So many people call a bankruptcy lawyer expecting to file for bankruptcy next week, when in reality there is a process that must be followed. For example, you must receive credit and budget counseling from an approved credit counseling service within the 180 days prior to filing a petition. The credit counseling agency will review other options with you to help you avoid bankruptcy, which should be viewed as a last resort. Some of these agencies will provide counseling via telephone or online, but most people find it more helpful to meet in person. If and when you decide to file for bankruptcy, your forms must include the certificate from this agency indicating you received credit and budget counseling.
How to choose a credit counseling agency
When the time comes to choose a credit counselor, you may find it difficult to distinguish one from another. Many agencies are legitimate but there are others that are rip-offs. Just because they say they are "approved" for bankruptcy counseling doesn't guarantee a good reputation. Remember, even the best agencies won't be able to help you much if you are in serious financial trouble.
Many of the approved credit counseling agencies will also offer debt management plans, also known as DMPs. A DMP allows you to repay some or all of your debts by consolidating them with the agency. The counseling agency then distributes the money to your creditors. Be careful if you choose an agency that offers this service, as some will try to enroll you in a DMP even when it doesn't make sense. In many cases, bankruptcy might be the best solution for you, and if you sign up for a plan that you cannot afford you will end up in bankruptcy anyway.
When should you meet with an attorney?
For most individuals, it is a good idea to meet with an attorney prior to hiring a credit counselor. Some law firms will have a specific counselor that they recommend. A bankruptcy lawyer can also give you legal advice about whether bankruptcy is the answer for you, as well as many other suggestions.
Which property can I keep in a Chapter 7 bankruptcy?
Another one of the most common bankruptcy-related questions is concerning property. Everyone wants to know what property they will be able to keep, but it all depends on the type of bankruptcy you choose. For example, in a Chapter 7 case you can keep all the property that is "exempt" from creditors' claims. However, in a Colorado bankruptcy lawyer will tell you there are some exemptions in this state.
Here are the Chapter 7 exemptions in Colorado:
- $5,000 in equity in your car or $10,000 equity if you elderly or disabled
- $60,000 in equity in your home, or $90,000 if you are elderly or disabled
- $3,000 for household goods
- $20,000 for things you need for your job (tools, books, etc.)
- Except for the home, the amounts are doubled when a married couple files together.
It is important to remember that the value of the property is not based on what you paid for it, but rather what it's worth now. This will be especially helpful in determining the value of furniture and cars.
What about Chapter 13?
In a Chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn't file bankruptcy.
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it if you pay its non-exempt value to creditors in Chapter 13.
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