Generally, in a Chapter 7 Bankruptcy, the debtor’s debts are discharged and his non-exempt assets, if any, are liquidated to pay the creditors. However, it is not true that you need to give up all of your property once you file bankruptcy.
Colorado law allows exemptions that provide the debtor with sufficient stability to have a fresh start after bankruptcy proceedings.
Once you file a Chapter 7 bankruptcy, your property, except that which is properly claimed as exempt, becomes the property of the bankruptcy estate, which is controlled by the trustee. Your property is determined on the day you file your bankruptcy. Think of it like a snapshot of your financial situation on the date of filing. You provide the court a complete picture of your assets, your debts, your income, and your expenses on the date of filing. Anything you acquire or receive after this date is generally not part of the bankruptcy estate unless the property is owed to you or you have a contingent interest in it on the date of filing. However, property you become entitled to receive through an inheritance, a division of property in a divorce, or life insurance proceeds within six months of the date of filing is a part of the bankruptcy estate.
Exemptions delineate what property a debtor can keep. They protect the debtor’s equity in an asset. It is very important that a debtor enlists the assistance of an experienced bankruptcy attorney to make proper claims of exemptions.
To determine whether a debtor’s property is protected he must determine the value of the item and subtract any loans on it. For example, if he owns a car that is worth $6000 but owes $5000 in car loan payments, his equity in the car is $1000. If the debtor’s equity in any property is less than or equal to the exemption amount, he can keep the property.
Using the car example and its $7,500 exemption, if the car is worth $12,000 and there is no lien, the bankruptcy trustee will likely sell the car, pay the debtor $7,500.00 for the exemption, and pay any remainder to the debtor’s unsecured creditors, less the trustee’s commission and costs of sale.
The following is a non-exhaustive list of Colorado exemptions of assets that are protected from liquidation:
- Wages: Minimum 75% of earned but unpaid wages, 100% of pension payments and retirement funds in qualified plans;
- Homestead: $75,000 in home equity; $105,000 if 60 years old or over, or disabled (A spouse or child of deceased owner may claim this exemption). The proceeds of a sale of a home are exempt two years after receipt if not commingled;
- Residential and utility security deposits;
- Public benefits: 100% of unemployment compensation benefits, workers’ compensation benefits, public assistance payments, personal injury recoveries, crime victims’ reparation law awards, state or federal earned income tax credit refund or child tax credit, etc.
- Burial sites for family members;
The following amounts are doubled for a joint petition:
Motor Vehicles: $7,500 in equity in aggregate value of vehicles or bicycles, $12,500 if over 60 years old or disabled;
- $3,000 in household furnishings;
- $2,500 in watches and jewelry;
- $2,000 in clothes;
- $600 in food and fuel;
- $3000 in household goods: includes electronics, furniture, and appliances;
- $2000 in family pictures, personal library, and books;
What Kinds Of Property Are Not Exempt?
Some assets are not protected in Chapter 7 bankruptcy. Examples include non-homestead property, such as vacation and rental homes, tax refunds, portions of checking and savings accounts, firearms, ATV’s and boats. For non-exempt property, a debtor may be able to “buy it back” from the trustee. .
Colorado Bankruptcy Attorney
As a former trustee for the U.S. Bankruptcy Court, with over thirty years experience, Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Denver, Colorado. We also serve Aurora, Centennial, Highlands Ranch, Englewood, Littleton, Lakewood, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, call the Law Office Of Long & Long for a free initial consultation at (303) 832-2655.