Colorado’s bankruptcy laws are meant to relieve individuals and businesses experiencing financial difficulties. However, this help is only as good as your repayment plan and financial decisions during and after bankruptcy.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is also known as a wage earner’s bankruptcy. It is typically applied by individuals with a regular income; however, small business owners in financial distress can use it too. It works by reorganizing your debt and setting up a repayment plan that the bankruptcy court can agree with. If you satisfy the bankruptcy arrangement, the judge might dismiss some of your debts, giving you a clean start.
Preparing for Chapter 13 repayment plan
The first step in preparing your Chapter 13 repayment plan is understanding how much money you need to live on every month. This includes not only your basic living expenses but also other debts you are trying to repay.
With that figure in mind, you will need to create a budget. This will help you determine how much money you can realistically afford to put towards your repayment plan each month. Make sure to include some wiggle room in your budget in case of unexpected expenses.
When done, you will need to forward your budget to the court so that they can determine whether your proposed repayment plan can work. If they approve, you will make payments to a trustee who will then distribute the funds to your creditors.
Debts you must repay in Chapter 13 repayment plan
Regardless of your circumstances, there are debts that must be paid. They are known as priority debts and include state and federal back taxes, child support and alimony and wages, salaries or commissions you owe your employees.
There are also debts that you took with collateral. A creditor can claim the collateral if you don’t repay the debt in full under the repayment plan.
It’s important to stay current on your payments. If you’re struggling to make a payment, it’s important to reach out to your trustee or attorney as soon as possible to work out how you can modify your repayment plan to make it more manageable. Failure to do so could lead to a judge dismissing your case, which would force you to file for Chapter 7, where all your assets would be liquidated to clear your debts.