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Denver Lawyer Clark Daniel Dray

Filing for Bankruptcy After Divorce

Bankruptcy Attorney in Denver, CO

Filing bankruptcy after divorce is not uncommon for one or both former spouses. Divorce is one of the most common reasons people think about filing for bankruptcy. Family finances typically undergo significant changes after a divorce. Now, instead of just one mortgage payment, you have to make two. Other expenses, like child support, alimony, and court costs, must be considered. A reputable bankruptcy attorney in Denver, CO can provide you with legal assistance when deciding whether to file for bankruptcy after divorce.

We at the Law Office of Clark Daniel Dray, a bankruptcy law firm in Colorado, are here to help our clients with financial and marital concerns. Our bankruptcy and divorce attorney is well-versed in both areas of law. We can provide clients with the in-depth legal advice they need and we take the time to explain the different steps you need to take in filing bankruptcy and will answer your questions right away. We try to make the process of filing bankruptcy as simple as possible. Call us right now to make an appointment!

Why Do I Need a Bankruptcy Attorney in Denver, CO?

The most significant advantage of having an experienced bankruptcy attorney work for you is that you can anticipate and plan for any potential hiccups that may arise throughout your case. Here are a few examples of what a good bankruptcy attorney can do for you.

Bankruptcy Planning

  • Other options besides bankruptcy are provided to you. There may be other ways to get out of debt besides filing for bankruptcy relief. If bankruptcy isn’t the best option, your attorney can help you find a better way to handle your debt.
  • Advice on the types of bankruptcy you can use. The goals of Chapter 7 and Chapter 13 bankruptcy are different, and they are used for different things. For example, Chapter 7 can help you quickly eliminate many a debt, but it will not help you keep your house if you are falling late on your mortgage. Your bankruptcy attorney will consider carefully your needs and wants and recommend a way for you to reach your goals.

Bankruptcy Preparation

  • Preparation for the means test. The results of the means test determine whether you are eligible for Chapter 7 bankruptcy or if you have the ability to make payments under Chapter 13. An experienced bankruptcy attorney will be able to make the most of any unique circumstances that you bring up.
  • Evaluation of your property’s worth. Are you aware of how much your old TV or dining room set is worth? Your lawyer will ensure that you tell the truth about your assets and give them fair value.
  • Utilization of exemptions. In bankruptcy, each state has its own set of exemptions that can be used to keep the property. Your Colorado bankruptcy lawyer will know how to use the exemption rules to protect as many of your Colorado assets as possible.
  • Determination of debt discharge. Some debts don’t go away when you file for bankruptcy. Others only disappear if certain conditions are satisfied. Your attorney will tell you which debts will be forgiven and which will stay after your case.

During Your Bankruptcy

  • Fulfillment of all the schedules and necessary papers. You will provide several pages of financial information under penalty of perjury concerning your debts, earnings, expenses, assets, and most recent financial activities. Your attorney will know what you need need to tell the court, how to assign value to your assets, what is considered income, which among your expenses are “reasonable and necessary,” which tax returns you need to share, and a lot more.
  • In-depth walkthrough of the bankruptcy case. Your attorney will tell you what will happen next and help you get ready for it. For example, he or she will explain the role of the bankruptcy trustee and the judge, the steps you need to take to get a discharge, and what your creditors can do.
  • Assurance in providing true and complete information. You must sign your bankruptcy papers under penalty of perjury, telling the bankruptcy court that as far as you know, the information is correct. You’ll swear or affirm that you’re telling the truth at your meeting of creditors and any time you’re in court. Your lawyer will be there to make sure that what you say is true and complete.
  • Assistance in dealing with creditors who break the automatic stay. Some debt collectors just don’t know when to stop. If a creditor breaks the automatic stay, which is the court order that says no collection work can be done after the case is filed, your lawyer can tell the creditor to stop or ask the court to hold the creditor in contempt.
  • Make a deal with your creditors. In Chapter 7 bankruptcy, your lawyer can talk to a secured creditor about a reaffirmation agreement or redemption, which will let you keep your house or car. In Chapter 13 bankruptcy, your lawyer will talk to your creditors about payment terms, the value of the collateral (property that guarantees payment of a debt), as well as interest rates, to make your repayment plan affordable.
  • Make changes to a Chapter 13 repayment plan. During your Chapter 13 case, if your situation changes, your lawyer can help you ask the court to make a temporary or permanent change to the terms of your Chapter 13 plan or to let you out of your Chapter 13 case early because of hardship.

Bankruptcy and Divorce: Which Should Come First?

filing bankruptcy after divorceThe choice of filing bankruptcy after divorce or before divorce is influenced by your location, the number of your assets and liabilities, and the bankruptcy type you want to file. However, preparation may make both divorce and bankruptcy less expensive and less complicated. To discover more about things to consider when selecting whether to file for bankruptcy or divorce first, read on.

Filing a Joint Petition

A bankruptcy case begins when a person, married couple, or business files official bankruptcy documents with the bankruptcy court. A couple who are filing jointly will file a “joint petition” comprising both spouses’ financial information in a set of documents.

Spouses who are divorcing typically file together since it is more efficient doing so. Filing jointly, for example, provides the following advantages:

  • Bankruptcy will erase (discharge) both spouses’ qualified debts, limiting the problems to be settled in divorce court,
  • It is less expensive to file for bankruptcy collectively than separately.

However, it is not a requirement for married couples to file jointly. If one of the spouses needs emergency bankruptcy protection, a separate filing may be appropriate. Alternatively, because of a mutual decrease in income, either spouse may find filing bankruptcy after divorce much easier. However, when it is possible, a lot of couples realize that filing jointly simplifies the process of divorce.

Chapter 7 vs. Chapter 13 Bankruptcy – Which is It?

