Once you have filed a Chapter 13 petition, an impartial trustee will be appointed to administer your case. The trustee will evaluate your case and serve as a disbursing agent, collecting payments from you and distributing them to your creditors. Filing the petition automatically stays (stops) most collection actions against you and your property. As long as the stay is in effect, your creditors may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments.

Between twenty and fifty days after you file the Chapter 13 petition, the trustee will hold a meeting of creditors. During this meeting, the trustee places you under oath, and both the trustee and your creditors may ask you questions. You must attend the meeting and answer questions regarding your financial affairs and the proposed terms of the plan. The parties typically resolve any problems with the plan either during, or shortly after, the creditors’ meeting. You can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting. After this meeting, you, the Chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on your Chapter 13 repayment plan.

You must file a repayment plan for court approval within fifteen days of filing the petition. It must allow for payments of fixed amounts to the trustee on a regular basis, usually biweekly or monthly. As mentioned earlier, the trustee then distributes the funds according to the terms of the plan. Within thirty days of filing the bankruptcy case, even if the plan has not yet been approved by the court, you must start making plan payments to the trustee.

Within forty-five days after the creditors’ meeting, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards set forth in the Bankruptcy Code. Your creditors will receive twenty-five days’ notice of the hearing and may object to confirmation. If the court declines your plan, you may file a modified plan. You may also convert the case to a liquidation case under Chapter 7. If the court rejects your modified plan and dismisses your case, it may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to you.

As a Chapter 13 debtor you are entitled to a discharge upon completion of all payments under the plan so long as you:

• certify (if applicable) that all of your domestic support obligations that came due prior to making such certification have been paid;
• have not received a discharge in a prior case filed within a certain time frame (two years for prior Chapter 13 cases and four years for prior Chapter 7, 11 and 12 cases); and
• have completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for your district has determined that such courses are available to you).

The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on your homestead exemption. The discharge releases you from all debts provided for by the plan or disallowed, with limited exceptions. Creditors provided for in full, or in part, under the Chapter 13 plan may no longer initiate or continue any legal or other action against you to collect the discharged obligations.

Debts not discharged in Chapter 13 include:

• certain long term obligations (such as a home mortgage);
• debts for alimony or child support;
• certain taxes;
• debts for most government funded or guaranteed educational loans or benefit overpayments;
• debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs; and
• debts for restitution or a criminal fine included in a sentence on your conviction of a crime.

To the extent that they are not fully paid under the Chapter 13 plan, you will still be responsible for these debts after the bankruptcy case has concluded.

The following debts will be discharged unless a creditor timely files and prevails in an action to have such debts declared non-dischargeable:

• Debts for money or property obtained by false pretenses
• Debts for fraud or defalcation while acting in a fiduciary capacity
• Debts for restitution or damages awarded in a civil case for willful or malicious actions by you that cause personal injury or death to a person

The discharge in a Chapter 13 case is somewhat broader than in a Chapter 7 case. Debts dischargeable in a Chapter 13 case, but not in Chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.

The bankruptcy law regarding the scope of the Chapter 13 discharge is complex and has recently undergone major changes. You should definitely consult legal counsel regarding the scope of the Chapter 13 discharge prior to filing.

If you are from the Denver, Aurora, Arvada, Wheat Ridge, Littleton, Englewood, Northglenn, Westminster, Broomfield, Lakewood, Brighton, Lafayette, or Golden, Colorado area, and have any questions, please feel free to contact me at: 303-955-7570, help@cobankruptcyhelp.com, or fill out the free consultation form.

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A Chapter 13 bankruptcy is often referred to as a wage earner’s plan. If you have a regular income it enables you to develop a plan to repay all or part of your debts. Under this Chapter, you will propose a repayment plan to creditors, with payment to be made in installments over three to five years. The length of time depends on your monthly income as it relates to the state median income. During this time the law forbids creditors from any collection efforts.

Chapter 13 offers you several advantages over liquidation under Chapter 7. One of the most important advantages is the fact that you can stop foreclosure proceedings and may eventually resolve delinquent mortgage payments. (Of course, you will be required to make any mortgage payments at the time they are due during the Chapter 13 plan.) This Chapter also allows you to reschedule your secured debts (not including the mortgage for your primary residence) and extend them over the life of the repayment plan.  Under Chapter 13 you may make plan payments to a Chapter 13 trustee who will distribute them to your creditors. Thus while under Chapter 13 protection you will not have direct contact with creditors.

