Colorado bankruptcy laws are designed to protect creditors from fraudulent bankruptcy filing and to give borrowers some protection for valuable assets. Understanding Colorado bankruptcy laws before filing will make the process as smooth as possible.

Bankruptcy Exemptions

Before debts can be discharged, a debtor's assets may be sold to repay outstanding debts. Under Colorado bankruptcy law, some assets are exempt from this action. These include the following:

• Up to $60,000 in equity in your home, increasing to $90,000 for those over 60
• Up to $50,000 for farm machinery, tools and livestock
• Up to $2,000 for jewelry and other "articles of adornment"
• Up to $3,000 for a professional library
• Up to $50,000 in the cash surrender value on a life insurance policy
• One burial plot for each family member
• Up to $600 worth of provisions and fuel
• Up to $1,500 for family pictures and personal books
• Up to $20,000 in tools of the trade, including work-related electronics
• Up to $1,500 in clothing
• Your 401(k), IRA or pension plan
• Certain public benefits
• Up to $6,000 in equity for a vehicle or bicycle

For cars that still have loans on them, you may choose to reaffirm the debt. If you do this, you can keep the car as long as you pay the debts under the reaffirmed loan. If you do not make payments, your car will be repossessed, even if it falls under the exemption category, because you are not paying what you owe.

Chapter 7 Bankruptcy Information

For many in Colorado, Chapter 7 bankruptcy gives them the chance to start over. With this form of bankruptcy, debtors sell their assets, under court supervision, to pay back their loans. Once all assets are gone, with the exception of the exemptions, most remaining debts are wiped out.

Chapter 13 Bankruptcy Information

Under Chapter 13 bankruptcy, borrowers will work with trustees to create a workable repayment plan on the debts. The goal is to pay back most of the debt in three to five years. Payment is made to the trustee, who then pays the creditors. Some assets are still sold to pay down debt, but certain assets, like a home with a mortgage still on it, are protected under this form of bankruptcy, provided payments are continued.