The following topics are meant to provide answers for frequently asked questions. While we encourage to read about these topics, we understand that many prefer to get answers to their questions from an attorney. Wink & Wink offers free consultations with one of our attorneys. Whether you have a couple of questions or would like a full review of your situation, we’ll will give you honest answers and objective advice with no pressure.

Will I lose property if I file Bankruptcy?
What property can I keep if I file Bankruptcy?

Most people who file bankruptcy do not lose any property. This is because each state has Bankruptcy Exemptions, which allow you to protect certain property from your creditors when you go through a bankruptcy. Colorado’s bankruptcy exemptions make it possible for Chapter 7 personal bankruptcy filers to protect their property when filing. Most of Colorado’s Bankruptcy exemptions come from C.R.S. § 13-54-102.

Some of the current exemption amounts and categories in Colorado are:

  • Homestead Exemption: Allows you to protect up to $75,000 in equity in your home. This amount increases to $105,000 if you, your spouse, or a dependent family member is at least 60 years old or disabled. The homestead exemption applies only once to your home. It does not double for you and your spouse in a joint bankruptcy.
  • Vehicle Exemption: Allows you to protect up to $7,500 in equity in up to two vehicles. This amount increases to $12,500 if you or a dependent family member is at least 60 years old or disabled. If you file joint bankruptcy with your spouse, you each get your own vehicle exemption (ex., can enable you to protect up to $15,000 of vehicle equity). The vehicle exemption does not apply to motor homes, ATV’s, boats or recreational vehicles.
  • Household Goods Exemption: Allows you to protect up to $3,000 worth of household goods. If you file joint bankruptcy with your spouse, you each get your own household goods exemption (i.e., protect up to $6,000 of jointly owned household goods). When valuing your household goods and other personal property for purposes of bankruptcy, you should use resale value (ex., garage sale or craigslist) and not replacement value.
  • Clothing Exemption: Allows you to protect up to $2,000 worth of clothing for yourself and your dependents. If you file joint bankruptcy with your spouse, you each get your own clothing exemption (i.e., protect up to $4,000 of clothing).
  • Jewelry Exemption: Allows you to protect up to $2,500 worth of jewelry/watches of yourself and your dependents. If you file joint bankruptcy with your spouse, you each get your own jewelry exemption.
  • Personal Library and Family Pictures Exemption: Allows you to protect up to $2,000 in personal library and family pictures. If you file joint bankruptcy with your spouse, you each get your own personal library and family pictures exemption.
  • Tools of the Trade Exemption: Allows you to protect up to $30,000 in things you need for your job (ex., tools, books, furniture, inventory, etc.) if it is your primary source of income. If the tools of the trade are used for a secondary source of income, the amount you can protect is limited to $10,000. If you file joint bankruptcy with your spouse, you each get your own tools of the trade exemption.
  • Retirement Account Exemption: Allows you to protect any amount in an IRA, 401(k), or pension plan.
  • Whole Life Insurance Exemption: allows you to protect up to $50,000 cash surrender value of a life insurance policy, if only regular premium payments have been made for at least four years. If you file joint bankruptcy with your spouse, you each get your own whole life insurance exemption.
  • Certain Benefits: Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions is exempt, regardless of the amount.

Wink & Wink will help you determine which set of exemptions apply to your situation. If you have non-exempt property, Wink & Wink can provide you with pre-bankruptcy planning in order to maximize the applicable exemptions. There are many ways to protect your assets under the law so that you keep them through bankruptcy.

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I filed bankruptcy before, when can I file again?

If you filed a Chapter 7, you must wait 8 years from the date of filing to be eligible for another Chapter 7 discharge. You only have to wait 4 years until you can file a Chapter 13 after a prior Chapter 7.

If you filed a Chapter 13 bankruptcy, you must wait 6 years from the date of filing until you are eligible to file a Chapter 7 bankruptcy. You only have to wait two years to file another Chapter 13.

Wink & Wink can look up your prior bankruptcy to find out when it was filed and help you determine when you’ll be eligible for file bankruptcy again in Chapter 7 and Chapter 13.

