Bankruptcy is a legal procedure governed by federal law and handled in the federal court system. It helps people who cannot pay their debts get a fresh start. There are two types of bankruptcy procedures for individual debtors:
- Under Chapter 7 bankruptcy, the courts can liquidate your nonexempt assets to pay your debts
- Under Chapter 13, you file a plan with the court detailing how you will pay off your debts over a specified time period. Living in Colorado impacts certain aspects of your bankruptcy case.
Where to File for Bankruptcy in Colorado
You must file your bankruptcy case in Denver, Colorado's only federal district court, by mail or in person. If you have an attorney authorized as an electronic filer, he or she may file your case documents electronically. Four satellite locations exist for holding creditors meetings, in Pueblo, Grand Junction, Colorado Springs and Fort Collins.
Who Can File Chapter 7 Bankruptcy?
You are eligible to file Chapter 7 bankruptcy in Colorado if your average monthly income for the past six months is less than the state's median monthly income of $4,071 ($48,856 annually) in 2012 for a single-person household. If your income is greater, you may file for Chapter 7 only if you pass a strict, complicated means test.
How Long Will You Be in Chapter 13?
The duration of your Chapter 13 repayment plan will depend on your average monthly income. If it is less than Colorado's median income, you will have to repay your creditors within 36 months, and the court may extend that time to not more than 60 months if it finds good cause. If your income is at least as high as the state median, your Chapter 13 repayment plan may cover 60 months, but the court may agree to a shorter plan if you can pay your unsecured debt in less time.
Exemptions Available in Colorado
Exemptions are assets that you may legally exclude from bankruptcy. Federal law allows states to opt out of the federal exemptions and set their own, and Colorado has done this.
Colorado's exemptions include personal items such as clothing, jewelry, family pictures and school books up to a maximum value set by law. You may also exclude burial sites, tools of your trade and one motor vehicle, subject to statutory equity limits—the amount of money you have invested in the property as opposed to its market value.
The state also exempts up to $60,000 of equity in a homestead occupied by the owner or the owner's family. If occupied by elderly or disabled persons, the maximum homestead exemption in Colorado is $90,000 of equity. Special rules apply if you have moved recently, if you have lived in Colorado for less than two years, your previous home state's exemptions may apply.