The next question is whether you are eligible to file a Chapter 13 bankruptcy. If you are self-employed, or operate an unincorporated business, and have less than $336,900 of unsecured debt and less than $1,010,650 of secured debts you are eligible. These amounts are adjusted periodically so they may vary over time. (NOTE: A corporation or partnership may not file Chapter 13 bankruptcy.) Be aware that if you have filed for bankruptcy under any Chapter during the past 180 days, and your petition was dismissed you will not be permitted to file.

As was the case with the other Chapters I have discussed, a Chapter 13 case begins by filing a petition with the bankruptcy court in your area. You must also file the following items with the court:

• Schedules of assets and liabilities
• A schedule of current income and expenditures
• A schedule of executory contracts and unexpired leases
• A statement of financial affairs
• A certificate of credit counseling
• A copy of any debt repayment plan developed through credit counseling
• Evidence of payment from employers, if any, received 60 days before filing
• Any anticipated increase in income or expenses after filing
• A record of any interest you have in federal or state qualified education or tuition accounts

You must also supply the Chapter 13 case trustee a copy of the tax return or transcripts from your most recent tax year as well as returns filed during the case.

A case filing fee and a miscellaneous administrative fee are required by the court. You must pay the fees to the clerk of the court upon filing or, with the court’s permission, you may pay in at most four installments within 120 days of filing. If you file a joint petition, only one filing fee and one administrative fee are charged. Be aware that failure to pay these fees may result in dismissal of your case.

 In order for you to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, you should gather the following information:

• A list of your creditors and the amounts and nature of their claims
• The source, amount, and frequency of your income
• A list of all of your property
• A detailed list of your monthly living expenses

If you are married you must gather this information for your spouse regardless of whether you are filing a joint petition, separate individual petitions, or even if only you are filing. In a situation where only you are filing, the income and expenses of your spouse is required so that the court, the trustee and creditors can evaluate your household’s financial position.

Part 2 of my discussion of Chapter 13 bankruptcy will appear in my next blog. If you are from the Denver, Aurora, Arvada, Wheat Ridge, Littleton, Englewood, Northglenn, Westminster, Broomfield, Lakewood, Brighton or Golden, Colorado area, and have any questions at this time, please feel free to contact me at: 303-955-7570, help@cobankruptcyhelp.com, or fill out the free consultation form.

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If you have commercial or business activities (other than primarily owning or operating real property) with total debts of $2,190,000 or less, you are a “small business debtor.” In a small business case, you must:

• submit the most recently prepared balance sheet;
• submit a statement of operations;
• submit a cash-flow statement;
• submit the most recently filed tax return or provide a sworn statement explaining the absence of such documents;
• attend court and the U.S. trustee meeting;
• make ongoing filings with the court concerning your profitability and projected cash receipts and disbursements;
• report whether you are in compliance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure;
• report whether taxes have been paid and tax returns filed; and
• at the beginning of the case, attend an initial interview during which time the U.S. trustee will evaluate your viability, inquire about your business plan, and explain certain debtor obligations including the responsibility to file various reports.

As with cases under other Chapters of the Bankruptcy Code, a stay of creditor actions automatically goes into effect when the bankruptcy petition is filed. The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. The filing of a petition, however, does not operate as a stay for certain types of actions. The stay provides you a breathing spell, during which time negotiations can take place to try to resolve your financial difficulties. Under specific circumstances, the secured creditor can obtain a court order granting relief from the automatic stay. For example, when you have no equity in the property and the property is not necessary for an effective reorganization, the secured creditor can seek a court order lifting the stay to permit the creditor to foreclose on the property, sell it, and apply the proceeds to the debt. The ordinary expenses of the ongoing business, however, still must be paid.

