to employ some debt
solution program, but, still and all, this is still not necessarily the
time for bankruptcy. For this reason, your authors advise using one of
the debt calculators online to attempt some more accurate estimation of
your payment time lines and how much you would end up paying in compound
interest over the duration of your various debts. Even then, if you
still have trouble with the math (and credit card companies have little
reason to simplify this process), you may wish to talk with one of the
debt management or debt settlement companies that offer free
consultations to see what they would suggest.
Once again, in many
situations, these debt relief firms are likely to say that utilizing the
bankruptcy protection of federal and Colorado law would be the most
beneficial alternative. Successfully undertaken, Chapter 7 bankruptcies
could liquidate all applicable revolving debts – credit card accounts
primary among them – and your authors understand how very attractive
that scenario must seem. Discharged obligations are the cherry on the
cake of bankruptcy protection, but there are other benefits above and
beyond the potential of dissolution of legal debts much as that aspect
garners the headlines. In Colorado, as we have mentioned, merely filing
the initial documents for Chapter 7 or Chapter 13 bankruptcy declaration
will force all creditors to halt their attempts toward debt collection
even if court actions had already been begun to garnish wages or
repossess vehicles. Indeed, even those assets recently reclaimed by the
collection agency will be (temporarily, depending on the Colorado
trustee ruling) returned by the lender following a bankruptcy petition.
In the same way, utilities that had been turned off because of faulty
payments will be immediately restored, and foreclosure proceedings for
residences will be suspended for the time being. For borrowers who
believe their mortgage company or other lenders acted in poor faith or
had even committed out and out fraud but were unaware of how to alert
authorities or afford proper lawyers, this time and avenue toward the
courts should alone be worth the bankruptcy proceedings. It’s especially
difficult to fight multinational corporations when your power has been
shut off, and the Colorado justice system will be allowed additional
time to study and consider any borrower claims.
At the same point,
much as Chapter 7 bankruptcy protection can do grand things for the
lucky Colorado consumer, it’s certainly not the savior to every
borrower. Even if you are accepted into the program, you will find that
dollar one of many sorts of debts – for some individuals and families,
perhaps even the majority of your debts – will not be affected in any
way. Secured debts such as home mortgages and car loans, presuming you
wish to maintain the possessions that these debts are attached to, will
be essentially left alone although the consumers will be asked to
reaffirm these obligations with the original lenders. Student loans, for
these purposes, will be considered another sort of secured debt since
legislation pushed through congress in the late 1980s ever after
disallowed the discharge of all education loans in Colorado and
throughout the country. Furthermore, borrowers should not expect any
funds that are owed for familial debts like alimony or child support to
be done away with, and, for that matter, all debts handed down by the
government or courts (from penalties to taxes resulting from criminal
misdeeds) of America or Colorado are similarly rendered invulnerable. As
another element to consider, should the debts have been co-signed, the
other party may be held liable for the entirety of the obligation.
Considering the limited debt liquidation available even from successful
Chapter 7 bankruptcies, one can’t presume the program shall best aid
each consumer problem.
More to the point, there is also no guarantee that
Chapter 7 protection will even be made available to every Colorado
borrower that genuinely seeks an elimination of their burdens. Once a
petition is filed for Chapter 7 debt liquidation, the court decides on
whether or not the potential for unsecured loan discharge will be
deserved. Should the Colorado court trustee decide otherwise, the
borrower will be deemed eligible for Chapter 13 bankruptcy debt
adjustment program which – while still forcing a temporary stay of
collection that may be of sufficient help for truly needy consumers –
demands a monthly payment to the trustees which the courts shall then
distribute among the assembled lenders. Unlike the Chapter 7 program,
even credit card bills will be largely satisfied by the original
borrower under Chapter 13 protection, and the courts shall determine a
budget (alongside the budgetary guidelines predetermined by the Internal
Revenue Service according to their, shall we say, somewhat fantastical
expectations about Colorado living expenses) that the household shall
have to survive under for the sixty month period of repayment. In this
way, aside from the temporary end to bill collector harassment, Chapter
13 will be not much more effective than any personal attempt at debt
relief, but the programs legal restrictions could prove far more
damaging should the court unfairly decrease your actual expenses or
should your household earnings falter during the time of repayment.
