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Bankruptcy: Colorado

Bankruptcy in Colorado provides debtors the opportunity to seek relief from overwhelming debt, while helping creditors receive restitution to the extent that the debtor’s property or earnings permit.  Approximately 32,523 bankruptcies were filed in Colorado in 2010, ranking Colorado 8th in the nation for the number of bankruptcy filings per capita.  84% of Colorado bankruptcy petitioners in 2010 filed for Chapter 7 bankruptcy.

Filing Bankruptcy in Colorado

Bankruptcy in Colorado is governed by federal law and all bankruptcy cases are filed in US Bankruptcy Court.  Colorado’s US Bankruptcy Court is located in Denver. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, only Colorado’s State laws will be applied when determining what items of personal property are exempt in bankruptcy (the petitioner is eligible to keep) and what must be sold to repay creditors.

Chapter 7 Bankruptcy, Colorado

Chapter 7 bankruptcies in Colorado are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Colorado’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Colorado’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Colorado Bankruptcy Exemptions

Colorado’s state laws designate specific property that debtors may keep in bankruptcy so they can have a fresh start without being totally destitute.  That is, the law protects the petitioner from literally having to sell the shirt off their back to repay a creditor. These designations are “property exemptions.” The list of federal exemptions is not available to petitioners in Colorado. Colorado bankruptcy law requires debtors to use the exemptions provided in state law.

Because exemption values change, it is important to consult a Colorado bankruptcy attorney or refer to the codes and statues for up-to-date information. Colorado’s key exemptions include:

Colorado Homestead Exemption

  • $60,000 total: Real property, mobile home, manufactured home, or house trailer you occupy; $90,000 total if owner, spouse, or dependent is disabled or age 60 or older
  • Proceeds of home sale exempt 2 years after received (Husband and wife may double)
  • Spouse or child of deceased owner may claim homestead exemption

Colorado Personal Property Exemption

  • $3,000 total: Household goods
  • $600 total: Food & fuel
  • $1,500 total: Clothing
  • $1,500 total: Family pictures & books
  • $2,000 total: Jewelry & articles of adornment
  • $5,000 total: Motor vehicles or bicycles used for work, or up to $10,000 if used by a debtor or dependent who is disabled or age 60 or older
  • Health Aids
  • 1 burial plot per family member
  • Personal injury recoveries
  • Proceeds for damaged exempt property
  • Security deposits

Colorado Tools of Trade Exemption

  • $50,000 total: Livestock and other animals, machinery, tools, equipment, and seed for persons employed in agriculture
  • Military equipment personally owned by members of the national guard
  • 75% of weekly net earnings or 30 times the federal or state minimum wage, whichever is greater, including pension and insurance payments
  • $3,000 total: Professional’s library to (if not claimed under other tools of trade exemption)
  • $20,000 total: Stock in trade, supplies, fixtures, tools, machines, electronics, equipment, books, and other business materials

Colorado Public Benefits Exemption

  • $3,000 total: Disability benefits
  • Earned income tax credit or refund
  • Public assistance; Aid to blind, aged, disabled
  • Unemployment and Workers’ compensation
  • Veteran’s benefits for veteran, spouse, or child if veteran served in war or armed conflict
  • Crime victims’ compensation

Colorado Insurance Exemption

  • $200 per month for Disability benefits; entire amount is exempt if disabled receives a lump sum
  • Fraternal benefit society benefits
  • Homeowners’ insurance proceeds for 1 year after received, to homestead exemption amount
  • Group life insurance policy or proceeds
  • Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • $100,000 total: Life insurance cash surrender value, contributions to policy within past 48 months not eligible

Colorado Pensions and Retirement Savings Exemption

  • ERISA-qualified benefits, including IRAs and Roth IRAs
  • Firefighters, police officers, public employees, Teachers
  • Public employees’ deferred compensation and defined contribution plans
  • Veteran’s pension for veteran, spouse, or dependents if veteran served during war or armed conflict

Colorado Miscellaneous Exemption

  • Child support or domestic support obligation
  • Property of business partnership

Chapter 13 Bankruptcy, Colorado

In 2010, ­16% of debtors petitioned for protection under Chapter 13 bankruptcy laws in Colorado.  A Chapter 13 Trustee will reorganize the petitioner’s debts and develop a 3-5 year repayment plan allocating future earnings to pay off creditors.  Chapter 13 petitioners typically keep most – or all – of their property.

How to File Bankruptcy in Colorado

Colorado bankruptcy exemptions should have a significant impact on one’s decision to file (or not to file) for bankruptcy. For example, if a petitioner’s major assets are exempt and debts qualify for discharge, Chapter 7 may be the right choice for that person. Even so, every financial situation and bankruptcy case is different.  A Colorado bankruptcy attorney can educate potential petitioners on Colorado bankruptcy facts and advise the options available to them.

Bankruptcy Attorney: Colorado

It is the responsibility of potential petitioners (and their spouses) to be informed of their rights and obligations as debtors.  A Colorado bankruptcy attorney can simplify and interpret the federal laws and state exemptions on a petitioner’s behalf.  Given the complexity of most bankruptcy cases, the professional counsel of an experienced Colorado bankruptcy attorney is a sensible investment.