You (unless you are a “small business debtor”) have a 120-day period during which you have an exclusive right to file a plan. This exclusivity period may be extended or reduced by the court.  After the exclusivity period has expired, a creditor or the case trustee may file a competing plan. A Chapter 11 case may continue for many years unless the court, the U.S. trustee, the committee, or another party in interest acts to ensure the case’s timely resolution. The creditors’ right to file a competing plan provides incentive for the debtor to file a plan within the exclusivity period and acts as a check on excessive delay.

You (or any plan proponent) must file and get court approval of a written disclosure statement before there can be a vote on the plan of reorganization. The disclosure statement must provide “adequate information” concerning your affairs to enable the holder of a claim or interest to make an informed judgment about the plan. In a small business case, however, the court may determine that the plan itself contains adequate information and that a separate disclosure statement is unnecessary. If and when you file the disclosure statement, the court must hold a hearing to determine whether it should be approved. Approval of a plan usually cannot be solicited until the court has first accepted the written disclosure statement.

Upon approval of a disclosure statement, the plan proponent must mail the following to the U.S. trustee, all creditors, and equity security holders:

• The plan, or a court approved summary of the plan
• The disclosure statement approved by the court
• Notice of the time within which acceptances and rejections of the plan may be filed
• Such other information as the court may direct, including any opinion of the court approving the disclosure statement or a court-approved summary of the opinion.  

In addition, you must mail to the creditors and equity security holders entitled to vote on the plan(s):

• Notice of the time fixed for filing objections
• Notice of the date and time for the hearing on confirmation of the plan
• A ballot for accepting or rejecting the plan
• If appropriate, a designation for the creditors to identify their preference among competing plans

(In a small business case, the court may conditionally approve a disclosure statement.)

In a Chapter 11 case, a liquidating plan is permissible. Such a plan often allows you to liquidate the business under more economically advantageous circumstances than a Chapter 7 liquidation. Be aware that it also permits the creditors to take a more active role in fashioning the liquidation of the assets and the distribution of the proceeds than in a Chapter 7 case.

Any interested party may file an objection to confirmation of a plan. The Bankruptcy Code requires the court, after giving notice, to hold a hearing on confirmation of a plan. If no objection to confirmation has been filed, the Bankruptcy Code allows the court to determine whether the plan has been proposed in good faith and according to law. Before confirmation can be granted, the court must be satisfied that there has been compliance with all the other requirements set forth in the Bankruptcy Code, even in the absence of any objections. Confirmation of a plan discharges you from any debt that arose before the date of confirmation. After the plan is confirmed, you are required to make specified payments and are bound by the provisions of the plan. The confirmed plan creates new contractual rights, replacing or superseding pre-bankruptcy contracts.

There are, of course, exceptions to the general rule that an order confirming a plan operates as a discharge. Confirmation of a plan of reorganization discharges any type of debtor-corporation, partnership, or individual-from most types of pre-petition debts. It does not, however, discharge an individual debtor from any debt made non-dischargeable by the Bankruptcy Code. Moreover, except in limited circumstances, a discharge is not available to an individual debtor unless and until all payments have been made under the plan. In case of a liquidation plan, confirmation does not discharge the debtor, unless the debtor is an individual. When you are filing as an individual, confirmation of a liquidation plan will usually result in a discharge (after plan payments are made).

As you see there are many subtleties to filing Chapter 11 bankruptcy. I’ve tried to give you a helpful overview of the issues involved in Chapter 11. Please feel free to contact me for more information: 303-955-7570, at help@cobankruptcyhelp.com, or fill out the free consultation form.

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Chapter 11 of the Bankruptcy Code allows you to propose a plan of reorganization to keep your business alive and pay creditors over time. Individuals can also seek relief in Chapter 11. But typically, Chapter 11 is filed with the purpose of reorganizing a business, which may be a corporation, sole proprietorship, or partnership. The Chapter 11 bankruptcy case of a corporation (as debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company. A bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners as debtors. Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case (partnership as debtor), however, the partners’ personal assets may, in some cases, be used to pay creditors in the bankruptcy case. Or the partners, themselves, may be forced to file for bankruptcy protection.