There
are other forms of bankruptcies, the different Chapter applicable under
Colorado law range from those dealing with family farms to actual
municipalities, but virtually every borrower shall only have to concern
themselves with Chapter 7 or Chapter 13 protections. Really, since the
Chapter 13 budgetary guidelines are so strict and the benefits so small,
consumers in Colorado should only knowingly enter Chapter 13 when they
have a tax obligations that they’re otherwise unable to resolve or
secured (mortgage, auto loan, investment) loans that are in jeopardy of
default but which they believe they should be able to repay given
reaffirmed terms. As happens, most every borrower that goes into Chapter
13 protections only does so because the Colorado trustee – following
the directives of the 2005 congressional alteration of the US bankruptcy
code – finds the individual or couple declaring bankruptcy earns too
much money. The recent code changes examine each bankruptcy petition in
terms of the filers gross income as compared to the median income of
their state of residence. For consumers filing in Colorado, this means
that a single borrower must have less than forty two thousand in
earnings according to recent census information. A Colorado household
with two members would have to earn less than sixty thousand, three
members would need less than sixty four thousand, four members would
need less than seventy five thousand and so on. Understand, beyond
simple tax records of earnings, that the formal stipulation does not
allow the Colorado trustee to look at the filers’ debts but only their
incomes, and borrowers who petition for bankruptcy without properly
checking their figures against the median income of Colorado residents
could be in for five desperate years.
The legislation of 2005 did
more than simply make it more difficult to enter Chapter 7 debt
elimination programs, of course. There is so much misinformation
swirling around the recent changes that many of the Coloradan citizens
we have spoken to are falsely convinced that bankruptcy protection which
would liquidate credit card bills no longer even exists. As we have
written, presuming borrowers pass the income regulations, Chapter 7
protection could be a salvation for the right filer, but, still and all,
further hurdles have been erected. The documentation requested from all
debtors upon finishing their petitions – from expense receipts to half a
years worth of income evidence – has become far more challenging for
ordinary citizens who have little time to go tracking down paperwork.
Also, borrowers will be forced to take a credit counseling course before
their bankruptcy will first be considered and, again, before their
bankruptcy will be discharged. Not only will the interested consumers
have to pay the not inconsiderable costs from their own pockets, they
may have to travel some ways from their area of Colorado just to find a
training course certified by the federal government. For many debtors,
especially those who most need the assistance of bankruptcy protection,
the time required by these various new obligations and the initial costs
involved are more than they could easily bear. Frankly, once the
charges for the courses are put together with the governmental fees and
the truly significant funds demanded by the attorneys – more than ever,
after the paperwork grew exponentially more difficult following code
alterations, attorneys experienced in Colorado bankruptcy law are needed
to ensure not only that borrowers find the best representation but also
that they shield themselves from fraud charges following documents
mishandled from laziness or neglect – personal bankruptcy could be out
of reach just because consumers needed the protection too much.
There
is still more elements to be considered for any Colorado borrower
considering bankruptcy. Either form of debt protection thoroughly harms
credit ratings and F.I.C.O scores for years afterwards, up to a decade
in the worst possible case, and filers should expect interest rates
approaching twenty percent for vehicle loans or whatever other credit
accounts they could land. Even more troubling, Chapter 7 bankruptcies,
even presuming the trustee should agree that the case should go forward
(and presuming the debtor could afford to declare bankruptcy in the
first place), essentially guarantees that the courts are now in charge
of the filers personal possessions. As long as debt elimination
bankruptcy has existed in the United States, the assets of those
borrowers accepted into what became known as the Chapter 7 bankruptcy
were subject to forfeiture by the courts and eventual auction with the
funds to be handed over the lenders whose burdens would be defaulted
upon. However, previously, the courts only looked at the potential
resale value of the household items when deciding what and what was not
an asset while, currently, borrowers must now worry about their lives
possessions being prized as according to their replacement value which
renders most everything up for grabs.
