Colorado Homestead Exemption – Will I be able to keep my home if I file for bankruptcy in Colorado?

One of the biggest concerns of those facing bankruptcy is whether they will have the ability to keep their home through the process. One of the common myths surrounding bankruptcy is that you will lose all your stuff the instant you file. This is simply not the case. Like most states, Colorado has laws in place which allow debtors to keep property and still file for bankruptcy. Colorado’s bankruptcy laws allow residents to protect up to $60,000 of equity in a home, mobile home, manufactured home, or house trailer that is owner occupied. Married couples filing jointly can double the exemption. In addition, Colorado’s homestead exemption is increased to $90,000 if the owner, spouse, or a dependent is disabled or age 60 or older. The sale proceeds of any such home are also exempt 2 years after received.

It is important to understand just how the Colorado bankruptcy laws work. First of all, exempting home equity does not relieve you of your obligation to make normal monthly mortgage payments. In some circumstances, chapter 13 bankruptcy will allow debtors time to get caught up on past due mortgage payments, but if you plan to keep the house after bankruptcy, be prepared to pay the mortgage. The homestead exemption does not remove this obligation. Second, the Colorado homestead exemption allows debtors to protect up to $60,000 of home equity. This does not mean that a home worth more than $60,000 will be left exposed. For example, a homeowner with a $500,000 home in Denver can keep the house through the bankruptcy process if the home is encumbered with a mortgage of at least $440,000. In this example, the Denver home has a value of $500,000 but only $60,000 of home equity.

If you are considering filing for bankruptcy in Colorado, contact a Colorado bankruptcy attorney.

Need more information on how Colorado’s homestead exemption works? See: What Is A Homestead Exemption? Can My Creditors Take My Home?