What you keep: Colorado bankruptcy exemptions explained

The question I hear most often, in one form or another, is what you get to keep: the house, the car, the retirement account you spent fifteen years building, the tax refund you were counting on. Many people come to me afraid they will lose what they've worked for, and that fear is completely understandable.

I want to start with the reassuring part. In the large majority of the Chapter 7 cases I file, the client keeps everything, because Colorado law protects it. The rules that do that are called exemptions. The following is general information, not advice about your situation, and every case turns on its facts.

What is a bankruptcy exemption?

An exemption is a law that protects a category of property, usually up to a dollar amount, from being taken to pay creditors. When you file bankruptcy, everything you own becomes part of what is called the bankruptcy estate. You then claim exemptions, and whatever fits inside them comes back out of the estate and stays yours. In a Chapter 7, the trustee can sell only what is left over, which in most cases is nothing.

Do I use Colorado exemptions or federal exemptions?

If you have lived in Colorado for at least two years, you use Colorado's. The Bankruptcy Code has its own list of exemptions in 11 U.S.C. § 522(d), but it lets each state opt out and require its residents to use state law instead. Colorado has done that in C.R.S. 13-54-107. So the federal list is not available to a Colorado domiciliary, and the Colorado list is the one that matters.

For most of my clients, that is good news. After Senate Bill 22-086 took effect in 2022, Colorado's exemptions became substantially more generous than they had been, particularly for home equity.

How much does Colorado protect?

The table below summarizes the main categories. Several Colorado exemption amounts are subject to periodic adjustment, and I have marked any figure I could not confirm from the current statute text. Before a case is filed, I check every amount against the law in effect on the filing date.

Can I keep my house?

In most Colorado cases, yes, as long as your equity fits inside the homestead exemption and you keep paying the mortgage. Since SB 22-086, that exemption is $250,000 of equity in the home you occupy, and $350,000 if an owner, an owner's spouse, or an owner's dependent is 60 or older or disabled. The homestead exemption in Colorado generally applies to the home you actually live in without a separate filing. The 2022 changes also broadened what counts as a dwelling, so a manufactured home, a camper, or a tiny home used as your residence can qualify.

A married couple filing together should not assume the homestead amount doubles. It protects the home, not each owner separately. Some other exemptions work differently for joint filers, which is one of the details I sort out for each case.

What does equity mean, and how is it calculated?

Equity is what the property is worth today minus everything owed against it. The exemption applies to equity, not to the value of the property. That distinction is what protects most homes and most cars.

Value means a realistic fair market value on the filing date, not the price you paid or an optimistic online estimate. For a house, I look at comparable sales and condition. For a car, I use a reliable valuation for the actual mileage and condition. Getting the value right matters, because the trustee will look at it.

What happens if my equity is more than the exemption?

In a Chapter 7, the trustee may sell the property, pay off the liens, pay you your exemption amount in cash, and distribute what is left to creditors. In practice, a trustee weighs the costs of a sale first. If the unprotected equity is small once realtor fees and closing costs are counted, a sale does not make sense and the trustee usually will not pursue it. When it does make sense, the trustee will often accept a payment from you, or from family, in exchange for the unprotected equity so you can keep the property.

In a Chapter 13, you keep the property. The trade is what the Bankruptcy Code calls the best interest of creditors test, in 11 U.S.C. § 1325(a)(4): your plan must pay unsecured creditors at least as much as they would have received if your nonexempt property had been sold in a Chapter 7. So nonexempt equity sets a floor on what the plan pays. For someone with significant equity above the exemption, that is often exactly why a Chapter 13 is the right choice.

Is my retirement account safe?

Yes. Qualified employer plans such as a 401(k) or 403(b), pensions, and IRAs are protected under Colorado law and under 11 U.S.C. § 522(b)(3)(C), which applies even when you use state exemptions. Federal law caps the protection for traditional and Roth IRAs at $1,711,975 for cases filed on or after April 1, 2025, a limit that almost no one reaches, and money rolled over from an employer plan does not count against it.

