Robert M. Vockrodt, Esq.
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Bankruptcy has its roots in the United States Constitution. When the colonists broke away from England to set up this new country, they wanted to avoid some of the problems that they previously encountered. One of those problems was the treatment of debtors. In England, if a debtor were unable to pay his debts, he or she would be thrown into Debtor’s Prison. In order to avoid this situation, the Founding Fathers included in Article 1, Section 8 of the U.S. Constitution “The Congress shall have the Power…to establish…uniform Laws on the subject of Bankruptcies throughout the United States.” In response thereto, Congress enacted legislation protecting the rights of consumers consisting of, among others, Chapter 7 and Chapter 13 Bankruptcies.
Chapter 7 Bankruptcy, succinctly put, is an
exchange of non-exempt assets for a discharge of debts. Exemptions in
Colorado are listed in C.R.S. 13-54-101 as
exemption is property that the Bankruptcy Code or applicable state law permits
a debtor to keep from creditors. Exempt
property is property
or value in property that a debtor is allowed to retain, free from the
claims of creditors who do not have liens. Some debts, such as taxes
accrued within the last 3 years or student loans, with exceptions, are
not dischargeable. A trustee is appointed to your case and is in charge
of determining whether or not your assets are exempt; he or she will
“sell” non-exempt property, either back to you or to the highest
bidder, in order to distribute funds to creditors.
is a repayment/reorganization of the debts of an individual who has
regular income. The regular monthly expenses of the debtor are
determined, and the excess of income is paid to the bankruptcy trustee
for distribution to the creditors. This is called the Chapter 13 Plan.
Payments are generally made over a 3 year period, sometimes extended to
5 years, after which a discharge is entered. Secured creditors are
usually treated differently than unsecured creditors. A “secured”
creditor is one who has collateral as security for the debt. For
instance, if your home is in foreclosure due to non-payment, you can
spread the payment of arrearages over a three to five year period of
time. The amount paid to your unsecured creditors may be reduced,
depending on the amount of “excess income” that is paid into the
are negative aspects to filing bankruptcy. Your credit rating will
suffer. It may become more difficult to get a mortgage to purchase a
home or refinance your home; obtain auto insurance; or obtain credit
generally. Chapter 7 and 13 Bankruptcies may be reflected on your credit
report for up to 10 years.
This website is designed for general information only and is intended to be informational in nature. The information presented in this site should not be interpreted as the giving of legal advice nor should it be interpreted as creating a attorney/client relationship of any type. Persons accessing this side are encouraged to seek independent legal advice and counsel regarding their specific individual legal issues.
© 2004 Robert M. Vockrodt; all rights reserved.