Consumer bankruptcy
Bankruptcy, explained clearly and kindly
Bankruptcy is a federal legal process that lets someone who cannot pay what they owe resolve it under court supervision and move forward with real protections. It is a legal tool with rules and eligibility requirements. It is not a moral failing, and the people who use it are people like you: hardworking, responsible, and dealing with more than anyone should have to carry alone.
I have watched many capable people spend a year or more avoiding a process that would have taken a few months and cost them less than the interest they paid while they waited. If you are reading this late at night, after the house has gone quiet, you have already taken the hardest step, which is looking for answers.
Plainly
What it does and doesn't do
What it does
- It eliminates most unsecured debt: credit cards, medical bills, personal loans, balances left after a repossession, and most old collection accounts. At the end of the case, you receive a court order that you no longer owe the debt.
- Bankruptcy also stops collection activity the day it is filed. Garnishments, collection lawsuits, and creditor calls stop right away, not weeks later, because of a court order called the automatic stay.
What it does not
- It does not erase child support or maintenance (alimony), and it does not erase most tax debt, although some older income tax debt can be discharged under specific conditions.
- It does not let you keep property without paying for it. If you want to keep the car, you have to keep paying for the car.
- It does not by itself discharge federal student loans. Those require a separate proceeding inside the bankruptcy case. That work is a large part of my practice, and it has its own page.
- And it does not follow you forever, which is what most people fear. It appears on your credit report for a set number of years, and then it does not. Most of my clients see their credit begin to recover much sooner than they expected.
Which chapter
Chapter 7 or Chapter 13
You may have heard that Chapter 7 is a liquidation and Chapter 13 is a repayment plan. That description worries people more than it should, because in the large majority of the Chapter 7 cases I file, nothing is sold at all.
A more helpful way to think about it: Chapter 7 fits a household whose income, as measured by the Bankruptcy Code, is low enough to qualify, and whose property fits within the exemptions Colorado allows. It takes a few months and ends in a discharge.
Chapter 13 fits someone who does not qualify for Chapter 7, who owns something Chapter 7 would not protect, or who is behind on a mortgage and wants to keep the house. You pay what you can truly afford over three to five years, and the remaining eligible balance is discharged at the end.
Most people come to me not knowing which chapter fits, and that is completely normal. Figuring it out is not your homework before you call. It is what we do together in our first real conversation, using numbers you may not have gathered yet.
Usually four to six months
Chapter 7
The shorter chapter. Most unsecured debt is discharged, and in most cases you keep everything you own.
Who it fits, and what you keep
Three to five years
Chapter 13
A court supervised repayment plan that can help you catch up on a mortgage and keep your home.
What the plan is actually like
Read more
Before you decide
The Colorado bankruptcy means test, explained
How the Chapter 7 means test works in Colorado: current monthly income, the state median by household size, allowed expenses, and why timing the filing matters.
11 minute read
What you keep: Colorado bankruptcy exemptions explained
What Colorado bankruptcy exemptions protect: home equity, vehicles, retirement, wages, and tax credits, plus the rules for people who moved here recently.
11 minute read
Bankruptcy when you have a higher income: why it happens, and what Chapter 13 actually looks like
Why households earning $90,000 to $250,000 end up considering bankruptcy, how the means test really treats them, and what a five-year Chapter 13 plan involves.
12 minute read
In clients’ words
“We were self-employed, had income above the median level, and carried a significant amount of student loan debt … Tara took the time to truly understand our situation and never made us feel judged or ashamed.”
Not sure which chapter fits?
If you have read this far and still are not sure whether any of this applies to you, that is where most people start. You are not behind, and you do not have to sort it out alone.