A Chapter 11 case begins with the filing of either a voluntary petition by you, or an involuntary petition by your creditors, where your domicile or residence is located. Unless ordered otherwise by the court, you must file the following documents:

• Schedules of your assets and liabilities
• A schedule of your current income and expenditures
• A schedule of your executory contracts and unexpired leases
• A statement of your financial affairs

If you file as an individual (or husband and wife*), these additional documents are required:

• A certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling
• Evidence of payment from your employers, if any, received sixty days before filing
• A statement of your monthly net income and any anticipated increase in your income or expenses after filing
• A record of any interest you have in federal or state qualified education or tuition accounts

A case filing fee and a miscellaneous administrative fee are required by the court. You must pay the fees to the clerk of the court upon filing or, with the court’s permission, you may pay in at most four installments within 120 days of filing. If you file a joint petition, only one filing fee and one administrative fee are charged. Be aware that failure to pay these fees may result in dismissal of your case.

Upon filing a voluntary petition for relief under Chapter 11 or, in an involuntary case, the entry of an order for relief, you automatically assume an additional identity as the “debtor in possession.” This term refers to a debtor that keeps possession and control of his assets while undergoing reorganization. You will remain a “debtor in possession” until your plan of reorganization is confirmed, your case is dismissed or converted to Chapter 7, or a Chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally you, as “debtor in possession,” will operate the business and perform many of the functions that a trustee performs in cases under other Chapters.

You are required to file a written disclosure statement and a plan of reorganization with the court. The disclosure statement is a document that contains sufficient information concerning your assets, liabilities, and business affairs to enable a creditor to make an informed judgment about your plan of reorganization. The information required is decided by the judge involved and by the circumstances of the case. In a “small business case” you may not need to file a separate disclosure statement if the court determines that adequate information is contained in the plan. The plan must include a classification of claims, and must specify how each class of claims will be treated under the plan. Creditors who will be paid less than the full value of their claims, vote on the plan by ballot. After the disclosure statement is approved by the court and the ballots are tallied, the court will conduct a hearing to determine whether to confirm the plan.

The Bankruptcy Code requires you to perform all but the investigative functions and duties of a trustee. These duties and responsibilities, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include:

• accounting for property;
• examining and objecting to claims;
• filing informational reports as required by the court and the U.S. trustee or bankruptcy administrator, such as monthly operating reports;
• hiring attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during his bankruptcy case;
• filing tax returns and reports which are either necessary or ordered by the court after confirmation, such as a final accounting; and
• monitoring the compliance of the debtor in possession with the reporting requirements.

A creditors’ committee can play a large role in a Chapter 11 case. The committee, appointed by the U.S. trustee, consists of unsecured creditors who hold the seven largest unsecured claims against you. Among other things, the committee: consults with the “debtor in possession” on the administration of the case; investigates your conduct and operation of the business; and participates in formulating a plan. A creditors’ committee can be important in safeguarding the proper management of the business by the “debtor in possession.”

I’ve tried to give you a helpful overview of some of the issues involved in Chapter 11. Please feel free to contact me with any of your questions: 303-955-7570, at help@cobankruptcyhelp.com, or fill out the free consultation form.

* A husband and wife may file a joint petition or individual petitions.

To learn about the stay of creditor’s action and terms for small business see part 2 in tomorrow’s blog.

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In the news we hear about individuals, or companies, filing for bankruptcy on a daily basis.  Recently Stephen Baldwin filed for Chapter 11 bankruptcy, GM filed for Chapter 11 bankruptcy, CIT Group may be filing for Chapter 11, as may the parent company of the Chicago Tribune. Detroit Public Schools are considering filing for Chapter 9 bankruptcy. Last year Downey Financial, a large provider of mortgages, filed for Chapter 7 bankruptcy. You may well wonder what the different chapters are about—who is eligible for each chapter, and how each chapter works. I will take the next few blog entries to help clarify this issue.

 Let me start with Chapter 7. This Chapter does not involve a repayment plan. Instead, the bankruptcy trustee will liquidate your nonexempt assets and use the proceeds to pay your creditors in accordance with the provisions of the Bankruptcy Code. The Bankruptcy Code allows you to keep certain “exempt” property.  But do keep in mind that filing a Chapter 7 petition may result in the loss of property.

