Bankruptcy exemptions are the means by which people who file bankruptcy keep their belongings. Each state has their own set of exemptions (and there are even Federal exemptions that can be used in some circumstances) for bankruptcy filers to use. Colorado’s exemptions are used by any resident of Colorado who files for consumer bankruptcy (Chapters 7 and 13). In Colorado, these exemptions are found in C.R.S. § 13-54-101 and C.R.S. § 13-54-102.
The Colorado legislature recently passed some amendments to the bankruptcy exemptions that are mostly great news for people struggling with debt in Colorado. Many of the exemption categories went up in value, meaning you can protect more of your property when you file for bankruptcy.
Effective, July 1, 2015, here’s what has changed:
1) Homestead: The exemption for equity in your homestead has increased from $60,000 to $75,000. This amount also increased for people who are 60 or over or disabled, from $90,000 to $105,000. Equity is what would be left over after a hypothetical sale after you paid off all mortgages and liens on the property. For example, if your house is worth $200,000 and you have a $150,000 mortgage, you would have $50,000 equity in the property for bankruptcy purposes.
2) Motor Vehicles: The exemption for equity in your motor vehicle(s) went up from $5,000 per debtor to $7,500 per debtor. This amount also increased for people 60 or over or disabled from $10,000 per debtor to $12,500 per debtor. It isn’t all good news in this category. The old exemption did not place any limit on the number of motor vehicles a debtor can claim exempt, but the new amendment limits that to two vehicles per person filing. Additionally, it limits the exemption to exclude motor homes, recreational vehicles, boats and ATV’s.
3) Household goods: The exemption for household goods (appliances, furniture, electronics and accessories, musical instruments, toys, kitchen items, etc.) increased by $500 per person filing, from $3,000 per debtor to $3,500 per debtor.
4) Wearing Apparel: This exemption increased by $500 as well, up to $2,000 for each debtor and dependent.
5) Library: Books, etc. went up by $500 to $2,000, but this is total for the household and isn’t doubled.
6) Tools of the Trade: This exemption allows someone who has tools, inventory, fixtures, machinery and other common business items that are used for a gainful occupation to exempt them. If the gainful occupation is the primary source of income, the Tools of the Trade exemption is $30,000. If the gainful occupation is not the primary source of income the exemption is $10,000. This is a change from the previous exemption, which allowed a $20,000 exemption regardless of whether the business is the primary source of income.
7) Cash Value Life Insurance: Debtors can now exempt the cash value of their life insurance policies up to $50,000 as long as they have had the policies for four years or longer and have only made regular premium payments during the past four years.
In general, these changes are good news for people who need the protection of bankruptcy. If you are worried about how filing for bankruptcy will affect your property, please get in touch with us for a free consultation. At Wink & Wink we are very experienced in what is called “pre-bankruptcy planning”, which is mapping out a plan to maximize your bankruptcy exemptions in order to take full advantage of these legal protections.