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Does bankruptcy help with Foreclosure?

Filing for bankruptcy entitles you to powerful legal protection called the automatic stay. Once you file for bankruptcy, all foreclosure proceedings come to a halt. If your goal is to save the property, you can file a Chapter 13 bankruptcy and make up missed mortgage payments (arrears) over a five-year period. If your goal is to get a mortgage modification, you can pursue that option while in the protection of a Chapter 13 bankruptcy. If your goal is to simply buy time in the current property, Chapter 7 filed at the right moment can buy you six months or more in the property to give you breathing room to figure out your next steps.

In general, bankruptcy is a powerful tool if you have mortgage debt, pending foreclosure or just need to get in front of a few missed payments. However, you must file for bankruptcy before the foreclosure sale to take advantage of the automatic stay.

Wink & Wink has helped many people stop foreclosures and save their home. If you are facing foreclosure, time is of the essence.

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Can I keep my home and keep paying my mortgage in bankruptcy?

Yes. Many homeowners are able to keep their home and continue paying their mortgage through bankruptcy. However, if your home equity exceeds the applicable amount of the homestead exemption, you can lose your home in Chapter 7 bankruptcy. In that situation, you should consider Chapter 13 or debt settlement. Additionally, while you may remove a 2nd mortgage or home equity line of credit in Chapter 13 bankruptcy in certain circumstances, bankruptcy generally does not alter the requirement that you continue paying your mortgage to keep your home.

I can’t make my mortgage payments. Can bankruptcy help me?

Yes. Filing for bankruptcy starts the automatic stay, which halts any foreclosure proceedings against your home for months or even years. This time may take the pressure off, enabling you to make your payments in the future. If you will be able to make your mortgage payments in the future and simply need time to catch up, apply for mortgage modification or refinance your mortgage, a Chapter 13 bankruptcy will give you 3 to 5 years to cure any arrears on your mortgage and keep you in the home. And if your financial situation is such that you will not be able to make future mortgage payments, filing for Chapter 7 bankruptcy at the right moment can buy you six months or more in the property to give you breathing room to figure out your next steps. You will likely be able to live in your house without making any mortgage payments for most of this time (you must continue to pay any Homeowner’s Association dues). This will give you time to save money to put toward your next living situation.

Can bankruptcy help with Second Mortgages?

In some cases, a second mortgage can be completely removed in Chapter 13 bankruptcy. This is only possible if the home is worth less than the balance on the first mortgage. If you don’t qualify for a “strip-off” and you are behind on second mortgage payments, Chapter 13 can allow you to make the payments up over time.

Can bankruptcy help me get a mortgage modification?

The application process for mortgage modifications can be complicated and frustrating. Often, having your attorney handle the paperwork and deal with the lender gets better results than attempting the modification process on your own. Wink & Wink has had success helping clients get mortgage modifications as part of the bankruptcy process.

Wink & Wink has represented many homeowners in bankruptcy and debt settlement. We can advise you on how your home and mortgage impact your debt relief options.

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Is there a minimum amount of debt required to file bankruptcy?

No. There is no requirement that you have a certain amount of debt to file bankruptcy. Sometimes it makes sense to file bankruptcy with a relatively small amount of debt because a creditor has a judgment against you and will garnish your wages, making it difficult to impossible to pay for your necessities. If the amount of debt you have is more than you are able to pay off in a reasonable amount of time or is making it hard to pay your regular bills, then you should look into whether bankruptcy is a good fit for your situation.

Is there a maximum amount of debt allowed when filing bankruptcy?

There is no maximum debt limit in Chapter 7 bankruptcy but there are maximum debt limits in Chapter 13. In particular, you are only eligible for file Chapter 13 bankruptcy if you have less than $419,275 of unsecured debt and less than $1,257,850 of secured debt. These debt limits are adjusted from time to time and are particularly relevant for small business owners who tend to have more debt.

Will bankruptcy stop harassing phone calls from my creditors?

