Q: What is our mission?
A: It is our mission to help you to be at peace with the difficult decision to file bankruptcy. It is our goal to improve relationships at home by relieving the stress brought on by excessive debt. We love this area of the law for two reasons: the large degree of client satisfaction experienced by our clients and the interesting people we meet as we work with you to solve difficult problems.
Q: What distinguishes your firm from other attorneys practicing in this area?
A: The attorneys working for the Law Office of Stephen H. Swift, P.C., are some of the most experienced bankruptcy practitioners in Southern Colorado. Our attorneys presently have over 40 years of combined experience. We have nine full and part-time employees. By having such a staff, it is our goal to attend to your needs and to answer your concerns more quickly. Mr. Swift has successfully handled thousands of bankruptcy cases. Some of the cases have involved complex issues such as the discharge of student loans (Loudy vs. U.S. Department of Education), the discharge of federal and state taxes (In re Smith), allegations of fraud (Twin Duchess vs. Vanaman) and the discharge of pension fund benefits (Colorado Ironworkers Trust Fund vs. Popovich).
Q: What is bankruptcy? Will it wipe out my debt?
A: Bankruptcy is an action in the federal bankruptcy court designed to assist you to either eliminate or repay their debt. This is done under the protection of the bankruptcy court. Most people file either under Chapter 7 (Liquidation) or Chapter 13 (Repayment Plan). Under Chapter 7 you ask the bankruptcy court to wipe out (discharge) your debt. Under Chapter 13 you file a plan with the bankruptcy court proposing how you will repay your creditors. Under Chapter 13 some debts are paid in full while others may receive partial or no payment at all, based upon what you can afford.
Q: How does filing bankruptcy help protect me from creditors?
A: When you file a petition for bankruptcy relief, a court order called Aan automatic stay@ immediately goes into effect. The stay is a temporary injunction that prohibits your creditors from trying to collect or take action on any debt that you owe. Creditors are no longer allowed to call you at home or at work. They cannot contact you in any way other than through your attorney. They are prohibited from garnishing your wages, seizing your bank accounts or placing liens on your home.
Q: What types of debt are not dischargeable?
A: Certain types of debt cannot be discharged in bankruptcy. These include child support, alimony, and certain kinds of taxes. Student loans will not be discharged unless you can demonstrate that you will never be able to repay them because of undue hardship. Other debts could survive the bankruptcy if the creditor can show the court a legal reason for it to deny forgiveness of the debt such as fraud.
Q: What are the differences between filing a Chapter 7 and a Chapter 13? Which one will let me keep my property?
A: In a Chapter 7 Bankruptcy you ask the court to discharge as much of your debt as is allowed by law. In exchange for this, the court appoints a Trustee whose job it is to inquire about your assets; determine what assets may be available for liquidation; and distribute the proceeds from any sale to your creditors. Under Chapter 7, you select property from a state specific list of exemptions. The exemptions determine what property the trustee can sell and what property you are allowed to keep. For example, in Colorado you are entitled to have equity in your home of up $60,000.00, equity in your automobiles of up to $5,000 per person or $10,000 per couple, and a fairly extensive list of other property. This means that you can keep your home if you meet the following criteria:
You are current on your payments to the mortgage holder on the date of filing of your bankruptcy.
The value of your home less what you still owe on the mortgage(s) is less than $60,000.00.
Other types of property that are usually protected by exemptions:
Cars with equity of less than $5,000.00 per person or $10,000.00 per couple.
Most retirement plans such as 401(k) plans and IRAs.
Most insurance policies including the cash value of your life insurance.
Your personal property such as furniture, furnishings, clothes (other than furs), appliances, household goods, books, computers, T.V.'s, stereos and other items needed to furnish your home.
Your jewelry including wedding bands is exempt to certain dollar amounts.
The tools needed to carry on a trade equal to $20,000.00.
And many other specific kinds of property.
In a Chapter 13 Bankruptcy you file a plan with the court to repay part or all of your debt over time. This plan is completed in 36 to 60 months. The amount that you are required to pay is determined by your income over the last six months, the amount and type of debt that you owe, and the value of the property you own and want to keep. It is possible in many cases to keep all of your property as long as your income can sustain this.
Chapter 13 allows you to prioritize your debts according to their type and importance. The higher priority debts will be paid before others. In most cases, if the debtor=s income can only support the repayment of some of the debt owed, the lower priority creditors will receive what monies are left over, if any, after the priority creditors are paid. For this reason, in many cases your debts are forgiven even though they have not been repaid in full.
Q: Who can file for Chapter 7 Bankruptcy?
A: Chapter 7 Bankruptcy can be a powerful tool in dealing with overwhelming debt, but not everyone qualifies to file for Chapter 7.
