One of the best reasons to use a bankruptcy attorney when you file bankruptcy is to make sure that you keep as much property as the law allows.

When you file bankruptcy, you’ll have to take account of all your assets. That includes everything from your pots and pans to your retirement account. All of your property will either be exempt or non-exempt. Exempt property is protected. Your creditors can’t touch it. Colorado has exemptions for such things as clothing, household goods, jewelry, vehicles, and many other items (see Colorado Revised Statute Section 13-54-102 for other exemptions). Non-exempt property, unsurprisingly, is just the opposite. The bankruptcy trustee can force you to turnover non-exempt property and then distribute the proceeds from their sale to your creditors.

In Colorado, cash is non-exempt, whether it’s in a bank account, under your mattress, or in your purse. It also doesn’t matter if you give that money to someone to hold when you file. (In fact, doing so can get you into more trouble than that money is probably worth.) If that cash came from wages, however, the trustee can only demand the turnover of 25% of what you had on the day you filed. Also, if the source of funds was exempt, for example if it came from worker’s compensation or Social Security benefits, you’ll be able to keep all of that money, even if it was in your bank account when you filed. On the other hand, if that money came from inheritance, the lottery, or some other source, you’re going to be handing it over to trustee.

This is where a good bankruptcy attorney comes in handy.  When I meet with someone for a consultation, I ask them if they own certain common non-exempt items, like cash or season tickets. Later, when I prepare their bankruptcy petition, my clients have to disclose absolutely everything they own.  If I discover something that is non-exempt, I explain to my client what could happen if we file.  At that point, they can decide whether to convert the non-exempt item to exempt property or go ahead and file and see what the trustee decides. Of course, the other option is to not file. You might make that choice if the value of any non-exempt asset is worth more than the debts you’re hoping to get rid of.

As far as your bank account and cash is concerned, the best course is almost always to make sure that on the day you file your case (actually, let’s spend it by the day before you file just to be sure it’s gone), your cash on hand is as low as possible. Fill up your gas tank or your refrigerator. Pay next month’s car insurance. Get your teeth cleaned. Just make sure it’s gone. My job is to make sure that you keep as much money as possible when you file bankruptcy. Disclose everything to me, and I’m confident I can make that happen.

If you’re thinking about bankruptcy and are unsure whether your property is exempt or non-exempt consider scheduling a free consultation with a bankruptcy attorney. They’re free, confidential, and there is absolutely no obligation that you hire us. Call 303.331.3403 to schedule your consultation or click on the “Schedule Your Free Consultation” box to find a time that works for you.

I’m not stupid enough not to realize that many people have a poor impression of lawyers.  I watch TV. I’ve seen those commercials, and I can’t blame them. There are plenty of bankruptcy lawyers out there who seem to suggest that bankruptcy is an easy choice and will take care of all your problems.  No one thinks they’ll ever have to file bankruptcy. Bankruptcy is the worst-case scenario no one ever thought they’d see themselves in. I understand that and try to see if there is anyway that someone can avoid having to use it. Bankruptcy should never be considered an easy choice. There’s still a great deal of social stigma against it and your credit report will reflect your bankruptcy for ten years. In some states, employers can even refuse to hire you because you filed.

During my initial consultation with someone who is thinking about bankruptcy, my main objective is to find a reason for them not to file bankruptcy. Which means they won’t be hiring me.

Bankruptcy might not be your best option in a few different situations:

• If you’re unemployed. Although having a debt collector hound you and file suit can be stressful, if you’re unemployed – whether or not you’re receiving unemployment benefits – the collector won’t be able to do anything once it gets judgment. It can’t garnish your paycheck. If there’s nothing in your bank account, it can’t garnish that. Keep in mind, though, that if you own a home, it can record its judgment, which means that you’ll have to pay that creditor when it comes time to selling or refinancing your home.
• If your debts are low. I understand that debt, no matter how much sometimes, can feel overwhelming, but if buckling down and cutting down on non-essential items like travel or recreation for a year or two or buying a less expensive car means that you can pay off your debt, I encourage you to think seriously about doing just that. As a rule of thumb, if your credit card and other unsecured debt is more than 40% of your before taxes annual income, then bankruptcy might be a good option. Unless you interest rate is extremely low, you’ll be paying that debt off for a very long time.
• If you’re retired or disabled. If you’re receiving social security benefits, this money is protected from creditors. Again, even though they’ll be able to get judgment, there won’t be much they can do after that beyond hounding you for the money. Bankruptcy might give you peace of mind and make the phone calls stop, but that doesn’t mean you have to file right away.

If you’re having trouble making ends meet and think that bankruptcy might be a good idea, schedule a free consultation with a bankruptcy attorney. Your consultation is confidential and there’s no obligation to hire us. By the end of the consultation, you should know whether or not bankruptcy is a good idea and whether or not you want to work with us.

