Bankruptcy and Your Credit Score 

Although creditors don't like to see bankruptcy on a credit report, the damage it will evoke depends largely upon what your credit score was before you filed. Credit scores are like your driving record since they take into account years of past behavior.

What are the different "Chapters" in bankruptcy? 

Filing Bankruptcy is very complex and complicated which is why you need to hire a competent Bankruptcy Attorney for legal counsel. A Chapter 13 is like a consolidation loan of bills and normally filed to keep property and stop foreclosures. A Chapter 7 is used to wipe out unsecured debts and to get rid of secured debts for property you don't wish to keep. In Brief the differences in all the "Chapters" are the following:
  • Chapter 7 - the liquidation chapter of the Bankruptcy code.  Often referred to as "straight bankruptcy" or "liquidation" cases. A trustee is appointed to collect and sell all property not exempt and use any proceeds to pay creditors. An individual get a discharge, meaning the debtor does not have to pay off certain types of debt.
  • Chapter 9 - provides for bankruptcy for municipalities and government units, for instance: school districts, water districts, etc.
  • Chapter 11 - the reorganization available to businesses and individuals who have substantial debts or income to restructure and repay their debts.
  • Chapter 12 - for use by those who qualify as "family farmers" under the Bankruptcy Code
  • Chapter 13 - the debt repayment chapter for individuals with regular income, whose debt does not exceed $360,745 in unsecured debts and $1,081,400 in secured debts, including individuals who have a business as a sole proprietorship. Corporations and Partnerships cannot file under Chapter 13.
Should I file for Bankruptcy?
It is strongly suggested that you seek legal advice from a competent bankruptcy attorney on this matter.
  • An individual should only consider filing bankruptcy if, and only if, they are not able to make payments on their financial obligations or is about to lose property or have property attached by the court. 
  • Bankruptcy is a last resort; no one should file bankruptcy just to improve their credit by having their debt erased. If a debt is secured by a lien on any property belonging to you (i.e. a home mortgage or a lien on a title to a car), the discharge will not keep the creditor from repossessing your property. 
  • You must pay a secured debt according to the terms of the loan to avoid repossession. 
  • Bankruptcy, does not pay your bills, it only releases you from the responsibility of them. 
  • The debt will still exist, but your creditors are legally stopped from collecting anything from you. In other words: the indebtedness is canceled. 
  • The discharge relieves you of the responsibility, but not anyone who may have co-signed on a loan for you. A Creditor can sue the co-signer for payment.
What is a discharge?
  • A discharge is a court order that permanently prohibits creditors from taking personal action against a debtor to collect debts incurred before the filing of a bankruptcy petition. 
  • A discharge does not prevent secured creditors from seizing collateral if payments are not kept current, for instance, foreclosure on your home or repossession of your car. 
  • The discharge does not include any debt incurred after the bankruptcy filing. Some debts are not dischargeable. 
  • If you have questions about a discharge, consult with an attorney.
How do I know if a debt is secured, unsecured, priority, or administrative? 
If you have questions about the nature of a debt, you should consult an attorney.
  • Secured Debt: A secured debt that is backed by a mortgage, pledge of collateral, or other lien, including a recorded judgment lien. It is a debt for which the creditor has the right to pursue pledged property upon default. Usually, things like a car or a house are used as collateral to secure consumer loans.
  • Unsecured Debt: If you have promised to pay someone money and not pledged any property, it is an unsecured debt. This may include a judgment that is not secured by a lien. Usually things like medical bills, gas or electric bills are unsecured debts.
  • Priority Debt: Priority Debts, in Section 507 of the Bankruptcy Code, lists debts that are entitled to be paid ahead of most other unsecured debts. Examples of priority debts are some taxes, wage claims of employees, debts related to good and services provided to a debtor's estate during the bankruptcy case, and alimony, maintenance, or support of a spouse, former spouse, or child.
  • Administrative Debt: Administrative debt is a type of priority debt and arises when an individual provides good or services to the bankruptcy estate during the case. Sometimes attorney fees are an example of administrative debt, as well as trustees fees and costs.
Who pays my debts if I file? 
  • The creditor suffers the loss. 
  • These losses are part of doing business, yet in the big picture, the losses are transferred to the price you and everyone pays.
  • Similarly, the losses of an insurance company are transferred to the premiums everyone pays.
What is the filing fee for Bankruptcy? 
  • The current fee for filing Chapter 7 petition for bankruptcy is $355.00. 
  • The current fee for filing Chapter 13 is $310.00. 
  • The court does not accept checks or credit cards to pay the fees. 
  • Effective 9-1-14 payment of all fees must be made in the form of cashiers check, money order, or exact cash (no change is made by the Clerk's office). 
  • Consult the United States Bankruptcy Court District of Colorado website for information and contact information
Where do I file my bankruptcy case? 
  • In Colorado you file at the United States Bankruptcy Court, U.S. Custom House, 721 Nineteenth Street, Denver, Colorado 80202-2508.  
  • You may not fax pleadings
  • Electronic filing qualified attorneys may submit pleadings via the Court's Electronic Case Filing system 
  • Review more details about CM/ECF.
How long will it take to file Bankruptcy? 
  • Generally it will take 3-4 months for a Chapter 7 bankruptcy to be finalized. 
