If your debts have spiraled out of your control and if your bills begin piling up – and particularly if you’re getting rude calls and letters from collection agencies – you may consider filing a petition for bankruptcy. You’ll need the advice of a law firm handling bankruptcy in Loveland.

You will not be alone. As of August, more than 4,500 bankruptcy filings have been reported in the State of Colorado in 2021. Hard economic times always mean more bankruptcies.

Some people file for bankruptcy two, three, or even more times, and some people take advantage of the process, but for most of us, as soon as we begin doing some research about bankruptcy, it quickly becomes confusing.

What Makes Bankruptcy Confusing?

The first thing that an average person finds confusing about bankruptcy is the terminology. What are Chapter 7 and Chapter 13? What are secured and unsecured debts? What is an automatic stay? If you’ll keep reading, you will learn how these terms are used in a bankruptcy proceeding.

Understanding the language of bankruptcy is one key to achieving your goals when you file your bankruptcy petition. Having the advice and services of the right Colorado bankruptcy lawyer is equally imperative.

At the end of the bankruptcy process, you’ll have a fresh financial start and an opportunity to rebuild your credit and finances. But even before you file a bankruptcy petition, you should understand these basic terms and phrases commonly used by bankruptcy courts and attorneys.

What Are Chapter 7 and Chapter 13?

When your bankruptcy lawyer talks about a “Chapter 7” or “Chapter 13” bankruptcy, he or she is referring to the federal laws that govern bankruptcy. Chapter 7 and Chapter 13 are both chapters in Title 11 of the U.S. Code, the full federal laws of the United States.

As of 2021, the U.S. Code includes 53 “Titles.” Title 11 is the Bankruptcy Code, the complete federal bankruptcy laws. Chapters 7 and 13 are the chapters of Title 11 that govern personal bankruptcies.

How Are Chapter 7 and Chapter 13 Bankruptcies Different?

Chapter 7 bankruptcies and Chapter 13 bankruptcies are somewhat different legal procedures. Chapter 7 bankruptcies will be appropriate for some people, and Chapter 13 bankruptcies will be the better option for others. Let a bankruptcy lawyer in Loveland help you make the right choice.

A bankruptcy under Chapter 7 “discharges” (eliminates) “unsecured” debts, while a bankruptcy under Chapter 13 “reorganizes” your debts. With a Chapter 13 bankruptcy, you still must pay off your debts, but you are given the time you will need.

Almost anyone may file for bankruptcy under Chapter 13, but should you earn too much income or own too many assets, you will not be qualified to file under Chapter 7. However, if you earn less than the Colorado median income, you will qualify for a Chapter 7 bankruptcy.

What Is “Secured” and “Unsecured” Debt?

Some people may think that bankruptcy is a magic wand that makes all of their debts disappear, but it’s not. Bankruptcy eliminates only “unsecured” debts, so you should understand the difference between “secured” and “unsecured” debts before you submit a bankruptcy petition.

The “unsecured” debts that may be eliminated in the bankruptcy process include medical bills, charge and credit card balances, and similar kinds of debts.

Other debts are “secured” debts, which include college loans, federal, state, and local tax debts, and any fine or fee ordered by a court: a personal injury judgment, child or spousal support, or a criminal or civil fine. Bankruptcy does not discharge any of your secured debts.

Bankruptcy temporarily protects you from repossession and foreclosure, but you’ll be required to pay whatever you still owe on your vehicle or home at the end of the bankruptcy process. Total up the debts you owe. If the bulk of your debt is unsecured, bankruptcy might be your best alternative.

What is an Automatic Stay?

Both Chapter 7 and Chapter 13 bankruptcies have this in common: the automatic stay. An order for relief – called an automatic stay – takes effect immediately upon filing for bankruptcy.

Whether you need to prevent a vehicle repossession, stop a wage garnishment, or unfreeze a bank account, an automatic stay lets you, and it offers you a fresh chance to put your financial affairs in order.

Once it goes into effect, an automatic stay keeps your creditors from foreclosing, repossessing your vehicle, garnishing your wages, suing you, or demanding payment either in writing or over the phone.

If a Creditor Violates Your Rights

In fact, it is against the law for creditors to ignore automatic stays, and you could win a judgment against a creditor who violates your own automatic stay.

In Colorado, any creditors that you name in your petition for bankruptcy are promptly notified by the bankruptcy court that your automatic stay has gone into effect. The automatic stay is a central element of the protection you receive when your attorney files your bankruptcy petition.

Is Bankruptcy Right for You?

Bankruptcy lets conscientious people have a fresh start financially, and it allows them to make positive and lasting changes. But some people keep making the same blunders and end up in debt again almost overnight. If you declare bankruptcy, can you modify your spending habits?

If you can, bankruptcy may be the way to resolve your debt difficulties, but you may not need to take that drastic step. Bankruptcy may be the option for others, but it may not be the right option for you. A Loveland bankruptcy attorney can help you make that determination.

You may file your bankruptcy without a lawyer’s help, but that is not a smart move. If you make a mistake, it could be quite costly, and your petition for bankruptcy could be delayed or even denied.

When Should You Contact a Bankruptcy Attorney?

Consult first with a Loveland bankruptcy lawyer if you are considering bankruptcy or if you need to find out more about the bankruptcy process – and its advantages and disadvantages – before you make a final decision.

Filing a petition for bankruptcy must be an informed choice that cannot be made in haste, but if you face overwhelming debts, and you’ve thought about bankruptcy, make the call to a Colorado bankruptcy lawyer immediately.

Before you file for bankruptcy in this state, have all of your questions answered, and be sure to discuss any concerns you may have about bankruptcy with a bankruptcy attorney you trust. Having a good lawyer’s advice about bankruptcy is your right.