Are You Considering Filing for Bankruptcy in Colorado?

Deciding to file for bankruptcy is a significant step. It can feel like the best way to get a fresh start, especially if you live in or around Loveland and are struggling with debt. One of the biggest concerns people have is, “Does bankruptcy affect my spouse?” This is a very important question because a bankruptcy filing can have consequences that reach beyond just the person who files.

Navigating the complexities of bankruptcy law requires a knowledgeable hand. My legal team and I are here to help you understand the rules and how they apply to your specific situation. 

Is Colorado a Community Property State?

First, a crucial legal point: Colorado is not a community property state. This means that, unlike in a handful of other states, a spouse is generally not automatically liable for a debt just because the debt was incurred during the marriage. Instead, Colorado follows the principle of equitable distribution. A spouse is only liable for a debt if their name is on the account or loan agreement. This is a big deal when it comes to bankruptcy.

Since Colorado is not a community property state, creditors can still pursue the non-filing spouse for repayment of those joint debts.

What Are the Benefits of Individual Filing vs. Joint Filing?

When you are married, you have two main options for filing for bankruptcy: filing as an individual or filing jointly with your spouse. The choice you make will directly influence your spouse and your financial future.

When One Spouse Files Alone

If you file for bankruptcy as an individual, your bankruptcy discharge will only apply to you. It will wipe out your legal obligation to pay certain debts. The non-filing spouse is not responsible for any debt you hold solely in your name. Their credit will generally not be affected by your filing.

But if you have any joint debts with your spouse, such as a mortgage, car loan, or credit card, the creditor can still come after your spouse for the full amount. Even if you discharge your half of the debt in your bankruptcy, your spouse’s name is still on the hook. This is a primary reason why many couples in Loveland and throughout Colorado consider a joint filing, even if only one person has most of the debt.

When a Couple Files Together

Filing a joint bankruptcy can be smart, especially if you share significant debt. All your joint debts are discharged when you and your spouse file together. This gives both of you a fresh start. A joint filing is also often more cost-effective. You pay a single filing fee, and the attorney’s fees are typically less than they would be for two separate filings.

A joint filing also offers a significant advantage with bankruptcy exemptions. Colorado law, specifically Colorado Revised Statutes § 13-54-107, requires filers to use state exemptions rather than federal ones. Married couples filing jointly can double the exemption amount on certain assets, allowing you to protect more of your property. For example, some exemptions, like the personal property exemption, can be doubled. This provides added protection for your possessions.

How Will Your Spouse’s Income Affect Your Bankruptcy Case?

Even if you choose to file for bankruptcy by yourself, your spouse’s income is still a factor. You must pass the means test when you file for Chapter 7 bankruptcy. The means test determines if your household income is low enough to qualify for Chapter 7. The test requires you to report your household income, which includes your spouse’s earnings.

If your spouse earns a high income, it could prevent you from qualifying for Chapter 7. You would then have to file for Chapter 13, which involves a repayment plan. This is a critical factor we review with clients in our Loveland office; it can significantly change the type of bankruptcy you file and the outcome of your case.

How Can You Protect Your Property and Assets in Colorado Bankruptcy?

One of the main goals of bankruptcy is to protect assets while discharging debts. Colorado has specific exemptions that protect particular property from being sold to pay creditors. Some of these exemptions are especially important for married couples.

The Homestead Exemption

The Colorado Homestead Exemption, found in Colorado Revised Statutes § 38-41-201, protects a portion of the equity in your home. It allows you to protect up to $250,000 of equity in a property you own and live in. For individuals who are 60 years or older or who have a disability, or have a spouse or dependent with a disability, this amount increases to $350,000. It is critical to know that, unlike some other states, Colorado does not allow married couples to double the homestead exemption.

Other Key Exemptions

Colorado’s laws provide other valuable exemptions. The Motor Vehicle Exemption, for example, allows you to protect up to $15,000 in equity in one or two motor vehicles. If you are married and filing jointly, you can double this exemption. You can also double exemptions for personal property like household goods, which can be a relief for a family going through a hard time.

The exemptions you can claim depend on the type of property you own. My legal team and I help clients in Larimer County and beyond make the most of these exemptions to protect their belongings.

What is an Automatic Stay?

When you file for bankruptcy, an automatic stay immediately goes into effect. This powerful court order stops most collection activities, like foreclosure, repossession, and wage garnishment. If you file individually, this automatic stay generally only protects you. Creditors can still pursue your spouse for any joint debts.

If you file for Chapter 13 bankruptcy, there is a special co-debtor stay. This stay protects your spouse from collection activity on joint consumer debts. It remains in effect as long as you are making your plan payments. The creditor can ask the court to lift the stay if you fall behind on payments.

Schedule a Free Strategy Session with Our Highly Skilled Legal Team

Filing for bankruptcy is not a simple transaction; it is a complex legal process with many variables. A misstep can significantly impact your spouse and your financial future. Having an experienced attorney and a dedicated legal team can make all the difference.

I have a deep knowledge of Colorado bankruptcy law and federal court procedures. I believe in providing personalized attention to every client, because every financial situation is unique. I will take the time to listen to your story, understand your specific concerns, and develop a strategy tailored to your needs.

You do not have to face this financial challenge alone. I offer a free strategy session to all potential clients. Click to call today at 970-205-9690 to get the knowledgeable guidance you need and to start on the path toward a fresh financial start.