 You may qualify for relief under Chapter 7 as an individual, a partnership, or a corporation or other business entity. Relief is available under Chapter 7 irrespective of the amount of your debts or whether you are solvent or insolvent. As I have mentioned in previous blogs, the primary goal of bankruptcy is to give an honest individual debtor a “fresh start,” so you will not be liable for discharged debts. (In a Chapter 7 case, however, a discharge is only an option for individual debtors, not partnerships or corporations.) The right to a discharge is not absolute, and some types of debts will not be discharged. And be aware that a bankruptcy discharge will not remove a lien on property.

 The first step in a Chapter 7 bankruptcy case involves filing a petition with the bankruptcy court serving the area where you live, or where your business is organized or has its principal place of business or principal assets.

The following items must also be filed with the court:

• A schedule of your assets and liabilities
• A schedule of your current income and expenditures
• A statement of your financial affairs
• A schedule of your executory contracts and unexpired leases

 In addition, you must submit to the trustee assigned to your case a copy of your tax return, or the transcripts for the most recent tax year as well as tax returns filed during your case (including tax returns for prior years that had not been filed when the case began).

 If filing as an individual with primarily consumer debts, you will have to file the following additional documents:

• A certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling
• Evidence of payment from employers, if any, received 60 days before filing
• A statement of monthly net income and any anticipated increase in income or expenses after filing
• A record of any interest in federal or state qualified education or tuition accounts

 There will be court charges: a case filing fee, a miscellaneous administrative fee, and a trustee surcharge. Usually the fees are paid to the clerk of the court upon filing. With the court’s permission, however, you may pay in at most four installments within 120 days of filing.

You must also provide the following information when you petition the court:

• A list of your creditors and the amount and nature of their claims
• The source, amount, and frequency of your income
• A list of your property
• A detailed list of your monthly living expenses (food, clothing, shelter, utilities, taxes, transportation, medicine, etc.)

You and your spouse may file a joint petition or individual petitions. If you do file jointly, you are both subject to all the document filing requirements of individual debtors. Regardless of whether you file a joint petition, separate individual petitions, or even if only one of you files, you must gather this information for your spouse as well. The income and expenses of the non-filing spouse is also required so that the court, the trustee and creditors can evaluate the household’s financial position.

Once you have filed a Chapter 7 petition, most collection actions against you or your property must stop. The bankruptcy clerk will give notice of your case to all of your creditors. As long as the stay is in effect, your creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.

A Chapter 7 discharge is subject to many exceptions, so you need to consult legal counsel before filing. Usually, excluding cases that are dismissed or converted, individual debtors receive a discharge in over 99 percent of Chapter 7 cases. In most instances, the bankruptcy court will issue a discharge order relatively early in the case-generally, sixty to ninety days after the date first set for the meeting of creditors.

 This is a look at some of the issues involved in filing for Chapter 7 bankruptcy. If you have any further questions please contact me at: 303-955-7570, at help@cobankruptcyhelp.com, or fill out the free consultation form.

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The primary purpose of the federal bankruptcy laws that were passed by Congress is to create the opportunity for those individuals who have burdensome debts to begin anew. The Supreme Court stated the intent of the bankruptcy law in a 1934 decision:

“[I]t gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt (Local Loan Co. v. Hunt, 292 U.S. 234, 244, 1934).”

This goal can be fulfilled via bankruptcy discharge. It will protect you by releasing you from personal liability for specific debts, and prohibits creditors from acting against you to collect those debts. There are six basic types of bankruptcy cases under the Bankruptcy Code. The cases are traditionally given the names of the chapters that describe them: Chapter 7, Chapter 13, Chapter 11, Chapter 12, Chapter 9, and Chapter 15. I will explain the meaning of these Chapters in a future blog. This information will make filing for bankruptcy less intimidating to you, and will facilitate the process.

But, as I pointed out in the previous blog, a bankruptcy case depends on complex legal issues, such as automatic stay and exemptions. So the sooner you choose your bankruptcy attorney the better off you will be. If I can be of any help please contact me at: 303-955-7570, or help@cobankruptcyhelp.com, or fill out the free consultation form.

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In this age of online services you might be considering filing for bankruptcy without an attorney, via the internet. It is essential, however, that you consider the vital role a Denver bankruptcy attorney can play.

A bankruptcy lawyer will:

• assist you in dealing with bill collectors;
• help assess your specific situation;
• most importantly, be your advocate during this trying time.

