WHAT ASSETS DO BANKRUPTCY EXEMPTIONS PROTECT?
When you file a bankruptcy as a Colorado resident, you will be relying on Colorado bankruptcy exemptions to protect your personal property (real and otherwise). Colorado bankruptcy exemptions cover you in both Chapter 7 and 13 bankruptcies. It is of the utmost importance that you understand how these exemptions can help protect your personal property. You should also understand the limitations that these exemptions have. We will go through the list of exemptions below to assist you with understanding Colorado bankruptcy exemptions.
CAN I USE FEDERAL EXEMPTIONS OR DO I HAVE TO USE COLORADO’S?
There are two types of exemptions in bankruptcy: state and federal. Many debtors prefer federal exemptions. However, these exemptions are not eligible in every state. Colorado is an opt-out state, meaning it has opted out of using federal exemptions. As a result, if you qualify as a Colorado resident when you file bankruptcy, you will only be allowed to use Colorado bankruptcy exemptions. Your attorney can help you determine whether you qualify, but the rule of thumb is that you have resided in Colorado for two years.
LIST OF COLORADO BANKRUPTCY EXEMPTIONS
- Child or Domestic Support: As long as you keep the money received from child or domestic support in a separate bank account away from your other sources of income, the income received from child and domestic support is exempt.
- Property of a Business Partnership: This is exempt if proven to be property of a business partnership and not something that the individual debtor has rights to on their own.
- Burial Plot Exemption: If you have a burial plot picked out for you and your dependents, that will be exempt.
- Fraternal Benefit Society Benefits: If you receive benefits from a fraternal benefit society, those benefits will be 100% exempt.
- Crime Victims Compensation: If you are the victim of a crime where you have received, or are in the process of receiving, compensation from the state or criminal, then those proceeds will be 100% exempt.
- Insurance Benefits: If you have a group life insurance policy, that policy is 100% exempt. Any proceeds received from that policy are also 100% exempt. Outside of certain exceptions, you can exempt up to $4,000 a month in benefits from accident or sickness insurance during the timeline of your disability. Lump sum benefits are fully exempt as are all life insurance proceeds. If you are trying to recover the cash surrender value of a life insurance policy, you can exempt up to $100,000 outside of any contributions made to the policy over the previous four years before filing.
- Partnership Property: Colorado law exempts a specific partner’s interest in specific partnership property.
- Pension and Retirement Property: If you are a police officer, fire fighter, public employee or a veteran, your pension and retirement benefits are exempt. 401(k)’s and IRA’s are also exempt(as are other tax exempt accounts).
- Tools of the Trade: If you use certain tools in your primary occupation, they are exempt up to $30,000. If you do not use them in your primary occupation, you can exempt up to $10,00 for tools of the trade.
- Unemployment Benefits, Veterans’ Benefits, and Workers Compensation Benefits: These benefits are normally fully exempt unless enforcement of child support or alimony is involved. You cannot commingle other funds with unemployment benefits. Employer reimbursements can be taken out of workers compensation benefits.
- Wages: You can exempt up to 75% of your disposable income or 30 times the federal or state minimum hourly wage per week.
- Public Assistance Benefits: All public assistance benefits earned income credit on tax refunds are 100% exempt. You can exempt up to $3,000 in disability benefits.
CAN BANKRUPTCY EXEMPTIONS PROTECT MY HOME?
The biggest question most people who file bankruptcy have is whether they can protect their home. In Colorado, state laws provide you with a bankruptcy exemption called Homestead. This exemption states that you can exempt up to $75,000 of the equity you have in your house or other property. Most debtors do not own their homes outright or have owned them long enough to have a ton of equity. Therefore, that protects the full equity of many Colorado residents.
Let’s say you are a homeowner who has more equity than the exemption covers. You will have to buy back the remaining equity in your home if you want to keep the home from being auctioned off.
If you did have the home auctioned off, you would be entitled to the $75,000 in equity that the homestead exemption protected.
For people 60 years of age or older and for disabled individuals, the exemption for homestead increases to $105,000.
If you sold your previous home, and it was your homestead, the proceeds from that sale would be 100% protected. This is true as long as you kept the proceeds separate from your other funds and used those proceeds to purchase another homestead that qualifies for the same exemption as your previous homestead. You only have one year from the date of the sale of the previous homestead to do this before the proceeds become unexempt.
CAN BANKRUPTCY EXEMPTIONS PROTECT MY CAR?
Outside of protecting your home, your biggest concern will likely be whether you will be able to keep your vehicle. Everyone assumes that vehicles are exempt in bankruptcy because most of us need to drive to work. However, bankruptcy law does not provide an automatic exemption that protects your vehicle. Every state has their own exemptions for motor vehicles, and they can vary significantly.
Colorado bankruptcy exemptions provide a more generous exemption than most states. It allows you to protect up to $7,500 in your vehicle or vehicles. If you own two cars and their equity does not exceed $7,500, then your vehicles will be fully exempt. If you are disabled or considered elderly, or you are a spouse or dependent of the elderly or disabled debtor, you will be able to exempt $12,500 in your vehicle equity, or that of your spouse or dependent.
HOW DO BANKRUPTCY EXEMPTIONS PROTECT MY PERSONAL PROPERTY?
Each state has different exemptions regarding personal property. Colorado is again one of the more generous states with its personal property exemptions:
- Household Goods: your furniture and other household goods are exempt up to $3,000.
- Clothing: Your clothing is exempt up to $2,000.
- Jewelry: You can protect up to $2,500.
- Books and Family Pictures: Your books and family pictures are exempt up to $2,000.
- Food and Fuel: You get $600 of exemptions for this.
- Personal Injury Recoveries: This is exempt as it relates to your recovery. It is not exempt as it relates to treatment of your injuries.
- Livestock & Tools: this is protected up to an aggregate value of $50,000.
- Health Aids: Professionally prescribed health aids are fully exempt.
CONTACT A BANKRUPTCY ATTORNEY TODAY TO LEARN MORE ABOUT COLORADO BANKRUPTCY EXEMPTIONS
At Holland Law Office P.C., Steve Holland has the experience and knowledge you need to help you navigate bankruptcy process. Call today to learn more about how to use Colorado bankruptcy exemptions to their fullest advantage in your case.