When financial struggles hit Colorado residents, it can seem like the mounting debt continues to grow by the day. In many cases this is true, as individuals do not have the income necessary to pay off their debt, leading to higher interest payments and even more debt.
Ultimately, a person may be left with little recourse other than to file for bankruptcy when faced with overwhelming debt. However, even after the decision to file for bankruptcy has been made, there are several steps that must be taken before the person's debt can be discharged through the bankruptcy proceeding.
A typical bankruptcy case begins when a debtor files a petition with the court. In Chapter 13 bankruptcy, the debtor must also file a number of items with his or her petition, including a list of liabilities and assets, a list of expenditures and current income, a financial affairs statement and a list of executory contracts.
In addition to filing the above information, as well as additional items like tax returns, individuals must complete credit counseling before they can achieve a debt discharge in bankruptcy. The certificate received at the completion of the credit counseling is filed with the bankruptcy court, as well as a copy of a debt repayment plan that was developed during this credit counseling process.
The point of having the person provide this information is to determine the person's income and debt levels. In Chapter 13, a repayment plan will be established where the person will make affordable monthly payments toward his or her debt. Accordingly, it is essential that the full status of the person's income and debt be known by the court in order to create the repayment plan and put the person on the path toward debt relief.
Source: United States Courts, "Chapter 13," accessed on Sept. 29, 2014