Disabled veterans, who acquired most of their debt while on active duty and people whose debts stem primarily from the operation of a business, get a fast track to Chapter 7. All others need to meet the new requirements.
The bankruptcy law which took effect in 2005 requires debtors to meet a state average Amedian income@. This number is based upon national and regional statistical averages. Different averages are used according to the number of your dependents. The first step to see if you qualify for using this chapter is to determine your gross income (income before taxes) over the last six months. If this is less than the Amedian household income@ for a family of your size, then you qualify to file under Chapter 7.
If your income exceeds that median, it is necessary to apply a more in depth analysis called the Ameans test@. This test weighs your current monthly income against certain allowable expenses. The purpose of the test is to determine whether you have the means to repay your creditors. If it is determined that your disposable income is in excess of what you are allowed, you may be required to file under Chapter 13 and to repay your debt over 60 months.
There are other guidelines that restrict debtors from filing bankruptcy if they have previously filed for bankruptcy protection. You cannot file for Chapter 7 bankruptcy if you have previously filed a petition under chapter 7 within the last 8 years or a Chapter 13 petition within the last 6 years and have obtained a chapter 13 discharge.
Q: How does bankruptcy affect my credit report?
A: While it is true that filing bankruptcy negatively affects your credit rating, most people find that it affects their credit rating less than having a large number of delinquent accounts. Further, Bankruptcy stops creditors from taking more drastic actions and, in most cases, helps you to begin rebuilding your credit by giving you a fresh start and removing the heavy burden of your debt obligations.
Q: Will my bankruptcy filing be published in the newspaper?
A: While filing for bankruptcy is part of public record, which can be viewed by any one that is willing to do the research, there is no publication of your bankruptcy made in any newspaper or magazine. We are required to list all of your debt and your creditors do receive a notice that you have filed for bankruptcy relief. Without such a notice, the creditors would not know that they are to cease action on your account.
Q: Do I have to go to court?
A: Whether you file under Chapter 7 or Chapter 13, you are required to attend a creditors meeting about six weeks after you file.
At the creditors meeting you meet with the Bankruptcy Trustee who will ask you questions under oath about your case. These questions normally are about the circumstances that prompted you to file. The Trustee might also need more information about certain assets. This process is less formal than going to court. Your attorney accompanies you to this meeting and assists you in responding to the trustee's questions.
At that time you will need to provide some additional documentation to the Trustee which includes:
1. a valid picture identification card and;
2. an unlaminated Social Security Card,
3. a bank statement for each account that you own showing the monies in your account for the month in which you file; and
4. your pay stubs received for the pay period immediately following the filing of your case.
Q: How does bankruptcy affect foreclosure?
A: The automatic stay stops all foreclosures until the mortgage holders can apply to the court for permission to continue. In certain Chapter 13 cases, the court can give the debtor up to 60 months to bring his payments current. He is allowed to do this so long as he can show that he has current income and can maintain a payment to the Chapter 13 Trustee while paying the monthly mortgage payment. Once you have filed, the mortgage holder is no longer allowed to refuse receipt of your payments.
As part of filing under Chapter 7, you are required to sign a declaration telling your secured creditors what your plan is in relation to the collateral purchased with the money loaned to you. If you are still current on your mortgage payments on your home, Colorado law allows you to retain your home as long as the amount of the equity does not exceed the State Exemption. If your intent is to surrender the property, then the lender will normally file a motion for relief from the automatic stay with the court and, if granted, the lender will be able to start or re-start the foreclosure process.
The laws governing the foreclosure process changed in 2008. A more in depth explanation can be found on your county website for the Public Trustee for your county. The foreclosure begins by filing with the Public Trustee and mailing to you a document known as the Notice of Election and Demand (NED). The Public Trustee will set the date for the sale of your home within 110 to 125 days of the filing date of the NED. It is the mortgage holder's obligation to inform you of this date. You are allowed to stay in the home until after title to the property passes from you to the mortgage holder. Once title has passed, the mortgage holder is entitled to request that you vacate the home and to file, if necessary, an action for forcible entry and unlawful detainer (FED). An FED action is an eviction under Colorado law.
If you are so far behind on your mortgage that you deem it impossible to bring the payments current, a Chapter 13 Bankruptcy affords you the opportunity to pay any arrearage (back payments that are due) through planned payments spread out over a period of time. By this means you can take up to 60 months to bring your house payments current. While you pay your regular mortgage payment to the lender, the Trustee will use your monthly plan payment to pay down the arrearage.
Chapter 13 Bankruptcy can sometimes help you to eliminate second and third mortgages. If your first mortgage is secured by the entire value of your home (which is possible if the home has dropped significantly in value), you may no longer have any equity to secure these mortgages. You can then request that the court strip off (remove) the mortgages and re-categorize the debt as unsecured. Under Chapter 13, unsecured debt is the lowest priority debt and often is not paid in full or at all, depending on the circumstances of your case.