It is essential to hire a person who knows the law so you are not taken advantage of during your bankruptcy case. It can be challenging to know who to trust in such a stressful situation, but an attorney will help you through the process.

A bankruptcy attorney will handle the bill collectors. As you know all too well, bill collectors call your home and your workplace harassing you for money. An attorney will explain your rights when it comes to creditors. You may not know you have the right not to be harassed by bill collectors. Your lawyer will help stop this harassment as soon as he, or she, is working for you.

You will need an attorney while filing for bankruptcy to help make crucial choices about how to proceed. Your lawyer will help assess your specific situation. Each individual’s bankruptcy case is different. State exemption laws vary and can be quite complex. Your lawyer will assist you in navigating the subtleties involved in Colorado bankruptcy laws, so you will not lose any of your valuable property unnecessarily.

Entering the courtroom with your experienced Denver, Colorado bankruptcy attorney will ensure a more positive outcome. Having an advocate while going through the process of filing for bankruptcy makes good sense. Bankruptcy is one experience you should not have to go through alone, without sufficient information about the law. Remember, your lawyer is someone you can trust to guard your interests.

If you are thinking about filing for bankruptcy, you should contact a lawyer as soon as possible.  Please feel free to contact me at: 303-955-7570, or help@cobankruptcyhelp.com, or fill out the free consultation form.

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As a bankruptcy lawyer in Denver, Colorado, I see a variety of responses to filing bankruptcy. Some people anticipate a major burden being lifted from their shoulders and their primary reaction is one of relief. Others, however, experience a wide range of troublesome emotions. In meeting with my many Denver bankruptcy clients, I often observe a certain amount of anxiety about filing for bankruptcy. A person’s self-worth may be intertwined with his or her finances. Thus I’ve learned that a bankruptcy attorney has several roles, one of them being to help clients accept bankruptcy as a fresh start—not just financially, but emotionally as well. Attempting to deal with overwhelming debt can be quite stressful. I try to never forget that a bankruptcy lawyer must be prepared to be both a legal counselor and a psychological counselor.

One of the emotions you may be experiencing is embarrassment because you feel like a financial failure. I am here to remind you that bankruptcy is not the end of the world. In fact, most bankruptcy cases proceed smoothly. After their hearing, many clients often say, “Is that all there is to it?” You must also keep in mind, as I have pointed out in a previous blog, you are not alone. Over the past five or six years, more than a million people have filed for bankruptcy each year. Also, remember, once you file for bankruptcy, bill collectors stop calling and creditors will no longer be able to take further legal action against you. Many clients report that they can finally sleep well at night once they have started bankruptcy proceedings.

You might find the idea of consulting with a bankruptcy attorney awkward, but the knowledge you will gain is important. A good bankruptcy lawyer will be patient and will help you to understand the bankruptcy process.

Finally, since we all know getting into debt can happen to the best of people, (refer to my blog on July 6^th), consider your debt a setback and not a failure. Look at bankruptcy as a course of action to solve a particular problem. Learn what you can from your mistakes and ask yourself what you might do differently in the future.

I try to make the bankruptcy process as easy and stress-free as possible. If you are in need of assistance please contact me: at 303-955-7570, at help@cobankruptcyhelp.com, or fill out the free consultation form.

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With a new school year about to begin, I thought it would be a good time to examine the issue of financial aid and bankruptcy. The two questions frequently asked are one, is a student eligible for financial aid after filing for bankruptcy, and two, will filing for bankruptcy discharge one’s student loan.

In regard to the first question, eligibility for financial aid after filing for bankruptcy depends on the type of loan, private or federal. Eligibility for a federal loan should not be affected by your having filed for bankruptcy. Financial aid administrators are not allowed to refer to bankruptcy as an indication that a student would be unwilling to repay a loan. You should be able to acquire additional federal student loans, regardless of any past bankruptcies, if there are no delinquencies or defaults on student loans currently in repayment. However, if you have a federal student loan that is in default and was not included in a bankruptcy, you will not be eligible for further federal student aid until the problem is resolved. A student with a loan in default should contact the current holder of the loan to set up a repayment plan in order to reestablish eligibility for federal student aid. (If you have defaulted on a loan, then discharged it via filing for bankruptcy, it is no longer considered to be in default.)

