5 Steps to Take Before Filing Bankruptcy in Colorado

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Denver Bankruptcy Law Blog  ·  Long & Long PC

5 Steps to Take Before Filing Bankruptcy in Colorado

What every Colorado resident should do before walking into a bankruptcy courthouse — from a former U.S. Bankruptcy Trustee.

By Martin E. Long, Esq. June 2026 8-minute read

If you are struggling with debt in Colorado — whether it is credit card balances, medical bills, a threatened foreclosure, or wage garnishments — bankruptcy may be the fresh start you need. But filing too quickly, or without preparation, can cost you property you could have protected, create problems that follow you for years, or result in a case that gets dismissed entirely.

Before you file, there are five steps every Colorado debtor should take. As a former Trustee for the U.S. Bankruptcy Court, I have seen thousands of cases from both sides of the table. The people who navigate bankruptcy most successfully — keeping the most property, discharging the most debt, and emerging financially stronger — are almost always the ones who prepared before they filed.

Why This Matters: Attorney Martin E. Long of Long & Long PC served as a U.S. Bankruptcy Trustee before representing debtors. That means he has personally examined debtors under oath, evaluated their assets, and identified problems in filings. That insider perspective directly benefits Long & Long’s clients throughout Colorado.

Here are the five steps you should take before filing bankruptcy in Colorado.

Get a Complete Picture of Your Financial Situation

Before you can make any intelligent decision about bankruptcy — or any alternative — you need a clear and honest accounting of where you stand financially. This means gathering documentation on three fronts:

• Your debts. Pull a current credit report (free at www.AnnualCreditReport.com) and list every creditor, balance, and whether the debt is secured or unsecured. Do not rely on memory — there are likely debts on your credit report you have forgotten about.
• Your assets. List everything you own and its current fair market value: real estate, vehicles, bank accounts, retirement accounts, personal property, business interests, and expected tax refunds. Be thorough — a bankruptcy trustee will be.
• Your income and expenses. Gather your last six months of pay stubs or income records, and document your actual monthly expenses. This determines whether you qualify for Chapter 7 under the means test, and what your Chapter 13 plan payment would be.

Explore Non-Bankruptcy Alternatives First

Bankruptcy is a powerful tool, but it is not the only tool. Before filing, you should honestly evaluate whether any of the following alternatives would resolve your debt problem with less disruption to your credit, your assets, and your life:

• Negotiating directly with creditors. Many creditors — particularly credit card companies and medical providers — will negotiate reduced payoffs, waived interest, or payment plans.solvent.
• Debt consolidation. Consolidating high-interest debt into a lower-rate loan can make repayment feasible if your debt load is manageable relative to your income.
• Workout agreements. An experienced bankruptcy attorney can negotiate directly with your creditors on your behalf to restructure payment terms outside of court.

One critical caution: forgiven debt outside of bankruptcy is generally treated as taxable income by the IRS. If a creditor settles a $50,000 debt for $20,000, you may owe income tax on the $30,000 difference. Debt discharged in bankruptcy is not taxable. That distinction can significantly affect which path makes financial sense for you.

Important Not every financial crisis requires bankruptcy. But not every creditor negotiates in good faith, either. An attorney who handles both bankruptcy and creditor negotiations can tell you honestly which path is likely to produce the better outcome in your specific situation.

Understand Colorado’s Bankruptcy Exemptions — Before You Do Anything Else

This step is critical, and it is the one that trips up people who file without counsel. Colorado’s exemption laws determine what property you get to keep when you file bankruptcy. If you have non-exempt equity, a Chapter 7 trustee can liquidate that asset to pay your creditors.

Key Colorado exemptions (as of 2026) include:

• Homestead: Up to $250,000 in home equity ($350,000 if you are 60 or older, or disabled) — but only if the property is your primary residence.
• Motor vehicle: Up to $15,000 in vehicle equity ($25,000 if you are elderly or disabled).
• Retirement accounts: Funds in ERISA-qualified retirement plans (401(k), IRA, pension) are generally fully exempt under federal law and Colorado law.
• Personal property: Colorado provides exemptions for household goods, clothing, jewelry, and tools of the trade, each with specific dollar caps.
• Wages: Colorado provides a wage exemption for a portion of earned but unpaid wages.

Why does this matter before filing? Because certain actions taken in the months before a bankruptcy filing — transferring assets to family members, paying back relatives, paying down secured debt with cash — can be unwound by the trustee as fraudulent or preferential transfers. Knowing the exemption landscape in advance helps you avoid inadvertently creating problems in your case.

Former Trustee Perspective As a former U.S. Bankruptcy Trustee, Martin Long knows exactly what trustees look for when they examine a debtor’s assets and recent financial history. That experience is invaluable in structuring a filing that protects everything the law allows you to keep.