YES! Once you file for bankruptcy, an automatic stay legally protects you from all credit collection activity. This includes calls from creditors as well as foreclosure proceedings, auto repossessions, wage garnishments, IRS collection efforts and even most lawsuits. The automatic stay is powerful legal protection extended to you under the federal bankruptcy laws and one of the main benefits of bankruptcy. Additionally, once you retain a bankruptcy attorney, you can direct your creditors to call your attorney while you are preparing to file.

What debts can I get rid of in bankruptcy and what debts will not go away?

A discharge in Chapter 7 or Chapter 13 bankruptcy provides powerful debt relief by wiping out your unsecured debt. This includes credit card debt, medical bills, many judgments against you and most taxes that are over four years old. You can also use bankruptcy to walk away from contracts and secured debts such as oppressive auto loans and leases. Bankruptcy cannot get rid of: student loan debt (except in special circumstances, see below); debts incurred by fraud (such as lying on a credit application; domestic support obligations (such as child support or alimony); debts for personal injury caused by driving under the influence; court fines and most restitution orders. However, it can make it easier to comply with these obligations by wiping out other unsecured debt and relieving financial pressure so you can repay the debts that will not go away with bankruptcy.

Will bankruptcy stop a lawsuit?

Yes, bankruptcy will stop a lawsuit in its tracks. If you are being sued for a dischargeable debt, the bankruptcy will stop the lawsuit and get rid of the underlying debt no matter where in the process the lawsuit happens to be. Bankruptcy can even stop a creditor’s ability to enforce a judgment against you.

Will bankruptcy stop a garnishment?

Yes. Bankruptcy will stop a garnishment as soon as the petition is filed and you have a bankruptcy case number. If the underlying debt is dischargeable, there can be no garnishments in the future and bankruptcy will get rid of the debt and garnishment problem completely. If the debt is not dischargeable, bankruptcy will only temporarily stop the garnishment. In such instances, it makes sense to set up a payment plan for the non-dischargeable debt after bankruptcy.

Can bankruptcy help with student loans?

Student loans are not dischargeable in bankruptcy except in very limited circumstances. You can get only out of student loans in bankruptcy via a separate (very expensive) proceeding within your bankruptcy to prove “undue hardship”. Unfortunately, “undue hardship” is a very high standard and the odds of success in establishing it are generally very, very low. Chapter 13 bankruptcy can offer some relief, especially if you are being sued and/or garnished by your student loans. It also can stop the collection efforts and force creditors to accept minimal or no payments for up to five years.

Does bankruptcy get rid of tax debt?

Many back taxes can be discharged in bankruptcy, and tax debt for recent years that cannot be wiped out can be repaid without interest in a Chapter 13 bankruptcy. In general, unsecured (meaning no lien has been filed) income taxes that were due more than three years before you filed for bankruptcy can be wiped out completely so long as you filed the return at least two years before you file bankruptcy and the return you filed was not fraudulent. Tax liens are different. They are secured by your property and require special consideration. While the lien will survive Chapter 7 bankruptcy, it will eventually expire and become unenforceable after bankruptcy. Alternatively, you may be able to reduce the amount owed on the tax lien and pay it off in Chapter 13 bankruptcy.

Wink & Wink has represented many different types of debtors with all types of debts. We can advise you on the most cost-effective option for dealing with all your debt.

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What is Chapter 11 Bankruptcy?

Chapter 11 Bankruptcy is often confused with Chapter 13 Bankruptcy. Chapter 11 bankruptcy is usually used for corporations or high net worth individuals to reorganize their debt structure. It is very lengthy and expensive and is not used for typical consumer debt discharge or even for most small business owners. Many people think of Chapter 13 bankruptcy as a reorganization of debt but a completed Chapter 13 ends in a discharge of debt, which is typically better than a reorganization of debt.

Wink & Wink has helped many different types of people and businesses with debt. We can advise you and your business on how the most cost-effective debt relief option.

