Frequently
Asked Questions on Colorado Bankruptcy Law From an Experienced
Colorado Springs Bankruptcy Attorney at Anderson &
Travis, P.C.
Q:
What is bankruptcy?
A:
Bankruptcy is set of federal laws designed to provide
individuals and businesses who owe more debt than they
can pay a "fresh start," by allowing them an
opportunity to re-organize their payment of debt or authorizing
the discharge of debt. The person or business entity that
owes money is described by the bankruptcy code as the
debtor. The entity or person who is owed the money is
described as the creditor. The bankruptcy code allows
the debtor to either surrender non-exempt assets in exchange
for the forgiveness of certain debts, or work out a repayment
plan to pay all or a portion of the amount of debt they
owe to the creditor, while being protected from the collection
efforts of creditors.
Q:
Who can file for bankruptcy?
An
individual, corporation, business trust, or partnership
can file for bankruptcy. A debtor may initiate his or
her own bankruptcy proceeding, which is known as a voluntary
bankruptcy. Involuntary bankruptcy results from creditors
initiating the bankruptcy proceeding.
Q:
Do I need an attorney to file for bankruptcy?
A:
While the bankruptcy code does not require an individual
to have an attorney to file a petition, business entities
are required to be represented by an legal counsel. Filing
a bankruptcy petition is a fairly complex task that can
be completed by an individual without the assistance of
an attorney. However, if the petition, statement of financial
affairs, and corresponding schedules are not completed
properly then the entire process slows and the debtor
may unwittingly subject his or her petition to a motion
for dismissal.
Furthermore,
lawsuits may arise from a particular bankruptcy case.
These lawsuits are known as adversary proceedings. Federal
and State bankruptcy rules identify which actions must
be brought as adversary proceedings. In the event that
a creditor files a complaint as the result of a bankruptcy
proceeding, a debtor should obtain legal counsel.
Q:
What is the difference in bankruptcy "Chapters"?
A:
Chapter 7 bankruptcy requires the bankruptcy trustee to
collect and sell all non-exempt property that is not mortgaged,
and then distribute any proceeds to creditors. An individual
proceeding under Chapter 7 is permitted to retain from
the trustee sale exempt property (discussed below). Following
the sale the debtor is discharged of certain types of
debts. Corporations and partnerships, however, are not
entitled to discharges. Chapter 7 bankruptcy is known
as "straight bankruptcy" or "liquidation."
Chapter
9 bankruptcy is reserved for governmental entities such
as school districts, water districts, municipalities,
etc.
Chapter 12 bankruptcy is limited to those who meet the
qualifications as family farmers.
Chapter
11 bankruptcy is designed to allow debtors with substantial
debt or income to reorganize to pay their debts. Creditors
are involved in the process or restructuring to the extent
that they can vote to accept or reject a debtor plan fro
restructuring to pay their debts.
Chapter
13 bankruptcy allows individual debtors and sole proprietors
with regular income to keep property and pay for it under
a Court approved repayment plan with each creditor. Individuals
filing a chapter 13 petition may not have debts exceeding
$1,230,650. Corporations and partnerships may not file
for chapter 13.
Q:
What is a Bankruptcy Trustee?
A:
A Trustee is a lawyer, but not always, whose job it is
to administer the bankruptcy case and bankruptcy estate.
The Trustee presides over the creditor's meeting and ensures
that creditors are treated according to the bankruptcy
code. A Trustee will collect and sell non-exempt property
from the debtor in a chapter 7 bankruptcy, or collect
pay-out money in a repayment plan under Chapter 12 or
13 bankruptcy. The Trustee acts on behalf of the U.S.
Trustee Office and does not represent the debtor. Moreover,
a debtor's failure to cooperate with a trustee may result
in the trustee filing a motion to dismiss the bankruptcy
petition.
Q:
What is an "Automatic Stay?"
A:
An automatic stay protects the debtor from the collections
efforts of creditors, and provides statutory remedies
for the debtor when creditors fail to honor the stay.
Q:
Can you describe the bankruptcy process?