Determine Whether Chapter 7 or Chapter 13 Is Right for You

Not all bankruptcies are the same. The two most common options for individuals in Colorado are Chapter 7 and Chapter 13, and they serve very different purposes:

• Chapter 7 — Liquidation: A relatively quick process (typically 3–6 months) that discharges most unsecured debts. To qualify, your income must fall below Colorado’s median income level for your household size, or you must pass the Means Test. If you have significant non-exempt assets, a Chapter 7 trustee may liquidate them to pay creditors.
• Chapter 13 — Reorganization: A 3–5 year repayment plan that allows you to catch up on mortgage arrears and keep your home, strip off junior mortgage liens in certain circumstances, repay non-dischargeable debts (like certain taxes), and protect non-exempt assets you wish to keep.

The right chapter depends on your income, your assets, the types of debt you carry, and your goals — particularly whether saving your home is a priority. In some cases, a joint filing by both spouses makes sense; in others, only one spouse should file.

Colorado Median Income (2026) The means test threshold changes periodically. Your attorney should run current figures from the U.S. Trustee’s Office to determine Chapter 7 eligibility. Do not rely on outdated numbers you find online.

Consult a Qualified Colorado Bankruptcy Attorney — Before You File

This is not a self-serving recommendation — it is the most practically important step on this list. The U.S. Bankruptcy Code is one of the most complex areas of federal law, and the consequences of mistakes can be severe: loss of property you could have protected, denial of your discharge, dismissal of your case, or even criminal prosecution for fraud if documents are filed carelessly.

Here is what a qualified Colorado bankruptcy attorney can do for you that you cannot do for yourself:

• Run a current means test calculation to confirm Chapter 7 eligibility or determine Chapter 13 plan length.
• Identify every exemption available to you under Colorado and federal law, and structure your filing to maximize their protection.
• Review your recent financial transactions for potential trustee challenges (preferential payments, fraudulent transfers).
• Advise on the timing of your filing — sometimes waiting 60–90 days can dramatically improve your case outcome.
• Prepare and file accurate, complete schedules that withstand trustee scrutiny at your 341 meeting of creditors.
• Represent you at hearings and handle creditor objections.

Federal law also requires you to complete an approved credit counseling course within 180 days before filing — and a debtor education course before receiving your discharge. Your attorney can point you to approved providers.

Why “Former Trustee” Experience Matters Bankruptcy trustees question debtors under oath. They review every schedule, every asset, every recent transaction. Attorney Martin Long has conducted thousands of these examinations. When he prepares a filing, he prepares it knowing exactly what a trustee will look for — and how to ensure everything is properly disclosed and protected.

The Bottom Line: Preparation Is Protection

Bankruptcy is a federal legal proceeding with real stakes. Every schedule you file is signed under penalty of perjury. Every asset the trustee finds that you failed to disclose creates potential liability. And every exemption you fail to claim is a dollar left on the table.

The five steps above — taking stock of your finances, exploring alternatives, understanding exemptions, choosing the right chapter, and consulting qualified counsel — are not bureaucratic formalities. They are the difference between a bankruptcy that gives you a genuine fresh start and one that leaves you worse off than before.

At Long & Long PC, our consultations are free. We represent clients throughout Colorado including Denver, Aurora, Lakewood, Arvada, Littleton, Castle Rock, Centennial, Parker, Fort Collins, and Colorado Springs. Call us at (303) 832-2655 to speak with a Colorado bankruptcy attorney who has seen the process from every angle.

Frequently Asked Questions

What should I do before filing bankruptcy in Colorado?

Before filing, you should assess your complete financial picture, explore non-bankruptcy alternatives, understand Colorado’s exemption laws, determine which chapter is right for you, and consult a qualified Colorado bankruptcy attorney. Taking these steps before filing can protect more of your assets and improve your case outcome.

Can I keep my house if I file bankruptcy in Colorado?

Yes, in most cases. Colorado’s homestead exemption protects up to $250,000 in home equity ($350,000 for those 60 or older, or disabled). In a Chapter 13 case, you can also cure mortgage arrears over the life of your plan and keep your home even if you are behind on payments.

Do I have to take a credit counseling course before filing bankruptcy?

Yes. Federal law requires all bankruptcy filers to complete an approved credit counseling course within 180 days before filing and to file a certificate of completion with the court. A second debtor education course is required before your discharge is entered.

How long does bankruptcy take in Colorado?

A Chapter 7 case typically takes 3 to 6 months from filing to discharge. A Chapter 13 case involves a 3-to-5-year repayment plan, after which remaining eligible debts are discharged.

Will I lose my retirement account if I file bankruptcy in Colorado?

Generally, no. ERISA-qualified retirement accounts — including 401(k) plans, IRAs, pensions, and similar accounts — are fully exempt in bankruptcy under both federal and Colorado law. Retirement savings are one of the most protected categories of assets in a bankruptcy case.

Ready to Talk? Your Consultation Is Free.

Speak directly with a former U.S. Bankruptcy Trustee — at no cost and no obligation. We serve clients throughout Colorado, with extended hours and weekend availability.

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Long & Long PC  ·  Centennial, Colorado  ·  Serving Denver, Aurora, Lakewood, Arvada, Littleton, Castle Rock, Parker, Fort Collins & Colorado Springs

Legal Disclaimer: This blog post is provided for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Every bankruptcy case is unique. Please consult a qualified Colorado bankruptcy attorney regarding your specific circumstances. Long & Long PC  ·  www.denverbankruptcylawyer.net