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What is the Difference between Chapter 13 Bankruptcy and Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy is usually called “liquidation” bankruptcy. It is the most commonly filed chapter of bankruptcy and is usually over quickly, often within 5 to 6 months of filing your case. To qualify for Chapter 7, you typically must pass the “means test” by having household income lower the median income for your household size in your state. You will keep all property that is “exempt” and, if you have “non-exempt” property, it can be liquidated for the benefit of your creditors. Hiring a bankruptcy attorney, such as Wink & Wink, can help minimize your non-exempt property and ensure the process goes smoothly and that you lose little to no property at all. Chapter 13 Bankruptcy is a repayment plan bankruptcy. Most Chapter 13 bankruptcies are filed by people who earn too much money to qualify for Chapter 7. They will repay some portion of their debt in Chapter 13 based on a mathematical formula called the “long-form means test” where certain deductions are taken off the household income and the end result determines how much debt must be repaid over a 5-year period. This formula can result in you paying back a small percentage of your debt over five years without interest accruing, without creditors harassing you, and with a full discharge of all eligible debts at the end of the repayment period. Chapter 13 can also allow you to strip off a second mortgage, lower the interest rate on certain vehicle loans and cram tax liens to the value of your personal property. It can also help you protect your non-exempt property for liquidation.

Are there reasons to file a Chapter 13 when you qualify for Chapter 7?

Yes, people who are eligible for Chapter 7 bankruptcy choose to file Chapter 13 when: they owe debts not dischargeable in Chapter 7 (such as taxes, child support, student loans, fraud judgments) and Chapter 13 will allow them relief from collection activity on these debts; they have a second mortgage that they are able to remove or “strip off” in Chapter 13; they are behind on car or house payments, want to keep the property, and will use the repayment period to get current on the loan/”cure the arrears”; their assets are worth more than the available exemptions and they want to protect them by paying their non-exempt value over three to five years without fear of liquidation; they filed a prior Chapter 7 bankruptcy within the last 8 years and are therefore locked from filing another Chapter 7 bankruptcy. You can file a Chapter 13 four years after a previous Chapter 7, based on the filing date of the first case.

Wink & Wink has extensive experience in both Chapter 7 and Chapter 13 bankruptcy. We can advise you on the pros and cons of each chapter and which chapter is right for you.

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My divorce requires me to pay child support and also a property division order. Can bankruptcy get rid of this debt?

Bankruptcy cannot wipe out any debt related to child support, alimony or other domestic support obligations. However, award for property division or attorney’s fees may be dischargeable in a Chapter 13 bankruptcy so long as they are not part of a domestic support obligation. For example, attorney’s fees awarded during a custody battle will be part of a domestic support obligation and not dischargeable in any bankruptcy. This is a legal issue that requires the advice of an attorney.

Wink & Wink has extensive experience in both Chapter 7 and Chapter 13 bankruptcy. We can advise you on the pros and cons of each chapter and which chapter is right for you.

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I have heard a lot about consumer credit counseling being a better option than bankruptcy. Is that true?

The answer depends on your income, assets and debts. For most people, bankruptcy is much cheaper and faster than credit counseling. Those people should file bankruptcy not only because it is cheaper, but because their credit will recover faster. Unfortunately, credit counseling companies typically won’t advise people to file bankruptcy, even when it is their best option, because these companies do not provide that service. For those who would have to repay a lot of their debt in bankruptcy, settling debt can be the most cost-effective option. However, Wink & Wink can help you settle your debt for less than a credit counseling company because our fees are lower and we negotiate lump-sum settlements on your behalf. Typically, you can settle your debt for less when paid in a lump-sum instead of a payment plan. Finally, many people get sued while in credit counseling. Wink & Wink can help you settle lawsuits.

Because Wink & Wink offers a full suite of debt relief services, we can advise you on the most cost-effective means to get out of debt based on your situation.

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What is Debt Settlement?

Debt settlement means directly negotiating with your creditors outside of bankruptcy to achieve a reduction in the balance you owe your creditors. Most credit card lenders and medical creditors will accept a fraction of the balance owed in full settlement of the debt. Some creditors drive harder bargains than others, but our experience is that a balance reduction of approximately 50% can be achieved with credit card and medical creditors.

Wink & Wink has the expertise to negotiate the best settlements possible with your creditors.