A:
The debtor must complete what is known as a statement
of financial affairs, bankruptcy petition and related
schedules, which identify all the debtors' financial information
to include assets, liabilities, creditors, income, and
other financial resources. The petition is then filed
in the U.S. Bankruptcy Court. The Court will then send
notice to all the creditors identified by the petition
that petition has been filed, that an automatic stay on
collections is in place, and advise them of the creditor's
meeting. Once the petition and other required documents
are filed with the Court and the filing fee is paid, the
case is assigned to a trustee who will evaluate the request
for bankruptcy and administer the case according to the
U.S. Bankruptcy Code. The trustee will then conduct a
creditor's meeting.
In
Chapter 7 bankruptcy, creditors are provided 60 days from
the creditor's meeting to object to whether the debt owed
is dischargeable. If the creditors fail to object by the
deadline, the court will discharge the debt. If creditors
do object, then the court will hear the objection and
rule according to the bankruptcy code and other existing
law. However, the objection will not stop the court from
discharging the other debts identified in the petition.
Furthermore,
in chapter 7, the trustee will evaluate the bankruptcy
estate to determine if there are assets that may be sold
to pay the creditors. If the trustee discovers no non-exempt
equity in any of the debtor's assets, then he or she will
prepare a no distribution report and the case will be
closed. In the event there are assets, the Court will
establish deadlines for creditors to make their claims.
The trustee will collect the assets, sell the assets,
and distribute the proceeds to the creditors. The trustee
will then file a final distribution report with the court
and the case will be closed.
Chapter
13 and 12 cases require that the debtor file a repayment
plan with the court and provide creditors and Trustee
an opportunity to object to the plan. The court may confirm
the plan if no objections are raised. The plan will require
that the debtor pay the trustee for three to five years,
and the Trustee in turn will pay the creditors. When the
plan is completed the trustee will prepare a final report,
the court will enter a discharge order, and the case will
be closed. However, if the debtor experiences difficulty
fulfilling the terms of the plan, he or she may convert
the bankruptcy into another Chapter, or the case may be
dismissed on motion by the Trustee or creditors.
Q:
What is a 341 Creditors meeting?
A:
The meeting of creditors is conducted by the trustee,
outside the presence of the bankruptcy judge, between
20 to 40 days subsequent to filing a petition for bankruptcy.
Debtors must attend this meeting as it provides the trustee
an opportunity to review the petition and ask the debtors
questions under penalty of perjury. In the event that
the debtor does not attend the meeting of creditors, his
or her petition for bankruptcy may be dismissed. Creditors
are provided notice of the meeting and also provided an
opportunity to be present and ask questions of the debtor,
although creditors are not required to attend the meetings.
Q: What is "exempt"
property?
A:
"Exempt" property is debtor property that may
be held back from the bankruptcy proceeding. State law
allows certain assets to be withheld from creditors. For
instance, the bankruptcy code allows the debtor to exempt
vehicles, household goods, jewelry, clothes, and equity
in a home in certain amounts. In many cases choosing which
assets are exempt requires a legal judgment, and therefore
the counsel of a bankruptcy attorney is recommended.
Q:
What is a joint bankruptcy petition?
A:
A joint petition allows only a husband and wife to file
a single petition for bankruptcy. Business entities and
unmarried people are prohibited from filing joint bankruptcy.
Q:
What if I don't join my spouse in a bankruptcy petition?
A:
It is acceptable for one spouse to file for bankruptcy
while the other does not. However, information about the
non-filing spouse's assets and income must appear in the
filing spouse's statements to provide an accurate representation
of the entire financial situation. Furthermore, the non-filing
spouse may become liable fro jointly created debts under
a contract theory.
Q:
What is reaffirmation of debt?
A:
A reaffirmation agreement allows a debtor to exclude a
particular creditor from the bankruptcy proceeding by
reaffirming his or her debt. Debtors many times will reaffirm
a mortgage on their home and continue the agreement with
their lender to remain in their home.
Q:
How will the "Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005" (BAPCPA) impact my ability
to file a bankruptcy petition?
A:
See more on BAPCPA.
Q:
Where can I find out more information regarding the bankruptcy
code and procedure for filing?
A:
The District of Colorado Bankruptcy Court hosts an excellent
website http://www.cob.uscourts.gov
that provides a wealth of information to anyone interested
in bankruptcy. An experienced Colorado Springs bankruptcy
attorney at Anderson & Travis, P.C. can also answer
your questions.
Other
Bankruptcy Resources:
