USING THE COLORADO HOMESTEAD EXEMPTION IN BANKRUPTCY

Martin Long • Jan 11, 2019

In Colorado a homeowner is entitled to a $75,000 homestead exemption on the home he owns and occupies. If the homeowner or his or her spouse is 60 years of age or over, or disabled, the homestead exemption is $105,000. So, how does the homestead exemption protect your home when you file bankruptcy? Basically, it means you get to keep $75,000 or $105,000 in equity on your home.

Let’s say, for example, you are 60 years old, your home is worth $505,000 and you have a mortgage of $400,000 and no other liens. Your home then, has equity of $105,000. Hence, the homestead exemption protects you from your home being sold in a Chapter 7 bankruptcy because the homestead exemption covers the entire amount of the home equity. It also protects you in a Chapter 13 bankruptcy. How? In a Chapter 13 bankruptcy you are required to pay unsecured creditors in the Chapter 13 plan at least the amount they would receive in a Chapter 7 bankruptcy. In this instance the Chapter 13 Trustee cannot assert that additional money should be put into the plan because the home is exempt.

What happens when the equity exceeds the homestead exemption? In many cases a Chapter 13 bankruptcy may be preferable to a Chapter 7 bankruptcy. Discuss your situation with an experienced bankruptcy attorney. Call LONG & LONG P.C. now 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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As a Bankruptcy Attorney , I occasionally have clients ask, “Can I change from one chapter to another under the bankruptcy code? And if so, which chapter should I file under?” The short answer is: Yes. You may convert from a Chapter 7 to a Chapter 13, and vice-versa, with certain restrictions and limitations. A Recap of Chapter 7 and Chapter 13 Bankruptcies Chapter 7 bankruptcy provides for complete liquidation of the debtor’s non-exempt assets. This involves the bankruptcy trustee selling all of the debtor’s assets, subject to certain statutory exemptions, and paying the creditors with the liquidation proceeds. However, Chapter 7 cases often result in the debtor keeping all of their assets, in part because they were done correctly by an experienced bankruptcy attorney. If an individual’s current monthly income is more than the state median then the bankruptcy code requires the debtor to meet a “means test” to ensure the Chapter 7 filing is not presumptively abusive. Unless the individual overcomes this presumption, the case will typically be converted to a Chapter 13 bankruptcy or dismissed. Chapter 13 (“wage earner's plan”) is another part of the bankruptcy code that allows individuals to halt collection actions and present a repayment plan to debtors that takes place over three to five years. If a debtor’s current monthly income is less than the state median then the plan will generally be for three years, and if the individual’s current monthly income is greater than the state median, then the repayment plan will be five years. Converting From One Chapter to Another As mentioned, a Chapter 7 filing may be converted to a Chapter 13 bankruptcy proceeding. A debtor may convert a Chapter 7 to a Chapter 13. This may be done for a variety of reasons. For example, a debtor may file under Chapter 7 and realize that Chapter 13 may be a better alternative -- especially if the debtor wishes to keep certain property, does not satisfy the means test, or wishes to consolidate their debts and enter a repayment plan. This will stop collection efforts and allow the debtor to emerge from the bankruptcy plan with a “clean slate.” However, an individual cannot file under chapter 7 or any other chapter if during the preceding 180 days a prior bankruptcy petition was dismissed due to lack of the debtor’s cooperation (including appearances), or the debtor voluntarily dismissed the previous case after lien creditors sought relief from the bankruptcy court to recover property. There are certain eligibility requirements that will not allow conversion to a chapter if that case had previously been converted. Contact a Colorado Bankruptcy Attorney As a former trustee for the U.S. Bankruptcy Court, with over thirty years’ experience, Bankrupcy Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Centennial Colorado. We also serve Aurora, Loveland, Highlands Ranch, Denver, Littleton, Castle Rock, Colorado and the Denver metro area and front range with two convenient locations. For help with your financial matter, contact the Law Office of Long & Long P.C. for a free initial consultation at 303-832-2655.
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