Bankruptcy Discharge in Colorado: A Complete Guide
Bankruptcy can be a daunting process, but understanding the ins and outs of bankruptcy discharge in Colorado can make the journey a little easier. When individuals file for bankruptcy, one of their primary goals is to receive a discharge, which relieves them from personal liability for certain debts. This guide will break down everything you need to know about bankruptcy discharge in Colorado.
What is Bankruptcy Discharge?
A bankruptcy discharge is a legal order issued by the bankruptcy court that eliminates the debtor's obligation to pay certain debts. In Colorado, as in other states, discharge provides a fresh financial start for individuals struggling with insurmountable debt.
Types of Bankruptcy in Colorado
There are two primary types of bankruptcy for individuals in Colorado: Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy: Often referred to as “liquidation bankruptcy,” Chapter 7 involves selling off non-exempt assets to pay creditors. Most unsecured debts, such as credit cards and medical bills, can be discharged in this process.
- Chapter 13 Bankruptcy: This type is also known as "reorganization bankruptcy." Chapter 13 allows individuals to create a repayment plan to pay back their debts over three to five years. At the end of the repayment period, remaining unsecured debts may be discharged.
Eligibility for Bankruptcy Discharge
Eligibility for a bankruptcy discharge depends on various factors, including the type of bankruptcy filed and the individual's financial situation. For Chapter 7, individuals must pass a means test, which compares their income to the median income in Colorado. If their income is below the median, they are eligible to file. For Chapter 13, individuals generally need a regular source of income and debts that fall below specified limits.
Process of Obtaining a Bankruptcy Discharge
The process of obtaining a discharge involves several key steps:
- Filing for Bankruptcy: The process begins when you file a petition with the bankruptcy court, including schedules of assets, liabilities, income, and expenses.
- Credit Counseling: Before filing, individuals are required to complete a credit counseling course from an approved provider.
- 341 Meeting of Creditors: After filing, a meeting will be scheduled where creditors may ask questions regarding the debtor’s financial situation.
- Discharge Order: If all requirements are met and no objections are raised by creditors, the court will issue a discharge order, typically within a few months for Chapter 7 and after the completion of the repayment plan for Chapter 13.
Debts That Can Be Discharged
Many unsecured debts can be discharged through bankruptcy, including:
- Credit card debt
- Medical bills
- Personal loans
- Past-due utility bills
However, not all debts can be discharged. Certain obligations, such as alimony, child support, some student loans, and most taxes, are generally excluded from discharge.
Impact of Bankruptcy Discharge on Credit Report
Receiving a bankruptcy discharge does impact your credit report. In Colorado, a Chapter 7 bankruptcy can remain on your credit report for up to 10 years, while Chapter 13 can stay for 7 years. However, many individuals find that their credit scores improve over time as they rebuild their financial standing post-bankruptcy.
Conclusion
Understanding bankruptcy discharge in Colorado can provide hope and direction for those facing financial hardship. By knowing the types, eligibility requirements, and processes involved, you can take important steps toward reclaiming your financial future. If you’re considering bankruptcy, it may be beneficial to consult with a qualified bankruptcy attorney who can guide you through this complex process and ensure your rights are protected.