What Can I Legally Keep If I File For Bankruptcy?

Martin Long • Jan 09, 2017

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.

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A joint petition is when a married couple together files a single bankruptcy case. Unless noted otherwise in the statutes, if a married couple files jointly in Colorado, each spouse may claim the full amount of each exemption. The favorable effect of this is that the couple can claim twice the amount of exemptions. Unmarried couples, partnerships, and corporations must file separate petitions. If you are an individual and have a business entity, such as an LLC or a partnership, you cannot file a single petition for yourself and that business. In such a case you will note your interest in your company in your individual filing, e.g., John Doe, a member of Doe, LLC. If you are a sole proprietor, however, you may include your 100% ownership of the business in your individual bankruptcy. Once a joint petition is filed, all property and debts between the two individuals in the marriage become part of the bankruptcy filing. Sometimes it may be advisable for one spouse to file a petition alone and without the other spouse. An example is when the debts are owed only by the filing spouse, and not the non-filing spouse. Though the non-filing spouse is not part of the bankruptcy, information regarding the income of the non-filing spouse must be included in the filing spouse’s statements and schedules. Why, you ask? Because the income from the non-filing spouse given for the benefit of the filing spouse may mean the filing spouse has the means to pay some of the debt. The Bankruptcy Process You can start the bankruptcy process by filing a petition with the bankruptcy court serving your area. In addition to the petition, you must also file with the court (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. In addition, you must provide the assigned trustee with a copy of the tax return or returns for the most recent year as well as tax returns filed during the case. These documents must be provided for both husband and wife. Creditors Meeting Between 21 and 40 days after the filing date, the trustee will call a meeting of your creditors. In the case of a joint petition, both husband and wife must attend the creditors’ meeting and answer questions regarding their financial status and property. Within ten days of this meeting, the trustee will communicate to the court whether the case should be presumed to be an abuse under the "means test". Benefits Of Joint Bankruptcy Filing There are benefits to filing jointly. You will save on filing fees, as the fee is the same for both as it is for one. Filing jointly will often give the couple a greater chance of keeping their property because of the “doubling” of exemption amounts; However, in Colorado the homestead exemption amount is not doubled with a total maximum at the time of writing of $75,000, or $105,000 if 60 or over or disabled. In addition, joint filing will save the married couple a lot of time. Determining whether to file together or separately, whether to file for chapter 7 or chapter 13 bankruptcy, and ensuring the protection of as much of your property as possible is a complex process. Each couple’s situation is different, so it is important that a married couple considering a joint or individual petition consult an experienced 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 Colorado . We also serve Aurora, Centennial, Highlands Ranch, Denver, Lakewood, Englewood, Littleton, 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 .
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