Colorado Bankruptcy Exemptions and Law

If you live in Colorado and are having trouble paying down your debt, bankruptcy could shield you from bill collectors while you try to catch up financially. Bankruptcy offers individuals and couples who are deeply in debt and do not see a way to pay it off in the future a way forward. It can force your creditors to accept payment plans and reduced payments to give you a fresh start, free from most debt.

While bankruptcy courts are governed by federal law, the U.S. Bankruptcy Code allows states to create their own rules governing property that can be protected from creditors. This is usually referred to as “exempt property” and lets you shelter some assets to help you start over after bankruptcy.

Some states let you choose between state and federal exemption rules, depending on which one benefits you the most. Colorado requires you to use the state exemptions, which protect your property from liquidation or foreclosure in bankruptcy.

Most personal bankruptcies are one of the following types:

• Chapter 7 Bankruptcy is often known as a “liquidation” bankruptcy. A bankruptcy trustee takes control of your assets and sells all non-exempt assets to repay your creditors. To file a Chapter 7, you must pass a “means test.” If your income falls below the state’s mean annual income, you automatically qualify. Otherwise, the court weighs your debt and your ability to pay your living expenses.
• Chapter 13 Bankruptcy allows people who have a steady income to restructure their debt so that most of it is paid off over three to five years. Payments are made under a court-approved plan that often reduces the debt. In most cases, homeowners filing for Chapter 13 can keep their house.

One important benefit of both types of bankruptcy is the automatic stay issued by the court when you file. The stay stops all collection actions by your creditors, including court cases and foreclosures. It lets you stop worrying about harassment from your creditors while you work to find a solution to your debt problems. The stay also keeps more aggressive creditors from seeking payment ahead of others by stopping all collection actions.

The stay is not a magic bullet that erases all debt and makes a foreclosure vanish. It pauses collection actions while your financial situation under bankruptcy is considered.

Colorado Bankruptcy Eligibility

There are two means tests used to determine whether you can file under Chapter 7 in Colorado. If your household income is less than the median income for households of the same size in Colorado, you qualify. The median income is determined by the U.S. Department of Justice using census data and is adjusted annually for inflation.

If you determine that your income is above the state median, you may still be eligible for Chapter 7. The second means test is based on your monthly disposable income, which is calculated by subtracting your monthly expenses from your monthly income. If you are found to have little to no disposable income each month, you can file for Chapter 7 bankruptcy.

Filing bankruptcy under Chapter 13 requires a stable income and secured and unsecured debts below the federal maximum. Filers must have enough income to meet their living expenses and make monthly creditor payments for three to five years. The maximum allowable debt limit in 2026 is $526,700 for unsecured debt and $1,580,125 for secured debt.

Colorado Bankruptcy Exemptions

Colorado established its own exemption system, which must be used if you file for bankruptcy there. Exemptions allow you to protect certain properties from creditors and help you start over with more financial assets. If you are a married couple filing for bankruptcy jointly, Colorado allows you to double the amount of most exemptions if both spouses own the property together.

Let’s take a closer look at some of the exemptions you may qualify for.

Homestead Exemption

Colorado’s homestead exemption protects up to $250,000 of a home’s equity if the owner or their family lives there. If the resident is elderly or disabled, the exemption is $350,000. The homestead exemption applies to mobile homes, manufactured homes, and trailer homes. “Dwelling” may also include any movable personal property used as a primary residence.

Wage Exemption

Up to 80% of your unpaid wages at the time of filing may be eligible for exemption. Any money received as compensation, a pension, or allowance for your service in an armed conflict will be exempt.

Vehicle Exemption

Colorado law provides an exemption for up to two motor vehicles (or bicycles) with a total value of $15,000. That amount increases to $25,000 if you, your spouse, or a dependent is at least 60 or disabled. The exemption does not apply to motorhomes, travel trailers, tent trailers, snowmobiles, golf carts, all-terrain vehicles, or watercraft.

Personal Property Exemptions

Colorado provides several exemptions for your personal property. The value of the exempt property may change with inflation and the cost of living, so consider consulting an attorney when filing for bankruptcy. This can include:

• Household goods, like furniture, appliances, home electronics, and musical instruments
• “Necessary” clothing
• Jewelry, watches, and similar items
• Library, school books, family pictures
• Prescribed health aids

Be prepared for having to sell many of your items to satisfy creditors. Trying ot hide assets is not a good idea and can lead to your bankruptcy being revoked or even jail time.

Tools of the Trade Exemption

Up to $60,000 of tools, supplies, equipment, and other business property you use in your primary occupation is exempt. If they are not used in your primary occupation, the exemption amount drops to $20,000.

