Colorado Bankruptcy Law: How to Discharge Credit Card Debt
Understanding Colorado bankruptcy law is essential for anyone facing overwhelming credit card debt. Filing for bankruptcy can provide a fresh start and relieve individuals from the stress of unmanageable financial obligations. In this article, we will explore how to discharge credit card debt through bankruptcy in Colorado.
In Colorado, individuals have two primary options for bankruptcy: Chapter 7 and Chapter 13. Each type serves different financial situations and goals, particularly when it comes to discharging credit card debt.
Chapter 7 Bankruptcy in Colorado
Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," is designed for individuals who have few assets and significant non-secured debts, such as credit card debt. The main advantage of Chapter 7 is that it allows for the discharge of most unsecured debts, including credit cards, within a few months of filing.
To qualify for Chapter 7 bankruptcy in Colorado, you must pass the means test, which evaluates your income and expenses. If your income is below the median income for your household size in Colorado, you are eligible. If your income exceeds this median, you may still qualify by demonstrating that you have sufficient expenses that reduce your disposable income.
Once you file for Chapter 7 bankruptcy, an automatic stay takes effect, preventing creditors from pursuing collections. This covers credit card companies, halting phone calls and lawsuits. Following the bankruptcy discharge, you will no longer be legally responsible for repaying the discharged credit card debts.
Chapter 13 Bankruptcy in Colorado
Chapter 13 bankruptcy, known as a "reorganization bankruptcy," is suitable for individuals with a regular income who want to repay their debts over a three to five-year repayment plan. This option allows you to keep your assets while working towards paying off your creditors.
In Chapter 13, you will create a repayment plan that outlines how much you will pay to your creditors each month. Discharging credit card debt under Chapter 13 occurs post-repayment period, where any remaining unsecured debt, including credit card debt, can be discharged. This means that if you are unable to pay off all your credit card debt through the repayment plan, the remaining amount may be wiped away after fulfilling the terms of the plan.
It is essential to note that while Chapter 7 provides quicker discharges, Chapter 13 allows for debt restructuring and protecting valuable assets from liquidation.
The Process of Filing for Bankruptcy in Colorado
Regardless of the bankruptcy chapter you choose, the process will generally follow these steps:
Credit Counseling: Before filing for bankruptcy, you must attend a credit counseling session from an approved agency.
Filing the Petition: Prepare and file your bankruptcy petition with the U.S. Bankruptcy Court in Colorado, including all necessary schedules of debts and assets.
341 Meeting of Creditors: Attend the creditors' meeting where you will answer questions about your finances and bankruptcy petition.
Completion of Financial Management Course: After filing, complete a financial management course to fulfill requirements.
Discharge: If all goes well, you will receive a discharge of your eligible debts, including credit card debt.
Considerations and Consequences
While bankruptcy can discharge credit card debt, it also comes with consequences, such as a significant impact on your credit score. The bankruptcy will remain on your credit report for seven to ten years, depending on the chapter filed, which may affect your ability to obtain new credit in the future.
Moreover, not all debts can be discharged in bankruptcy, including certain tax debts and student loans. It's crucial to consult with a qualified bankruptcy attorney in Colorado to understand your specific situation and the best approach for managing your credit card debt.
Conclusion
Filing for bankruptcy under Colorado law can provide relief from excessive credit card debt, either through Chapter 7's faster discharge or Chapter 13's repayment plans. Understanding your options and the implications can help you make informed decisions and start your journey towards financial recovery.