Dealing with debt can be a particularly frightening experience, especially when one believes he or she is about to lose everything. However, individuals buried in debt need to know that they may have several options available to them, including some options that may actually help protect their assets from unrelenting debt collectors.
Indeed, bankruptcy is one alternative that many people use to safeguard their property and obtain a fresh financial start. Specifically, bankruptcy law in Colorado permits individuals to "exempt" several assets and property from the bankruptcy estate in certain situations, meaning they can keep this property following the bankruptcy process. However, the law regarding these particular exemptions can be quite complex to navigate.
Colorado bankruptcy exemptions
In many instances, the federal bankruptcy code exclusively governs the bankruptcy process, but, in the context of exemptions, federal law permits each state to determine whether they want to use the exemptions delineated under federal law or create their own. In fact, while some states allow individuals to choose between federal exemptions and exemptions drafted by state lawmakers, residents of Colorado that file bankruptcy can only use the exemptions expressly provided for under state law.
One of the most important exemptions in Colorado is the homestead exemption, which allows individuals to protect up to $60,000 in home equity should they ultimately decide to file bankruptcy. Importantly, this exemption amount increases to $90,000 if an elderly or disabled individual owns the home.
Some additional common bankruptcy exemptions under Colorado law include:
- One or more motor vehicles, up to a value of $5,000, which increases to $10,000 for elderly or disabled individuals
- Property held in, or payable from, any qualifying pension or retirement plan
- Necessary clothing, up to a value of $1,500
- Jewelry and watches, up to a value of $2,000
- Household goods, up to a value of $3,000
- Library and family pictures, up to a value of $1,500
Interestingly, in many situations married couples filing for bankruptcy can double these exemption amounts, although this option is entirely dependent upon the circumstances.
Seek legal assistance
Those contemplating bankruptcy need to ensure that they maximize their use of the protections afforded under the law, including bankruptcy exemptions. Consequently, it is important to contact an attorney who has experience navigating these complicated laws. A skilled attorney can explain the intricacies of the bankruptcy process and help ensure you get the new start you so desperately need.