In my law practice, I continue to see clients who believe that Chapter 7 bankruptcies either are not possible at all or are only possible for people with low incomes. This is a myth which has been largely perpetuated by erroneous reports by the news media.

Chapter 7 bankruptcy — usually the preferable way to go — means you are in and out of bankruptcy in only 90 days or so. Generally, you walk away from almost all of your debt and lose no property.

Most of our cases are still filed under Chapter 7. Even if your income is above the Colorado median income for your family size, frequently a Chapter 7 case is still possible by the time all allowable expenses are factored into the equation. Such expenses include, but are not limited to, day care, mortgage expenses, and health insurance.  However, Chapter 13 is still sometimes required — yet that’s not necessarily a bad thing.

In some cases, you might be better off filing Chapter 13 even if you qualify for a Chapter 7. For instance if you have a second mortgage and you want to keep your house, you can often eliminate your second mortgage in a Chapter 13 bankruptcy but not in a Chapter 7. Tax debts may also be a good reason to file Chapter 13 because you can pay the taxes over five years with no penalties and interest.  If the taxes are over three years old, and are not payroll taxes, they can usually be eliminated in Chapter 7 and Chapter 13.