  • You will receive a letter within 10 days of filling advising you of the time and date of the 341 hearing.  
  • It is usually scheduled about 4-6 weeks after you file. 
  • A Chapter 13 bankruptcy will take as long as the terms of the repayment plan.
Who notifies my Creditors and bill collectors? 
  • After the petition for bankruptcy is filed the Court mails a notice to all the creditors you have listed in the schedules
  • Usually taking about 1-2 weeks.
What are the most common mistakes made when filing bankruptcy? 
  • Failing to show up for your hearing -- your case will be dismissed
  • Not listing all of your debts -- fail to list a debt and you will continue to owe the debt
  • Do you have too much money in your checking account?
  • Are you expecting a tax refund?
  • Always list all debts and assets, even if you think they could be dischargeable
What documents do I need to submit in filing for Bankruptcy in Colorado? 
  • Most of the documents are available at the Court for a small fee or from Forms section of the United States Bankruptcy Court District of Colorado 
  • Click here for more United States Courts Bankruptcy forms
How does bankruptcy affect my credit score? 
  • There is no doubt that a bankruptcy will hurt your ability to get future credit 
  • Under the Fair Credit Reporting Act will remain on your credit record for ten years, but most of the damage to your credit has already been done. 
  • If you have additional questions, contact your bankruptcy attorney, and visit the Federal Trade Commission website
  • Although creditors don't like to see bankruptcy on a credit report, the damage it will evoke depends largely upon what your credit score was before you filed. 
  • Your credit history is like your driving record; the credit bureaus take into account your years of past behavior. That history can include delinquencies or bankruptcy. 
  • A bankruptcy discharge will not erase discharged creditors or your pre-bankruptcy payment history. 
  • No one can be forced to give you credit, but there are some lenders that may give you a second chance after reviewing your past credit history. 
  • There are some debts that will never be discharged; bankruptcy code prohibits the discharge of some types of debt. 
What if creditors are harassing me? 
  • You have specific rights by Federal law to sue creditors who threaten or harass you, call you at inappropriate hours, or make false representations to you.  
  • Review the Fair Debit Collection Practices Act
  • If creditor keeps trying to collect money after a discharge, contact your bankruptcy attorney and ask them to take actions on your behalf, you may be entitled to take further legal action.
Will the electric company shut off my power if I file for bankruptcy? 
  • An electric company can not discriminate against anyone who has filed for bankruptcy. 
  • They must continue providing you with electricity and may not cut you off
  • They may request a deposit from you for continued service. 
  • Review the Energy Outreach Colorado's Energy Bill Assistance Program
What if a spouse has a lot of debt and files bankruptcy? 
  • Bankruptcy cases are individual, and should be explained by a bankruptcy attorney. 
  • It is not like owning a house in joint tenancy where both spouses own it together. Each spouse's debt is only that particular spouses debt; bankruptcy filing should only affect the person filing, as long as there are no credit bureau errors. 
  • See Federal trade Commission's "How to Dispute Credit Report Errors"  at Consumer Abitlity to Dispute Reports
  • Credit bureaus go by social security numbers to minimize these types of errors. 
  • Information about assets and wages for the non-filing spouse must appear on your statements and schedules to give a complete picture of your financial situation.  
  • If a spouse files and there is a loan or debt, where the non-filing spouse is a co-signer/co-debtor, the creditor will look to the non-filing spouse for the debt re-payment.
Will filing for bankruptcy stop a wage garnishment? 
  • Yes, all wage garnishments, except for child support are vacated by the provisions of Automatic Stay.
Do the Automatic Stay provisions of the Bankruptcy Code protect the money I have in the bank? 
  • Money in your banking account may or may not be seized by the trustee, depending on the bankruptcy exemptions claimed.
  • Usually debtor's banking accounts are exempted
  • Contact an attorney to be advised of the often overlooked exceptions.
What is a trustee? 
  • A trustee is appointed after a bankruptcy case is filed. 
  • The trustee orally examines your case, as well as the debtor to determine if there are any assets available to creditor. 
  • Review the list of United States Department of Justice Chapter 7 trustees 
  • The trustee is not the judge.  
  • The trustee represents the bank, not you.  
  • The trustee is there to take any assets they can and to check the accuracy of the paperwork you have submitted.
What are my Colorado Bankruptcy Exemptions? 
  • Bankruptcy exemptions allow a debtor to protect property from the trustee and from creditors. 
  • Many of the Colorado Bankruptcy Exemptions can be found at Colo. Rev. Stat. §§ 13-54-102 and 38-41-201 et. seq. 
What is the means test? 
  • The means test is used in cases where Chapter 7 individual debt's current monthly income exceeds the state's median family income.  
  • Used to determine if a debtor has an ability to repay, if there is, this is a "presumption of abuse." 
  • If the debtor receives a Chapter 7 discharge this would be an abuse of the bankruptcy process because the debtor may have the ability to pay debts outside of bankruptcy, or through a Chapter 13 repayment over time. 
  • Review IRS guidelines for median income.
How can I improve my credit score after bankruptcy?
Old Bad debt is not erased from your credit report, what is reported is that you had debt and that you filed for bankruptcy. Bankruptcy does not give you a good credit report, or automatically repair your credit. You will need to repair your credit by paying your debts on time after the bankruptcy. Even though bankruptcy will remain on your credit report for ten years, you can start rebuilding your credit right away. 