I say this plainly because I have met many responsible people who drained their retirement accounts to pay debt a bankruptcy would have discharged. Once the money leaves the account, the protection generally goes with it, and taxes and penalties follow. I have written about that separately in cashing out retirement to pay debt.

What happens to my paycheck and wages I have already earned?

Wages you have earned but not yet been paid on the filing date are property of the estate, and Colorado protects the portion that would be exempt from garnishment under C.R.S. 13-54-104, usually 80 percent. The same limits define how much of your final pre-filing paycheck is exempt in the bankruptcy.

Once you file, the automatic stay, the court order that halts collection, ends an existing wage garnishment. Wages you earn after a Chapter 7 filing are not part of the case at all.

Is my tax refund protected?

Partly, depending on what makes it up. Colorado exempts the portion of a federal or state refund attributable to the earned income tax credit and the child tax credit. The rest of a refund, the part that is simply your own overwithheld wages, is generally property of the estate to the extent it relates to income earned before filing. That makes the timing of filing around tax season a planning question, and it is one I look at in every case filed between January and April.

What about bank accounts, life insurance, an HSA, and child support?

• Bank accounts. Money in the bank on the filing date is part of the estate. Money that came from an exempt source, like exempt wages or Social Security, can keep its protection if it can be traced. Colorado also protects $2,500 in bank accounts, which can be combined with the wage exemption to protect a total of $12,500 of earnings in your bank account per person.
• Life insurance. Term life insurance has no cash value, so there is nothing to protect. For whole life or universal life policies, Colorado protects a substantial amount of cash surrender value, with an exception for recent contributions. The limit is $250,000 of cash surrender value, not counting contributions made in the 48 months before filing.
• Health savings accounts. Health savings accounts are protected in full under C.R.S. 13-54-102(1)(s).
• Child support. Support you receive for a child is protected under Colorado law, and support you owe is not discharged in any chapter. (C.R.S. 13-54-102(1)(u) and 13-54-102.5)

I moved to Colorado recently. Which exemptions apply to me?

If you have not been domiciled in Colorado for the 730 days before filing, federal law may send you back to your prior state's exemptions. Under 11 U.S.C. § 522(b)(3)(A), you use the exemptions of the state where you were domiciled for the 180 days before that two year period, or for the longer part of those 180 days. If that state's exemptions are not available to someone who no longer lives there, the statute lets you use the federal exemption list instead.

There is a second rule for homes. Under 11 U.S.C. § 522(p), if you acquired your interest in a home within 1,215 days before filing, which is about 40 months, the homestead exemption you can claim for that interest is capped. The cap is $214,000 for cases filed on or after April 1, 2025. The cap does not count equity you rolled over from a previous home in the same state that you acquired before the 1,215 day period. For someone who sold a house in another state and bought here within the last few years, this cap can matter more than the Colorado amount.

1. Lived in Colorado more than 730 days before filing: Colorado exemptions apply.
2. Lived in Colorado fewer than 730 days: look to the state where you lived during the 180 days before that window, and whether its exemptions reach former residents.
3. Bought your current home within 1,215 days before filing: the federal homestead cap may limit how much of your equity is protected, unless the equity came from an earlier home in Colorado.

These rules can produce surprising results, and timing matters. Sometimes waiting until the 730 day mark passes changes which exemptions apply. That is something I would want to talk through with you before you file, not after.

What should I do before filing to protect what I have?

Mostly, nothing at all. Do not move money around, pay back family, transfer a car title, or cash out a retirement account to pay creditors before you talk to a bankruptcy attorney. Transfers made shortly before filing can be undone by the trustee, and some of them cost you an exemption you would otherwise have had. Please bring me the whole picture, including the things you are worried about. There is no judgment here, and I will tell you what is protected.

For most of the households I see, the answer is that they keep the house, the car, the retirement, and the everyday belongings their family relies on. If your situation is more complicated, or you simply want to know where you stand, I would be glad to meet with you in a Strategy Session. I will go through what you own, what it is worth, and what Colorado law protects, and you will leave with a clear answer. You can read more about Chapter 7, about how I work, or reach me here whenever you are ready.