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Parker Colorado
Bankruptcy Lawyer

Bankruptcy Myths
Colorado Attorney R. Brian Daniel

There are many myths and misconceptions surrounding bankruptcy.  As a result of these myths, some people rush to file for bankruptcy protection under the assumption that the act of filing their case will release them from all of their debt liabilities only to later discover that some of their debts cannot be discharged.  Others procrastinate the filing of their bankruptcy case out of a fear of losing all of their assets.  In the meantime, these individuals may continue to sink deeper and deeper into debt.  Misconceptions such as these can cause frustration, stress and financial harm when individuals act on them rather than getting sound legal advice from a qualified Parker, Colorado Bankruptcy Attorney. 

Some common bankruptcy myths (and the truth regarding each) include the following:

Myth #1: Filing for bankruptcy will ruin my credit
While it is true that a bankruptcy filing is reported on your credit report, this does not mean you will be unable to obtain credit in the future.  In many situations, individuals are able to begin rebuilding their credit shortly after their debts are discharged through bankruptcy.  In fact, many individuals find that they begin receiving credit card applications within a matter of weeks after filing.  While a your credit rating may take an immediate hit as the result of filing your bankruptcy case, most individuals see a similar upswing over a period of the first 12 months or so after they file if regular (and timely) payments are made to utilities, auto lenders, home lenders, and if the individual is able to obtain a credit card with a small limit or a secured credit card that is paid off every month.  The reality of the situation is that an individual’s credit is much more likely to be damaged if they continue to accumulate debt or miss scheduled payments than it would be if the individual filed for bankruptcy protection and received the fresh start that the bankruptcy laws are designed to provide.

Myth #2: All of my assets will be taken away if I file for bankruptcy protection
An individual’s assets are handled differently depending on the chapter (type) of bankruptcy protection that is sought; however, it is extraordinarily unlikely that an individual’s assets would all be taken away.  In a Chapter 7 bankruptcy (a liquidation case), only those assets owned by the individual that have a value in excess of the numerous exemptions allowed are available to the U.S. Trustee for possession and liquidation.  If, however, an individual has equity in an asset that is in excess of the appropriate bankruptcy exemption allowed, then the individual will usually be given the option to pay the excess into the Bankruptcy Estate, or surrender the asset to the Trustee for liquidation.  In a Chapter 13 bankruptcy (involving a payment plan pursuant to which a percentage of an individual’s debts are paid out over time), individuals are rarely required to forfeit any assets because the creditors are all going to receive a proportionate share of all monies paid into the Chapter 13 Plan.  This is not to say that individuals never lose assets in a Chapter 13 case or that lenders are not granted relief from the Bankruptcy Court’s Section 362 Automatic Stay in order to move forward with a repossession or foreclosure; however, if a payment plan is proposed (and accepted by the court and the creditors), then a Chapter 13 debtor will simply make payments equal to a portion of monthly income to the Trustee who will then divide the payments among the creditors – no assets necessarily need to be liquidated.

Myth # 3: All of my debt can be eliminated through bankruptcy
Most types of unsecured consumer debts, including credit cards bills and medical bills, may be eliminated (discharged) through a Chapter 7 bankruptcy; however some will remain. For example, in most cases you cannot discharge the following debts: mortgages; child support; spousal maintenance (alimony), most student loans; court fines and criminal restitution; personal injury judgments resulting from drunk driving or driving under the influence of drugs. In cases where an individual has debts that cannot be discharged through a Chapter 7 bankruptcy, careful analysis by a Parker, Colorado Bankruptcy Attorney may provide an individual with options including filing for bankruptcy protection pursuant to Chapter 13, wherein the individual would be able to place all of the non-dischargeable debt (including past due non-dischargeable debt) into a payment plan that, if approved, would permit the individual to get "caught up" over the course of between 3 and 5 years. At the end of the payment term, the debtor would be granted a discharge (assuming all plan payments had been made in a timely manner), and that person would then be in a position to have discharged most debts and to have gotten back to even on the ones that were outstanding at the time of the filing of the bankruptcy case.

Myth# 4: I have to be unemployed to file for bankruptcy
Your employment status may affect the type of bankruptcy you are eligible; however, whether you are employed or not has no effect on your ability to file for bankruptcy protection.  Parameters do exist by which an individual’s (or a couple’s) income is compared to certain federal median standards and if the income of the debtor(s) is higher than the applicable standard, then a Chapter 13 bankruptcy would be required instead of one pursuant to Chapter 7.

Myth# 5: Filing for bankruptcy is too difficult
Bankruptcy law can be complicated and there are limitations you need to understand as well as specific requirements that need to be met. However, a skilled Parker, Colorado Bankruptcy Attorney can help you navigate through the process while also providing advice regarding your unique situation. 

Many other bankruptcy myths also exist; therefore, it is important to speak to an experienced Parker, Colorado Bankruptcy Attorney who can help you better understand the difference between bankruptcy fact and bankruptcy fiction. 

If you are facing a complicated legal issue, reach out to The Daniel Law Firm. We take great pride in serving clients all over Colorado. Let us discuss with you the best strategy for moving your case forward in both a positive direction and timely manner. Call us today at (303) 951-0233.


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The Parker, Colorado Personal Injury Law Office of Brian Daniel serves all of Colorado including the residents of cities such as Parker, Franktown, Elizabeth, Kiowa, Castle Rock, Centennial, Sedalia, Lone Tree, Denver, Aurora, Brighton, Littleton, Highlands Ranch, Westminster, Northglenn, Commerce City, Boulder, Ft. Collins, Colorado Springs, Pueblo, Thornton, Arvada, Lakewood, and Englewood, as well as Arapahoe County, Douglas County, Jefferson County, Denver County, Larimer County, Weld County, and Colorado's Western Slope.
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