Colorado borrowers declaring
Chapter 7 are considerably more fortunate than their fellow citizens in
this matter. Under Colorado state exemptions – as opposed to federal
ones – residents filing for bankruptcy may vouchsafe household
furnishings up to three thousand dollars, tools of trade up to twenty
thousand, and two thousand dollars worth of art, music, collectibles, or
hobby equipment. Compared to the national exemptions, the Colorado
bankruptcy statutes should be seen as exceedingly generous. Furthermore,
under the Colorado homestead exemption, residents filing for bankruptcy
may keep their homes provided there is not more than sixty thousand
dollars of equity as would be proven by recent appraisal (which should
not be much of a problem given the current real estate market slowdown),
and they’re also able to keep their automobiles as long as there is not
more than five thousand dollars of equity from blue book pricing
(which, for most any vehicle, should not be an issue at all).
Furthermore, aside from the homestead, all of these Colorado exemptions
would be doubled for married couples filing jointly. Also, though this
is true for most of the nation, retirement plans (social security
benefits, I.R.A, and most any pension) won’t be touched as well as most
forms of public assistance including unemployment compensation and
veterans benefits no matter how large the eventual funds may be.
Even
though debtors filing for bankruptcy protection in Colorado are
demonstrably better off than their counterparts throughout America, any
consumers who remain curious about the option should keep in mind how
quickly – regardless of the exemptions Colorado grants – the values of
household possessions could grow depending upon the wrong trustee at the
wrong time. Again, depending upon circumstances, Chapter 7 or, even,
Chapter 13 bankruptcy declaration could be the right choice for a
certain sort of Colorado borrower, but other alternatives should not be
ignored. Admittedly, the depressed property values in Colorado,
particularly the Denver and Colorado Springs areas, should effectively
preclude mortgage debt consolidation for any borrower that wants to keep
their family residence. Also, the Consumer Credit Counseling approach
has recently come into question after the income profile of most
consumer credit counseling companies showed that they accepted as much
if not more from the credit card companies they were supposedly fighting
against as they did from their debtor clients. When speaking with
Coloradan borrowers that managed to liquidate their accumulated burdens
without braving the potential household destruction of bankruptcy
protection, the industry that comes up time and again as a success story
has been debt settlement.
After employing a certified and
experienced debt settlement negotiator to use the very threat of Chapter
7 debt elimination against the lenders, these counselors regularly
induce representatives of the credit card companies to cut the accounts
owed by as much as fifty percent with minimal effects toward the
borrowers’ credit ratings. Nothing comes for free, of course, and the
debt settlement companies shall still insist upon an eventual repayment
of the lingering unsecured balances in less than five years. Obviously,
the debt settlement firms also have little assistance to offer with
those loans attached to neither collateral nor any governmental
protections. Nevertheless, considering the minimal upfront costs and the
limited damage done to credit reports and F.I.C.O scores from a
successful debt settlement negotiation (as well as the long list of
satisfied Colorado debt settlement clients we have corresponded with
over the past year), your authors would be remiss if we did not urge
every potential filer for bankruptcy protection to at least have a chat
with a local debt settlement professional. Even if your area of Colorado
doesn’t have a debt settlement specialist easily obtainable in person,
there is any number of relevant professionals available from internet
sites throughout the web. So much of financial analysis ends up being
conducted remotely, in any event, and, as long as the Coloradan client
researches the online firm they wish to talk with, there should not be
any more fear to web sites than from unfamiliar store fronts. It’s still
likely, even probable, that bankruptcy protection will be the best
possibility for you and your family, but, as long as debt settlement
continues to thrive in Colorado, there is no reason not to explore other
solutions.