Chapter 7 bankruptcy is the most frequently filed kind of bankruptcy in the state of Colorado. While chapter 7 is the easiest type of bankruptcy to file, the process can still be confusing when it comes to figuring out the rules for what you can - and can't - keep. Read on to find out about how exemptions work in a chapter 7 bankruptcy in the state of Colorado.
Before You Can Keep, You Must First Disclose
In a chapter 7 bankruptcy, you will be required to disclose all of your financial records. During the first appointment with a bankruptcy lawyer, you'll need to discuss all of the following things so that the lawyer can verify that you're eligible to file a chapter 7 bankruptcy.
Property: Including your primary residence, any secondary residences, and any other residential or commercial property that you own.
Assets: Assets can include everything that you own. Bank accounts, vehicles, collections, furniture, and anything else of significant value should be included.
Debts: Debts include any money that you owe.
Don't fear full disclosure of your finances. In many cases, Colorado residents are able to keep the majority of their property during a bankruptcy, thanks to exemptions.
Why Exemptions Are Allowed
The state offers exemptions that allow you to keep your primary home, your primary vehicle, and other personal property as long as your equity does not exceed the amount set forth in the exemption. The main purpose of exemptions is to allow people who are declaring bankruptcy to be able to go about their lives and continue working and living normally. After all, without a home or vehicle, it would be very difficult - if not impossible - to continue working, and the state of Colorado recognizes this.
The Different Exemptions
There are many different exemption categories in Colorado. These include:
Homestead Exemption: This is the largest of the exemptions. It applies to the primary residence. This exemption is $60,000 ($90,000 if you, your spouse, or your child is disabled or over 60). This means that as long as you don't have over that amount of equity, you can keep the home while still declaring bankruptcy.
Vehicle Exemption: The vehicle exemption in Colorado is $5,000. The exemption amount doubles if you, your spouse, or your child is disabled or over 60.
Personal Item Exemptions: The property exemptions in Colorado allow up to $1,500 for clothes, $3,000 for household items, $2,000 for jewelry, and $1,500 for books and photos.
Other Exemptions: Certain other things can be included in other specific exemptions that are designed for unique cases. For example, people who have equity in tools used in their job can use a "Tools of the Trade" exemption. If you receive disability benefits, you can keep those benefits under the "Public Benefits" exemption.
If you plan to declare bankruptcy in the state of Colorado, make sure that you discuss all of your potential exemptions with a bankruptcy lawyer. You may be pleasantly surprised at just how much you get to keep!