Credit scoring companies look at several factors when determining your score. 
  • What is your payment history, do you pay your bills on time or have filed for bankruptcy?
  • Do you have any outstanding debt?
  • What is your length of credit history?
  • How much new credit have you applied for?
How do I qualify for an auto loan with a bankruptcy on my credit report?
  • Some lenders are reluctant to provide a car financing to those with a past bankruptcy. The chief concern is if a person has defaulted on a loan in the past they might just do it again. 
  • When you are able to secure financing for a car loan with a bankruptcy showing up on your credit report, you will usually find that it is at a higher than normal interest rate. 
  • If you have recently gone through a bankruptcy and are now finding it difficult to obtain financing for an auto loan, don't worry. You won't have to wait years for the bankruptcy shadow to reflect negatively on your credit report before you can purchase a vehicle. 
  • It is possible to get an auto loan with bankruptcy on your credit report. You have come to the right place: Colorado Credit Repair will help you today!
What factors determine what my monthly payment will be on a car? 
  • How much you borrow
  • The interest rate
  • Terms of the loan
When I qualify, how much down payment money will I need?
  • The down payment money amount that you will need is based on a number of factors. 
  • You may get a general idea of the amount by first determining your credit profile 
  • A trade-in is like a down payment
  • An additional down payment may be required if there is a lien on the vehicle you are trading. 
  • A Cosigner may be considered for a Buyer who does not comply with all the credit requirements.  
  • The income of the Buyer, however, must meet all the income and budget guidelines without reliance upon the income of the cosigner.
What are the monthly payments? 
  • Monthly payments are based on your credit profile and the vehicle you are purchasing.  
  • Newer, lower mileage cars qualify for extended terms. 
  • The best payments are on less expensive cars that have under 50,000 miles. 
  • If you have an idea of the amount you want to finance and the interest rate you will qualify for use our Payment Calculator to estimate your payments.

*It is strongly suggested that you find a reputable bankruptcy attorney to answer your questions prior to filing.  The following information may help you to have a better understanding of bankruptcy and provide insight to the questions you need to ask your bankruptcy attorney, but it in no way serves to completely educate an individual questioning the filing of bankruptcy.