Eligibility for a private loan after you have filed for bankruptcy is a bit more complex. It depends on the type of bankruptcy filed and the type of loan. If you offer to secure a loan, or if your bankruptcy case involved extenuating circumstances beyond your control—such as medical issues or natural disasters—or if you have a cosigner who has a good credit rating, a lender may be willing to consider making an exception to the general rule of not loaning to a student who has a history of bankruptcy. (Of course, seven to ten years after filing for bankruptcy, you will be eligible for loans, particularly if you have begun the process of improving your credit rating.) If you are applying for a loan, you will be at an advantage if you filed for bankruptcy with a payout plan, whether it was partial or 100%. Finally, if your parents have filed for bankruptcy and are not cosigning for the loan it should have no impact on your loan process.

I will give a more succinct answer to the second question regarding discharging a student loan obligation through bankruptcy. In general, student loans funded privately, by FFELP (Federal Family Educational Loan Program), or by FDSLP (Federal Direct Student Loan Program), are not dischargeable in a bankruptcy case. The only exception to this is if you file an undue hardship petition and a judge rules that the loan can be discharged.

If you want to read a more detailed discussion of these issues you may refer to the following financial aid site: http://www.finaid.org/questions/bankruptcy.phtml. Or please feel free to contact me, a Denver bankruptcy attorney, Kevin D. Heupel at 303-955-7570, or at help@cobankruptcyhelp.com.

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In response to a request posted as a comment on my June 22^nd blog, here is additional information on the Supreme Court case regarding freedom of speech and bankruptcy.

“First, the plaintiffs contend that the prohibition against a consumer debtor with limited assets to ‘incur more debt in contemplation of such [debtor] filing’ for bankruptcy, 11 U.S.C. § 526(a)(4),violates the attorney plaintiffs’ First Amendment right, the client plaintiffs’ First and Fifth Amendment rights, and the separation of powers principle. Second, they contend that the requirement that a debt relief agency provide certain written disclosures to such consumer debtors, 11 U.S.C. § 527, violates the First Amendment. Third, plaintiffs contend that the requirement that a debt relief agency insert a written disclosure in advertisements for bankruptcy assistance, 11 U.S.C. § (a)(3)-(4), violates the First Amendment. Fourth, they challenge the requirement that a debt relief agency execute a written contract describing the services to be provided and the fees for such service, 11 U.S.C. § 528(a)(1)-(2). Finally, plaintiffs claim that the professional standards imposed on debt relief agencies violate their due process rights. Based on these claims, they seek a preliminary injunction enjoining defendants from enforcing Sections 526, 527 and 528 against the plaintiffs, the members of their organization, and others similarly situated. These allegations fail to state a claim for which relief can be granted. Accordingly, their complaint should be dismissed and their request for a preliminary injunction denied (U.S. Trustee Program, Department of Justice).”

These issues have generated some debate. A detailed discussion related to this issue can also be found at the following government site: http://www.usdoj.gov/osg/briefs/2008/0responses/2008-1119.resp.pdf .

Note that last year in St. Louis, the 8th U.S. Circuit Court of Appeals ruled that certain attorneys can be considered debt relief agencies and also ruled that the facet of the bankruptcy law that prevents lawyers from counseling their clients to take on more debt if they are thinking about filing bankruptcy violates the lawyers’ First Amendment rights. “In a case challenging application of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), summary judgment for plaintiff is affirmed in part and reversed in part where: 1) attorneys providing bankruptcy assistance are ‘debt relief agencies’ under the BAPCPA, 11 U.S.C. section 526(a)(4) is unconstitutional as applied to these attorneys; but 2) sections 528(a)(4) and (b)(2) are constitutional (caselaw site).” Milavetz v. United States, 08-1119, and United States v. Milavetz, 08-1225, are the cases involved.

Here is a link to the amendments to the Federal Rules of Bankruptcy Procedure that have been adopted by the Supreme Court of the United States pursuant to Section 2075 of Title 28, United States Code, which was submitted to the Congress, April of last year: http://www.supremecourtus.gov/orders/courtorders/frbk08p.pdf .

I hope these resources are helpful. Thanks for your interest.

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