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Bankruptcy Overview

Bankruptcy is a procedure under federal law which allows debtors, both households and businesses to eliminate some bills and repay others over a period of time, usually sixty months. There are five chapters of bankruptcy each for certain situations.

Chapter 7

Is the most common and is used by consumers and businesses. Chapter 7 eliminates many debts such as credit card and medical bills not secured by collateral, also known as unsecured debts, in exchange for the liquidation of assets not protected by federal or state exemption laws. Debtors may retain certain exempt property.
See Colorado Exemption Allowances
 

Debtors may also pick and choose which debts he/she would like to eliminate and which debts he/she would like to reaffirm. There is no repayment plan in a Chapter 7. To qualify for Chapter 7 an individual must be under the state median income levels.
See Colorado Median Income Levels

Chapter 13

Is a debt reorganization plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. The repayment plan typically lasts between 3 and 5 years. During the duration of the plan creditors are forbidden from continuing recollection efforts. Chapter 13 is akin to a court protected repayment plan. The filing of the Chapter 13 stops accruing interest and penalties. One advantage of a Chapter 13 over a Chapter 7 is the ability to cure delinquent mortgage payments over the duration of the plan and save a home from foreclosure.

Chapter 11

Is similar to a Chapter 13 plan but is a debt reorganization and pay-back plan for businesses and also by some consumers with too much debt to qualify for Chapter 13.

Chapter 12

Is similar to chapter 13, designed for family farmers and fishermen.

Chapter 15

Applies to bankruptcy cases involving parties in more than one country.