Do You Run the Risk of Losing Property by Filing Chapter 7?
Suppose you are contending with overwhelming amounts of debt. In that case, you have likely considered various options for discharging that debt or rebuilding your finances. While many treat bankruptcy like a dirty word, filing for bankruptcy can sometimes be the only reasonable option left available to individuals, businesses, and families drowning in debt.
Considering Chapter 7 bankruptcy can be a daunting experience, and you should not file for Chapter 7 without considering all other alternatives. Chapter 7 bankruptcy allows you to hit the reset button, get a clean slate, and start over financially, though not without the risk of having some property seized or liquidated in the bankruptcy process.
Luckily, many state bankruptcy exemptions are available to those in Colorado considering Chapter 7 bankruptcy. To claim property as exempt in Chapter 7 bankruptcy, you must list the valid exemptions on your Schedule C form, which is part of the necessary paperwork you must file with the bankruptcy court.
What Property May You Be Allowed to Keep in Colorado Bankruptcy Proceedings?
Chapter 7 bankruptcy proceedings virtually eliminate all unsecured debts, giving you a fresh financial start. In exchange for the clean slate, a Colorado bankruptcy court can liquidate your assets to pay off outstanding debts owed to your creditors. However, certain bankruptcy exemptions exist, meaning that not all of your assets will be forfeited in the bankruptcy process.
Colorado bankruptcy exemptions include the following examples:
- A limited amount of money in bank accounts
- Alimony, child support, Social Security benefits, unemployment benefits, and certain other payments may be fully protected
- Homestead exemption, for your primary living residence
- The motor vehicle exemption is for necessary cars and transportation. Please note that if you do keep your vehicle, you may have to reaffirm on the loan
- Personal property exemptions for clothing, certain household goods, limited amounts of jewelry, burial plots, hunting and fishing equipment, family photos, food, fuel, and health aids
- Retirement accounts, local government pensions, police officer and firefighter pensions, IRAs, and pensions for veterans who served in armed conflict
- Tools of trade exemptions that help you maintain your primary source of income
- Wildcard exemption, which is used to protect specific property that is not included in other categories
Though the above-listed examples of bankruptcy exemptions could be kept in your Chapter 7 bankruptcy case, there are certain limitations and restrictions.
What Are the Colorado Bankruptcy Exemption Amounts?
Among debtors’ most significant concerns is that filing for bankruptcy could result in them losing their homes. Thankfully, Colorado has a homestead exemption that protects a certain amount of equity in a house or mobile home.
Bankruptcy exemption amounts in Colorado include the following examples:
- You can protect up to $250,000 in equity in your home. If you, your spouse, or a dependent family member is considered disabled or is at least 60 years old, the amount of protected equity can go up to $350,000
- The amount that is protected for tools of the trade, such as your machines, electronics, equipment, business materials, and other supplies, can vary depending on your occupation. The amount that is protected is $60,000 if these items are used in your primary occupation and $20,000 if these items are used in an occupation other than your primary one
- You are allowed $15,000 of equity for any personal motor vehicles you own. Those with disabilities or considered among older adults may have an exemption of $25,000
- There is a $100,000 exemption for livestock, farm equipment, vehicles used in agriculture, tractors, harvesting equipment, seeds, and related agricultural machinery
- Professional libraries are afforded a $3000 exemption amount
- Food and fuel receive a $600.00 exemption amount
- Debtors can claim up to $2,500 worth of jewelry
- You are permitted to hold $1000 worth of firearms, fishing equipment, and hunting equipment, exempt
- Bank accounts are allowed to claim $2,500 in exemptions
- You are allowed to claim $2,000 worth of clothing as exempt in the bankruptcy process
- Household goods, which can include many different types of items, can be exempted up to $6,000
What if Your Assets Are Not Exempt or You Forget to Claim Exemptions?
What happens to non-exempt or unclaimed property in Colorado bankruptcy cases will depend on the type of bankruptcy you decide to go with. In Chapter 7 bankruptcy cases, you will likely lose the property not covered by a valid exemption. The bankruptcy trustee overseeing your case can sell off the property for the benefit of your lenders and creditors. In Chapter 13 bankruptcy matters, you can keep all your property, but there are some drawbacks. You will be asked to pay your creditors the value of any property not covered by bankruptcy exemptions in a Chapter 13 payment plan.
If you forget to claim an exemption or do not fill out Schedule C at all, your property will be unprotected. That property will likely be taken, sold, and used to repay your unsecured debts.
Debtors who accidentally overlook something on their Schedule C form may be allowed to address their errors if the bankruptcy trustee allows it. Please note, however, that the trustee is not required to give you this second chance.
Are There Federal Bankruptcy Exemptions?
State and federal exemptions exist for those considering protecting their property in the bankruptcy process.
While some states allow debtors to choose between state and federal bankruptcy exemptions, Colorado does not. Our state has opted out of federal bankruptcy exemptions, meaning that debtors who file for bankruptcy in Colorado must use Colorado-specific exemptions.
Contact Our Colorado Law Firm to Schedule a Free Strategy Session with a Compassionate Bankruptcy Attorney Today
The bankruptcy process can feel complicated, overwhelming, and sometimes cold or unsympathetic. While your bankruptcy options are meant to provide you with the possibility of a fresh start financially, that does not mean that the procedures are simple or come without risks. Colorado has reasonable bankruptcy exemptions to help you defend against forfeiting your assets during a Chapter 7 bankruptcy process.
Those considering filing for bankruptcy and are concerned about what assets may or may not be protected by Colorado bankruptcy exemptions are encouraged to seek the professional legal advice of experienced attorneys in this practice area. Our law firm has extensive experience assisting clients in various legal matters related to bankruptcy. We would be proud to represent your interests as you pursue the most favorable outcome for your case.
To learn more about the benefits of retaining the legal services of a bankruptcy lawyer, please get in touch with our law office to schedule your free initial consultation today. You can reach us at 970-205-9690.
