If you are drowning in personal or business debt, you may have considered filing for bankruptcy. Bankruptcy is a set of federal laws and rules that can help individuals and businesses that owe more debt than they can pay. In almost all 94 federal judicial districts, bankruptcy cases are filed in bankruptcy court. They are not filed in state court, and while bankruptcy looks similar in most states, some things are specific to Colorado.
When someone files for bankruptcy, it tells their creditors that they can no longer pay their debts. It also allows them to get a fresh start by liquidating their assets to pay their debts or create a repayment plan. While individuals usually file either Chapter 7 or Chapter 13, businesses have other options. Businesses can file Chapter 7, Chapter 11, or Chapter 13 bankruptcy.
If your business has no viable future, chapter 7 bankruptcy is the best one. Chapter 7 bankruptcy is typically used when business debts are so overwhelming that restructuring is not possible. Chapter 7 can be used for a sole proprietorship, partnership, or corporation.
Chapter 11 can be a better choice for businesses with a realistic chance of turning things around. It is usually used for partnerships and corporations. Chapter 11 is a plan where a company reorganizes and continues business under a court-appointed trustee.
Finally, chapter 13 bankruptcy is a reorganization bankruptcy reserved for individuals. In chapter 13, you file a repayment plan with the bankruptcy court that details how you will repay your debts.
In Colorado, you will not lose everything in bankruptcy. You can use state bankruptcy exemption laws to protect properties. There are several property exemptions, including the homestead exemption, an exemption for cemeteries and burial property, a personal property exemption, an exemption for partnership property, and an exemption for tools used for the debtor’s job.
If you are drowning in debt and considering filing for bankruptcy, contact a local lender, such as Aspen Commercial Lending, to review all of your options.