There has been a lot of talk about whether or not homeowners should walk away from their mortgage lately, and we thought it would be helpful to write about how bankruptcy and walking away intersect.

It probably comes as no surprise that homeowners who are considering giving up their home are usually “underwater” with their mortgage, meaning that the home is worth less than what they owe. Desperate to keep their heads above water, many homeowners simply move out of their home and mail the keys to the bank. Before you take a step like this, consider the consequences and whether or not there are any alternatives.

First, defaulting on your mortgage will trigger a foreclosure sale. If the public trustee sells the home for less than what you owe, the result is that there is a “deficiency.” The deficiency is the difference between what you owe and what the house sold for. You can bet that the lender will want someone to pay the deficiency, and unfortunately, that someone is the homeowner who walked away.

Are there any alternatives to walking away from your mortgage? Yes, a couple. You could negotiate a “short sale” with your lender, where your lender agrees to let you sell your home for less than what you owe. Again, since you are obviously selling for less than you owe, you need to consider what the bank will do with the deficiency. The best course is to ask if the lender will agree to not pursue your for the deficiency. Their response can depend on many factors, so it is impossible to say whether or not they will agree.

Your other alternative is to consider filing Chapter 13 bankruptcy. Chapter 13 bankruptcy will allow you to “strip” and second or third mortgages. Keep in mind that you can only use this strategy as long as you owe more on the first mortgage than what the home is worth.  Any other mortgages will be converted to unsecured debt through your Chapter 13 plan. You’ll pay your unsecured creditors based on a simple formula to calculate your disposable income. At the end of your plan any thing still owing to your unsecured creditors will be discharged, just like in Chapter 7 bankruptcy. What this means is that at the end of your Chapter 13 bankruptcy (which can last between three and five years), you’ll be left owing only your first mortgage. Also, Chapter 13 may not be an option if you can’t repay any back payments to the lender that you’ve missed during your bankruptcy.

Lastly, if you decide to walk away from your mortgage and the lender pursues you for the deficiency, the deficiency can be eliminated in either Chapter 7 or Chapter 13 bankruptcy. In some cases, this is the best way to be sure that the bank doesn’t come after you for any money you still owe.

If you are thinking about walking away from your mortgage, sit down for a free consultation with a Denver bankruptcy attorney to see if Chapter 7 or Chapter 13 bankruptcy is your best option. We’ll be glad to talk to you about the bankruptcy process and won’t hesitate to tell you if we don’t think it’s a good idea in your case.

One of the primary goals of Chapter 7 or Chapter 13 bankruptcy is to provide debtors with a financial fresh start. Imagine a world where bankruptcy stripped debtors of everything and you have to wonder how anyone could start over again.

Fortunately, both Chapter 7 and Chapter 13 bankruptcy allow you to keep property that provides that new beginning. These provisions of the bankruptcy code, called “exemptions,” allow debtors to keep certain property that is essential to a new start. Among the items that are protected are household goods, tools used in a trade, and the equity in a vehicle up to a certain amount. One of the biggest Colorado bankruptcy exemptions can be found in Colorado Revised Statute 13-54-102(s) which protects retirements accounts like 401(k)s and IRAs.

13-54-102(s) reads:

Property, including funds, held in or payable from any pension or retirement plan or deferred compensation plan, including those in which the debtor has received benefits or payments, has the present right to receive benefits or payments, or has the right to receive benefits or payments in the future and including pensions or plans which qualify under the federal “Employee Retirement Income Security Act of 1974″, as amended, as an employee pension benefit plan, as defined in 29 U.S.C. sec. 1002, any individual retirement account, as defined in 26 U.S.C. sec. 408, any Roth individual retirement account, as defined in 26 U.S.C. sec. 408A, and any plan, as defined in 26 U.S.C. sec. 401, and as these plans may be amended from time to time.

Be aware that the retirement plan must be a qualified plan, meaning that it must fall under ERISA. What that means is that if you have been putting savings into an E*trade account or other similar stock purchase account, that account won’t be protected. Unless you convert the stock to non-exempt property, you’ll be turning it over to the bankruptcy trustee who will distribute it to your creditors.

The bottom line is that your 401(k) or IRA account is protected when you file Chapter 7 or Chapter 13 bankruptcy. Instead of liquidating your retirement to pay your creditors, consider if bankruptcy might be a better option, especially if your retirement account will only keep you afloat for a few months. With your retirement account intact, you’ll be able to move forward with your retirement dreams.

If you are thinking about Chapter 7 or Chapter 13 bankruptcy but are considering using your retirement account to make ends meet, schedule a consultation with a Denver bankruptcy attorney first.  Our consultations are free and require no obligation to hire us. The conversation could help you find out what your best option is.