Chapter 7 is a liquidation bankruptcy that is used to get rid of unsecured debts like credit card debt and medical bills. In Chapter 7, you usually only have to wait a few months to get a discharge. Therefore,  it can be finished quickly before a divorce.

Chapter 13 bankruptcy, on the other hand, lasts between three and five years because you have to come up with a plan to pay back some or all of your debts. So, if you want to file a Chapter 13 bankruptcy, you might want to wait until after the divorce to do so because it takes a while to complete.

Chapter 7 Bankruptcy: What are the Advantages?

Chapter 7 bankruptcy is an efficient solution to eliminate debt fast, and the majority of people would prefer to file under this chapter if allowed. This is how Chapter 7 works:

  • It doesn’t take a lot of time. A Chapter 7 bankruptcy case usually takes between 3 to 6 months to complete.
  • No payment plan. In contrast to Chapter 13 bankruptcy, a Chapter 7 filer does not have to pay into a 3-5 year repayment plan.
  • Many debts are forgiven. A person who files Chapter 7 bankruptcy emerges from it debt-free, with the exception of “nondischargeable” debts such as recent taxes, outstanding student loans, as well as back child support payments.
  • Property can be protected. Even though you can lose property in a Chapter 7 bankruptcy, many people can keep everything they own with the use of bankruptcy exemptions. Most necessities are protected by bankruptcy, and if you don’t have many luxury items, you’ll most likely be able to “exempt,” or preserve, all or most of your property.
  • There are times when you can keep your house or your car. You can also keep your house or your car as long as your payments are current, continually making payments after filing bankruptcy, and exempt the equity amount you have in the property.

Who Should File for Bankruptcy Under Chapter 7?

Many people benefit greatly from Chapter 7, particularly those who:

  • Own only a little property
  • Have unpaid credit card bills, medical bills, as well as personal loans (bankruptcy wipes out these debts), and
  • Whose family income is not greater than the state median for families of the same size as theirs.

You will take the “means test” to find out if your income is qualified for chapter 7. If your income is less than the average for a family of the same size in your state, you will automatically be eligible.

If your income is more than the average, you will get another chance to pass. However, supposing that after deducting allowable expenses such as child support, tax bills, and secured debts (like a mortgage or vehicle loan), you have enough money left over to make a sizable payment to your creditors. This is referred to as disposable income. If this is the case, you won’t be able to use Chapter 7.

Chapter 13 Bankruptcy – When is it a Better Choice?

Chapter 7 bankruptcy is not always the best option for you. Chapter 7 bankruptcy will not help people whose debts will not be “discharged” or wiped out, such as certain income tax debt, school loans, as well as domestic support obligations. It is hard to qualify if you have a high income. It’s also not a good choice for people who would lose a lot of equity in a home or other property under a Chapter 7 bankruptcy or who are facing foreclosure or repossession. Chapter 13 bankruptcy will most likely be a better choice for these people.

What is the Major Disadvantage of Chapter 13?

Most people choose Chapter 7 bankruptcy since it does not compel you to repay a fraction of your debt to creditors, unlike Chapter 13 bankruptcy. In Chapter 13, you must pay your creditors all of your disposable income (the remaining amount after allowing for monthly costs) for 3-5 years.

What are the Costs of Divorce and Bankruptcy?

The fees for bankruptcy filing are the same whether you file jointly or individually. So, if you and your spouse file for bankruptcy together before getting a divorce, you can save much money on legal fees. If you also decide to engage a bankruptcy attorney, the legal fees for a combined bankruptcy will most certainly be significantly lower than if both of you filed individually. You should, however, inform your attorney about your impending divorce since it may create a conflict of interest for the attorney to represent both of you.

Filing bankruptcy prior to a divorce may also help to streamline debt and property division difficulties and lower your divorce fees.

How is Property Division Done in Bankruptcy and Divorce?

Having your debts discharged jointly through bankruptcy simplifies the property split process in a divorce. However, before filing a combined bankruptcy, make sure that your state provides adequate exemptions to preserve all property you and your spouse hold. Some states allow couples to double their exemption amounts if they file jointly. Therefore, if you own a lot of property, filing a joint bankruptcy may be a better decision if you can double your exemptions.

If you can’t double your exemptions and have more property than you may exempt in a combined bankruptcy, filing independently after the property has been divided in the divorce may be more favorable. Also, bear in mind that if you file for bankruptcy while your divorce is still pending, the automatic stay will halt the property split process until the bankruptcy is finalized.

How Do I Discharge Marital Debt?

In a divorce, determining whose debts should be assigned to each spouse can be an expensive and time-consuming undertaking. Furthermore, in a divorce decree, ordering one spouse to pay a specific debt does not diminish the other spouse’s obligation to that creditor.

Assume your former husband was required to pay your joint credit card in the divorce decree. If he does not pay the credit card debt or if he declares bankruptcy, you are still liable for the amount, and the creditor may pursue you to collect it. If you pay the debt, you are entitled to reimbursement from your ex-husband because he breached the divorce decree. This is the case even if the husband declares bankruptcy because he can get out of paying the creditor by getting a discharge but not his responsibilities to you from the divorce decision.

Call our Colorado Divorce and Bankruptcy Attorney Now!

If you need help solving your financial problems and restoring your credit, the Broomfield, Colorado-based Law Office of Clark Daniel Dray can help.

Our credit repair attorney will meet with you one-on-one to assess your situation and provide you with legal advice on the best course of action, whether Chapter 13 or Chapter 7 bankruptcy is suitable for you. We will also help you have a fresh start with a clear set of credit-repair goals.

Call us right away for a free consultation so we can get started on addressing your bankruptcy and divorce problems to fully restore your credit.

Denver Lawyer Clark Daniel Dray

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