Q: What is a reaffirmation agreement and how does it affect me?
A: A reaffirmation agreement is a contractual agreement between you and your creditor that is filed with the court. It allows a debt to survive the bankruptcy and, in turn, allows you to keep an important asset such as a car.
Some creditors require reaffirmations to be signed in order for you to retain the asset. They will forward the reaffirmation agreement to the office and, after your attorney has reviewed it, you will be asked to sign it. It is then filed with the court and is subject to the court's approval.
Note: Most credit card companies have language in their contract which states that filing for bankruptcy is a term of default. This makes it so that in many cases, even if you want to continue paying them, they will close your account and write off the debt.
After you file, you are likely to receive many offers from credit card companies and others wanting to loan you money. The thought is that because you just filed, you are restricted from filing again. You are now considered a good risk. We advise you to use credit cautiously and to pay back loans quickly to avoid interest charges.
As a general rule, our office does not recommend signing reaffirmation agreements unless the terms of the new contract are a significant benefit to you.
Q: How can I minimize the affect of losing my property or assets in bankruptcy?
A: What we do is called Negative Estate Planning. We advise you on how the law allows you to keep some things and not others. Once we are fully informed as to the circumstances of your case, we can make recommendations to you which allow you to take the best advantage of the protections afforded by the bankruptcy law.
Q: Why is filing bankruptcy so hard?
A: Knowing something about the history of the bankruptcy law will help you to feel better about the difficult decision you are making. The bankruptcy law comes from the Old Testament and is part of the Jewish law of the Sabbath. In Genesis, Chapters 1 & 2, it states that God created the earth in six days and on the seventh He rested. The Jewish law, out of respect for the Sabbath, forbade any work from Friday at dusk until Saturday at dusk. The penalty for violating this law was death by stoning. See Exodus, Chapters 20 & 31. Out of respect for the Sabbath, the Jews forgave debts in the seventh year; released their servants in the seventh year; and gave their servants part of their flocks and their crops with which to make a fresh start. The bankruptcy law is a legal remedy patterned after the law of the Sabbath. See Deutoronomy, Chapter 15, verses 1-3 and 9-12.
Q: Why is it so important to give my bankruptcy attorney accurate information?
A: Bankruptcy fraud is investigated by the FBI. The FBI has many resources to uncover hidden assets. The chances are they will find where you hid your gun collection. Federal law provides severe penalties for bankruptcy fraud, including up to five years in federal prison and up to $500,000.00 in fines. The penalties also apply to family members or friends that you have convinced to hold your property. How would you feel if Granddad were serving hard time because of you? If you are not planning to be completely honest, please do not bring us your business.
Please be as thorough in your disclosures as possible. The law requires that you list all of your debts and all of your property. Each of your creditors must be notified. To do this, we need an accurate name and address for each creditor. If family members are owed money, they too must be listed in your bankruptcy.
Q: How long does it take?
A: Most chapter 7 cases take about 4 to 6 months from the date your case is filed. Most chapter 13 cases take 37 to 61 months. The reason chapter 13 takes longer is that your discharge does not enter until you have completed your payments to the chapter 13 trustee.
Q: How does the process work?
A: Before you file, we have you complete a set of worksheets. The official bankruptcy forms are prepared from these. We then have you sign the documents. These documents are filed electronically with the federal bankruptcy court in Denver. About six weeks into the process, you and your attorney attend the creditors meeting. Creditors have a period of approximately three months from the date you file to object to their claim being discharged. After this period has expired, the court in a chapter 7 case will enter the discharge order. In a chapter 13 case, the court enters the discharge order after you complete your payments to the trustee.
Q: Why use a bankruptcy attorney to prepare my case?
A: In 2005 when the new law took effect, many attorneys quit the bankruptcy practice because they felt the law had grown too complex and too dangerous. A good bankruptcy attorney will often pay for himself. He does this by skillfully using the law to maximize what you can keep and to minimize what you have to pay back. Each year we are hired by a certain number of clients who pay us to repair what was done improperly in the first instance by an unqualified person. If someone tells you that they cannot give you legal advice, run!
Q: What do I bring to the first meeting with the attorney?
A: Some of the things needed for the first meeting with the attorney are the following:
1. A list of what I owe;
2. Recent pay stubs showing what I earn and what income I have received in the last six months; pay stubs showing what other family members who contribute to my budget have earned in the last six months;
3. A list of what property I would like to keep and the information concerning any debt which is secured by that property;
4. Tax returns from the last 2 years; and
5. Information concerning any tax refunds to which I may be entitled.