I may get myself into trouble, but I’m going to assume that if you’re looking at our website, you’re trying to find a way to get out from under overwhelming debt. While bankruptcy is one way to do that, another way is to negotiate with your creditors to settle your debt for less than you owe, either directly or by using a debt settlement company. I thought it might be helpful to write about a couple of differences between the two methods that might help you make a decision. Two of the biggest areas of difference between bankruptcy and debt settlement are taxes and lawsuits.

Tax consequences – If you settle a debt with a creditor for less than you owe, there will likely be tax consequences. Let’s say that you Citibank $10,000.00, but they agree to let you settle your account for $5,000.00. You can rest assured that come tax time, Citibank will send you a 1099-C. This 1099-C will essentially be saying that you realized $5,000.00 in income as a result of debt forgiveness. The bottom line? You’ll be paying income taxes on that $5,000.00. When you file bankruptcy, there are no tax consequences for the debt you get rid of. Creditors won’t be sending you 1099s, and you’ll be that much closer to a fresh start. Keep in mind, however, that you should carefully time your bankruptcy filing to avoid the bankruptcy trustee asking for your tax refund.

Lawsuits - When you work with a debt settlement company, they promise to reduce how much you owe to your creditors. What they don’t mention is that in order to negotiate with your creditors, they need money. Before they can pay any of your creditors, you’ll have to build up an escrow account, which is essentially a savings account they’ll use to pay your creditors. What the debt settlement company may not mention is that while you are building up your escrow account, the creditors still want to be paid. That means they’ll probably move forward with suing you. Once they get judgment, they can have your paycheck garnished. Bankruptcy, on the other hand, will immediately stop any collection action by your creditors. They can’t call you or your boss. They can’t write you. Even more importantly, they can’t sue you or take any of your paycheck.

If you are considering bankruptcy, schedule a free consultation with a Denver bankruptcy attorney. You’ll be able to ask all the questions you have about bankruptcy and debt settlement and be able to make a more informed decision.

If you’re thinking about filing personal bankruptcy and you’re like most of the people that hire me, one of your biggest concerns is whether you’re going to lose any of your belongings in the process. The bottom line is that most people get to keep their property. Colorado, like every other state, has laws (most of which can be found at Colorado Revised Statutes 13-54-102) in place that protect certain property from ever being taken from creditors, either in or out of the bankruptcy process. These laws, called exemption laws, allow bankruptcy filers to keep their property and help ensure they get the fresh start that the Bankruptcy Code is intended to give.

As you can imagine, however, the powers that be limited their generosity to the essentials. In Colorado, the exemption laws protect household goods, clothing, jewelry and vehicles, but only up to a certain value. For example, the vehicle exemption is for $5,000 in equity. So, if you own your car outright and it “Blue books” for less than $5,000, you’ll be able to keep it. Also, if your vehicle is worth more than you owe, $5,000 of that equity is protected.

Where debtors need to be concerned is when they own property that isn’t protected by the exemption laws. Examples of non-exempt property in Colorado include cash, season tickets, boats, and even firearms. The bankruptcy trustee can force the debtor to turnover this non-exempt property so that she can sell it and distribute the proceeds to creditors. The good news is that the debtor is given the chance to buy back this property. What that means is that instead of turning over your non-exempt item, you can negotiate a price for it and pay the trustee that amount. In some cases, the trustee will agree to monthly payments, but will usually only spread them out for a limited time.

Another option regarding non-exempt property is to convert it to exempt property before you file. Be careful, though, because certain pre-filing transfers can get you in trouble and might prevent the court from issuing a discharge.

Navigating Colorado exemption laws is just one reason to consider hiring a Denver bankruptcy attorney.

If you’re think about filing your own bankruptcy, you’re not alone.  In Colorado, about 10% of people who file represent themselves.  In California it’s even higher.  As I’ve written before, I don’t think it’s absolutely necessary for everyone to hire a Denver bankruptcy attorney. If you’re prepared to navigate the Internet, you’ll find all the forms and information you need to file your case. And my experience is that the clerks at the bankruptcy court are very helpful. (Keep in mind, though, that there is a large sign in the clerk’s office which recommends hiring an attorney.)

Filling out forms and filing them is just one part of the bankruptcy process, however. Consider the pro se debtor representing herself at the meeting of creditors I saw the other day. While my clients and I waited to be called, the trustee called her to the conference table. I won’t say he scolded her, but in a very stern voice he told her that her meeting would not be held that day. He explained that she had missed the deadline to provide him with her prior year’s tax returns (due one week before the meeting). He also told her that he was likely going to ask the court to dismiss her case.

