When Bankruptcy May Not Help to Defend a Foreclosure

Summary:  A bankruptcy may be the wrong solution for you in some cases. In most of these cases, you can survive your debt and get back on track with some type of work-out and minimal income tax owed on the debt forgiveness.

When Bankruptcy May Not Help You Keep Your Colorado Home

Many homeowners can solve their debt problems with work-outs such as loan modifications instead of filing bankruptcy, particularly in the following situations:

1. You can afford to pay your present debts without any real hardship.

2. You are totally judgment-proof because of your Colorado exemptions. However, keep in mind the fact that your wages may be garnished if you are employed by a third party. Wages in some other state may not be garnished, depending on that state’s laws.

3. You have only a few debts and strong defenses to the payment of these debts. Such as wrongful activity by the lender or provider of the goods and services.

4. If your debt is secured by liens on your home and you do not have enough income to pay the debts even if you were able to catch up on the payments. This means that you cannot afford to live in your home. Usually you can make a work-out agreement to sell or give up the home and pay off the debts. This may get you debt-free. But be careful of the income tax effects of a workout.

5. You have a lot of nonexempt assets, such as a lot of cash, savings or investment accounts that are not retirement accounts, or a lot of equity in real estate which is not your principal residence or equity in your principal residence which is much greater than $60,000. Filing bankruptcy, even a Chapter 13, will not allow you to shelter nonexempt assets, but you may be able to pay them over a period of time rather than all at once.

6. Because you filed for a Chapter 7 bankruptcy within the past 8 years, you cannot now file a Chapter

7. However, you can still file a Chapter 13.