There are varying reasons Colorado residents get deep in debt. For some, debt may accumulate over a period of time, with monthly payments adding up until they are too much to bear. For others, a sudden incident like a job loss or medical situation can land a person deep in debt with little or no warning.
While there are many different ways of getting in debt, the process of debt relief through Chapter 7 bankruptcy tends to be fairly similar between different individuals. The Bankruptcy Code lays out a process for debtors to receive a discharge of their debt, and debtors and creditors alike must follow this process.
This is not to say all Chapter 7 cases are the same. Typically, debtors receive a discharge of their debt in 99 percent of Chapter 7 cases, meaning the debtor no longer is personally responsible for paying back the debt to the creditor. However, there are many exceptions to discharging debt under Chapter 7, and therefore, some creditors may have an exception in one case that does not apply in another.
Creditors usually must file an objection to the discharge of their debt within a specified time period. For instance, secured creditors have certain rights to a person's property in spite of a discharge. Other types of debt, like those for alimony, child support, tax obligations or other situations may not be discharged in the bankruptcy proceeding. In other words, the debtor still is responsible for paying these debts if they are not paid off in the Chapter 7 proceeding.
Ultimately, there are rules in place under the Bankruptcy Code for addressing different kinds of debt and specifying which types may be discharged. Individuals should be aware of how these rules will apply to their individual case so they understand which of their debts will be discharged, and which debts they may still be responsible for after the discharge.
Source: United States Courts, "Liquidation Under the Bankruptcy Code," accessed on Dec. 13, 2014