Denver Bankruptcy Lawyers Can Help You Keep the Maximum Amount of Your Assets
You may be wondering what happens to your assets – your home, your car, your other possessions – when you declare bankruptcy.
Do creditors swoop in and take those away, and you’re left out on the street with nothing, but at least you don’t have debt anymore?
Or do you get to just keep everything, and your debt is wiped away?
Of course, it falls somewhere in the middle. But the reality is that most Colorado residents won’t lose all their assets when filing for bankruptcy. However, this depends on the type of asset and how much equity you have in that asset (i.e., how much of it you already “own”).
What Are Bankruptcy Exemptions?
Bankruptcy exemptions help you protect certain assets when you file for bankruptcy. Some assets creditors can take to repay debts, while others they can’t.
These exemptions reduce the burden of filing for bankruptcy, because you’re still able to keep many things you need to have a basic quality of life. After all, bankruptcy would not be a reasonable option for someone dealing with financial hardship if it meant that while you no longer have debt, you’re also now homeless and have zero possessions.
Exempt vs. Non-Exempt Assets
Exempt assets are assets that may not be taken by creditors in a bankruptcy case. Many of these are considered necessary to maintain a basic quality of life, work a job, and other day-to-day needs.
Examples of exempt assets include:
- Your home
- Household goods
- Tools or instruments related to your main source of income
- Pensions and benefits related to welfare, unemployment, social security, and other things
- Motor vehicle
- Retirement accounts, such as a 401(k), IRA, etc.
- And more.
It’s important to note that there are caps on the amount that is exempt. Exemptions don’t mean you can keep any amount of clothing or tools or jewelry or motor vehicles, etc. We’ll get into Colorado-specific exemptions in a bit.
On the other hand, non-exempt assets are assets that the bankruptcy trustee – the individual who handles your bankruptcy case (paying off creditors, etc.) – may sell to go toward paying off your debts when you file for bankruptcy.
Examples of non-exempt assets include:
- Funds in a bank account
- Stocks or bonds (though not what’s in a retirement account)
- Antiques and heirlooms
- Certain valuable items, such as a coin or stamp collection
- Additional motor vehicles
- Vacation or rental homes (vacation home, cabin, etc.)
To get a detailed rundown of which assets you may possibly get to keep when you file for bankruptcy, speak with an experienced, trusted debt settlement attorney at Wink & Wink. They’ll look at your specific case and help you understand what to expect.
Colorado Bankruptcy Exemption Amounts
Here are some of the current exemption categories and amounts for Coloradans.
- Homestead Exemption: This allows you to protect up to $75,000 in equity in your home. If you, your spouse, or a dependent family member is at least 60 years of age or disabled, the amount you can protect goes up to $105,000. Note: This can only apply once, i.e., if you and your spouse file a joint bankruptcy, this amount doesn’t double.
- Example 1: Let’s say you have a home that is worth $300,000, and your remaining mortgage due is $250,000. Therefore, you have $50,000 equity in the home. You fall below the $75,000 equity threshold, thus, you should be able to keep your home.
- Example 2: Let’s again say your home is worth $300,000, but this time your remaining mortgage due is $200,000. Therefore, you have $100,000 equity in the home. This exceeds the $75,000 equity limit. In a Chapter 7 bankruptcy case, the bankruptcy trustee may then sell your house to repay creditors. In a Chapter 13 bankruptcy case, you may keep the house, but you may be required to pay the amount of equity you have that is above the $75,000 limit – in this case, $25,000 – during your three- to five-year repayment plan to settle with creditors.
- Household Goods Exemption: Colorado allows you to protect up to $3,000 worth of household goods. The amount is based on what the resale value of the asset would be (such as when sold at a garage sale), not the replacement value. If it is a joint bankruptcy, this amount doubles to $6,000.
- Clothing Exemption: This allows you to protect up to $2,000 of clothing for you and your dependents. The amount doubles to $4,000 if you are filing for bankruptcy jointly with your spouse.
- Jewelry Exemption: This allows you to protect up to $2,500 worth of jewelry (rings, watches, etc.). In a joint bankruptcy, each spouse gets their own jewelry exemption. IT is important to know the relevant value is resale, not replacement. Typically, resale value is much less than replacement value for jewelry.
- Personal Library and Family Pictures Exemption: This allows you to protect up to $2,000 worth of personal library and family pictures. For joint bankruptcies, your spouse again gets their own $2,000 exemption amount.
- Vehicle Exemption: This allows you to protect up to $7,500 in equity for up to two vehicles. If you or a dependent family member is 60 years of age or disabled, the amount goes up to $12,500. If you file jointly with your spouse, each partner gets their own vehicle exemption.
- Note: This exemption does not apply to motorhomes, boats, ATVs, or recreational vehicles.
- Tools of the Trade Exemption: This allows you to protect up to $30,000 of things you need to do your job for your primary source of income (e.g., books, tools, inventory, furniture, etc.). If you have a secondary source of income, the amount you’re allowed to exempt is up to $10,000 for tools of the trade. For joint bankruptcies, each spouse gets their own tools of the trade exemption.
- Retirement Account Exemption: Any amount in your 401(k), IRA, or pension plan is exempt. There is no limit.
- Certain Benefits: Filing for bankruptcy does not affect your right to receive certain benefits, such as social security, veteran’s benefits, public assistance, unemployment compensation, and pensions in any amount.
- Wholesale Life Insurance Exemption: This allows you to protect up to $50,000 cash surrender value of a life insurance policy, as long as only regular premium payments have been made for a time of at least four years. For joint bankruptcies, each spouse gets their own exemption.
Colorado Bankruptcy Attorneys
Filing for bankruptcy can be a confusing, daunting experience. You may be worried which assets you’ll get to keep and which you may lose. Speak with a dedicated bankruptcy law firm serving the greater Denver area at Wink & Wink and begin getting the debt relief you need. The initial consultation won’t cost you a cent. Call Wink & Wink today at 303-410-1720, or contact us online to begin learning which assets you’ll be able to keep.