Now, it’s possible that he didn’t ask the court to dismiss her case, but I’m guessing he did. And, it’s also possible that the court will give her additional time to provide her tax returns and allow the meeting of creditors to be rescheduled. That is, if she responds to the trustee’s motion to dismiss. Take a look around and see how easy it is to find a “form” response to a motion like that.

My point is that the bankruptcy process is filled with requirements that aren’t included on any forms. You have to be prepared to learn the entire process, including deadlines and what documents you must provide the trustee or creditors. You may find yourself trying to learn the Bankruptcy Code. An experienced Denver bankruptcy attorney would have guided her through her meeting of creditors easily, and she likely would have gotten her discharge right on schedule.  Instead, she faces the possibility of having to defend a motion to dismiss, or worse, having to refile her case and pay the court another filing fee. If her case is dismissed, you can be sure her creditors will be picking up their collection activity where they left off.

Bankruptcy Basics – Part 1: Introduction

Bankruptcy Basics – Part 2: Types of Bankruptcy

Bankruptcy Basics – Part 3: Limits of Bankruptcy

Bankruptcy Basics – Part 4: Filing for Bankruptcy

Bankruptcy Basics – Part 5: Creditors Meeting

Bankruptcy Basics – Part 6: Bankruptcy Crime

Bankruptcy Basics – Part 7: Court Hearings

Bankruptcy Basics – Part 8: The Discharge

Plaintiffs-appellants George and Georgia Diamond filed an adversary proceeding against Chapter 7 debtor Scott Bakay alleging that Bakay fraudulently induced them to loan him money. The bankruptcy court entered summary judgment in favor of the Diamonds and declared the loan nondischargeable, but denied the Diamonds postjudgment motion for prejudgment interest. The Diamonds appealed this latter decision, and the Bankruptcy Appellate Panel of the Tenth Circuit (BAP) affirmed the decision of the bankruptcy court. The Diamonds appealed to the 10th Circuit Court of Appeals.

Under federal law, “prejudgment interest may generally be awarded if 1) the award of prejudgment interest would serve to compensate the injured party, and 2) the award of prejudgment interest is otherwise equitable.” In re Inv. Bankers, 4 F.3d at 1566. “Thus under federal law prejudgment interest is ordinarily awarded, absent some justification for withholding it.” U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1256 (10th Cir. 1988), overruled on other grounds as recognized by Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1231 (10th Cir. 1996). That said, however, prejudgment interest “is not recoverable as a matter of right.” U.S. Indus., 854 F.3d at 1256. Instead, “awards of prejudgment interest are governed by fundamental considerations of fairness.”

Affirmed.

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It can happen to the best of us. Despite your best intentions, circumstances beyond your control can lead to bankruptcy a second time. The same reasons that bring people to bankruptcy in the first place: divorce, unemployment, and unexpected medical expenses, are things that we have little control over and, unfortunately, can cause financial circumstances to spiral out of control. While the bankruptcy laws discourage people from filing multiple times, they allow individuals to file more than once. The same rules that allowed you a fresh financial start the first time will give you a second chance to get back on your feet.

When you can file a second bankruptcy can depend on different factors including when the first case was filed and whether or not the case was discharged or dismissed. It can also depend on whether your first case was a Chapter 7 or Chapter 13 and what chapter you will be filing in your second case.  Generally, the refiling times are set out below:

• If you previously filed a Chapter 7 bankruptcy and your debts were discharged in that case, you can file another Chapter 7 bankruptcy after 8 years from the date that your prior Chapter 7 was filed. If your prior bankruptcy was dismissed, you may be able to file sooner.

• If your prior bankruptcy was a Chapter 13 bankruptcy, you may not file for Chapter 7 bankruptcy until 6 years after your Chapter 13 case was discharged. Again, if the Chapter 13 was dismissed, you may be able to file sooner. Also, if you paid off more than 70% of your unsecured creditors in your prior Chapter 13 case, you may be able to file sooner.

• If your prior bankruptcy was a Chapter 7 bankruptcy, you may file a Chapter 13 bankruptcy 4 years after your prior Chapter 7 bankruptcy was discharged.

• If your prior bankruptcy was a Chapter 13, you may file another Chapter 13 bankruptcy 2 years after your prior Chapter 13 case was discharged.

It is important to be aware of the timing of a second bankruptcy case. If you file too soon, your case may be dismissed, and you will lose the protections of bankruptcy and creditors can proceed against you, including suing you and garnishing your wages. You should work with an experienced bankruptcy attorney to help guide you through this complicated process.

If you are considering bankruptcy, we hope you’ll sit down with one of our attorneys for a free consultation to learn if you are eligible. Filing bankruptcy a second time may not be your best option. If we don’t think it is, we’ll tell you and discuss other options with you.