Retirement and Pension Exemptions

The following retirement and pension benefits are exempt under state law:

• Tax-exempt retirement accounts, such as 401(k)s, defined benefit plans, and profit-sharing plans
• IRAs and Roth IRAs
• ERISA-qualified retirement plans and the pensions of veterans who served in an armed conflict
• Public employee pension, defined contribution, and deferred compensation plans

This applies to both single and jointly filed bankruptcies.

Government Benefit Exemptions

The following government benefits are exempt in Colorado:

• Unemployment compensation
• Workers’ compensation
• Veteran’s benefits for the spouse or child of a veteran serving in an armed conflict
• Disability benefits
• Earned income tax credit
• Crime victims’ compensation
• Public assistance, such as aid to the blind, aged, and disabled

Other benefits may also be exempt.

Business Partnership Property

If you are a member of a business partnership, the partnership’s property is exempt.

No Wildcard Exemption

Many state and federal bankruptcy laws provide a “wildcard exemption” that lets you protect any property of your choosing from creditors, up to a certain amount. Colorado does not have a wildcard exemption.

Secured vs. Unsecured Debt

The purpose of bankruptcy is to clear your unsecured debt so you can pay off your secured debts. Unsecured debts include credit card debts and medical bills. Other debts, like tax debt and student loans, usually survive a bankruptcy discharge.

Unsecured Debt

An unsecured creditor has no right to seize your property if you fail to pay. Credit card debts, court judgments, medical bills, and most income taxes are unsecured debt. In a Chapter 7, these debts are discharged if you lack the assets to pay them.

Not all unsecured debt can be eliminated in bankruptcy. Spousal support and child support arrearages usually will not be discharged.

Secured Debt

Your secured creditors can get a court judgment to seize your property. Home mortgages, car loans, and property liens are the most common types of secured debt.

How Secured and Unsecured Debt Work in Bankruptcy

In a Chapter 7 bankruptcy case, you can usually discharge most of your unsecured debt. Unsecured creditors are paid after secured creditors. In addition, unsecured creditors do not have access to your exempt property. In general, you’ll have three options for secured debt in a Chapter 7 proceeding:

• Return the property to the creditor: You’ll lose the property, but it will usually free you from making more payments
• Keep the property and keep making payments: This is most likely when a state exemption covers your equity in the item
• Purchase the property outright: This is rare in a Chapter 7 filing because people often lack the funds to do so

A Chapter 13 filing lets you create a plan to repay your creditors over three to five years. The court may force your creditors to accept a repayment plan that reduces or restructures the debt. Your unsecured creditors will be paid with the disposable income left after you have repaid your secured creditors. At the end of the plan, your unsecured debts will be discharged by the court.

Mortgage payments are not included in the plan, and you will continue to make those payments as you did before filing for bankruptcy. Your trustee may negotiate a payment agreement with your lender if you have fallen behind on payments.

How Do I Start Bankruptcy in Colorado?

Before you can file for personal bankruptcy in Colorado, you’re required to take a credit counseling course to help assess whether you can pay your debts outside of bankruptcy. You must show that you finished the course within 180 days of filing by including a completion certificate with your bankruptcy filing.

If you are not represented by an attorney, you will begin the bankruptcy process by downloading the correct bankruptcy petition for the District of Colorado. There are separate petitions for Chapter 7 and 13. The instructions will indicate which additional bankruptcy forms and documents must be filed with the petition.

How Much Does Bankruptcy Cost in Colorado?

If you want to file for Chapter 7 bankruptcy in Colorado, the filing fee is $338. The filing fees for a Chapter 13 case are $313. These are the same whether you represent yourself (known as filing “pro se”) or use a lawyer. If you can’t afford the filing fee, you can ask to pay in installments. In addition, you can request that the fee be waived if your income is below 150% of the poverty line.

Most filers choose to hire an attorney to represent them in bankruptcy. Typical costs for bankruptcy lawyers range from $800 to $1,500 for a relatively simple Chapter 7 filing. Fees for a simple Chapter 13 filing can run from $2,000 to $4,000.

Get Legal Advice From a Colorado Bankruptcy Attorney

If you are having financial trouble, paying a bankruptcy attorney may seem like an expensive luxury. Personal bankruptcy can be a very complicated process, and messing up the rules or missing a deadline can result in your case being dismissed. Colorado bankruptcy courts mirror federal courts, but local rules control how documents get filed. It’s a good idea to have a Colorado bankruptcy attorney who can explain the rules and ensure you meet all the filing deadlines.