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Will I lose my retirement account if I file for bankruptcy?

No. Your 401(k), pension plan, deferred compensation plan, IRA and ROTH IRA are protected in bankruptcy. You will not be required to use any of your retirement funds to pay your debts in a bankruptcy proceeding. In fact, the biggest mistake people make is liquidating retirement funds to repay debt that could be included in bankruptcy without getting a professional opinion first.

Should I use my 401(k) to pay my debts?

If bankruptcy is your most cost-effective debt relief option, you absolutely should NOT liquidate your retirement account to pay your debt. Your 401(k) is safe in bankruptcy, but once you pull the money out it becomes fair game for creditors and is counted as taxable income by the IRS. If you keep your money in your retirement account, you will have it after bankruptcy. If bankruptcy is not your most cost-effective option, you may wish to liquidate your retirement account to settle your debt. Because you can typically settle debt for approximately 50% of the balance owed, settling debt is preferable to paying your debt in full.

Because Wink & Wink offers a full suite of debt relief services, we can advise you on the most cost-effective means to get out of debt based on your situation. We can help you make sure your retirement account is protected.

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How will filing for bankruptcy affect my credit score?

Your credit report will reflect your bankruptcy filing for 10 years, but many credit reporting agencies will remove it after 7 years. Regardless, your credit will recover much faster than 7 to 10 years. It is possible to have a 700+ credit score within 2-3 of filing bankruptcy. And if your credit was in bad shape prior to filing for bankruptcy (which is the case for most everyone considering bankruptcy), it will almost instantly be better after bankruptcy because you will have improved your financial situation by wiping out your debt.

Will I be able to get credit after bankruptcy?

Yes. Credit will still be offered to you after your bankruptcy. These offers may be at higher interest rates and for lower limits, but you will be able to get credit. You can get a car loan almost immediately after your bankruptcy discharge and you can be eligible for a mortgage in 2-3 years from filing bankruptcy.

What can I do to rebuild my credit after bankruptcy?

Using credit is the key to rebuilding credit after bankruptcy. If you have debts that are not discharged in bankruptcy such as student loans, paying these on time will help you rebuild your credit. You may also wish to get a credit card as soon as possible after filing bankruptcy. Using the card and paying the balance in full each month does wonders for your credit. If you are unable to obtain a credit card initially after bankruptcy, you may wish to purchase a secured credit card (where you supply the bank with an amount of money and draw down from that), which will report to the credit bureaus.

Getting out of debt is the first step toward rebuilding your credit. Wink & Wink can help.

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What if I have a co-signor on a loan, how will bankruptcy affect them?

A co-signor is 100% liable for the loan if you do not repay it, either by default or by discharging the debt in bankruptcy. This means that the creditor will seek to collect the entire amount of the debt from the co-signor. There are certain protections for co-signors in Chapter 13 bankruptcy that an attorney can advise you on. Often, though, the co-signor will need to continue paying the debt or look into their own bankruptcy options.

Wink & Wink can advise you on the best way to manage debt that is co-signed by another.

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Can I file bankruptcy without my spouse?

Yes you can file bankruptcy without your spouse. However, you will have to account for their income on your means test. This is because your spouse’s income is part of your “household income” and must be disclosed in your bankruptcy. Their separate assets, belonging only to them, do not have to be disclosed. And their debt is not included in your bankruptcy.

What if I am separated? Do I have to file with my spouse?

If you are legally married but separated, you can file without your spouse OR with your spouse, if that is advantageous. This can be complicated because you and your separated spouse may have conflicts of interest. You should seek legal counsel before deciding which is best for your situation.

Wink & Wink can advise you on the pros and cons of filing bankruptcy with or without your spouse. We have represented many couples filing jointly as well as many individuals filing bankruptcy without their spouse.

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Wink & Wink offer expertise in a full suite of debt relief services. Whether you have generic questions about debt relief or are faced with a particular situation, we have the experience to answer your questions and advise you on the most cost-effective debt relief option for your situation. Contact us to schedule a FREE CONSULTATION.