Keep Your Exempt Property

Summary:  Colorado is fairly generous in providing property exemptions from the reach of creditors. Such as $60,000 for your home. Don’t use any of this exempt property to pay creditors, especially unsecured debt such as credit cards. One of the biggest mistakes you can make is to use retirement assets such as 401(k) assets to pay bills.

You Must Keep All of Your Colorado Exempt Property, Which Is Everything For Most People

You should always keep your exempt assets no matter whether you are doing a loan workout, you are sued in a Colorado court, or you are filing bankruptcy.

Bill Collectors and Creditors Can Only Get Your Exempt Assets If You Give Them Away

Exempt assets are property which are not reachable by creditors. Some of these general exemptions under Colorado C.R.S. §13-54-102 (which were increased in June 2007) include:

1. Homestead exemption (home equity) in the amount of $60,000 ($100,000 for elderly age 60 or older or disabled debtor), except for consensual mortgage liens (deed of Trust); and the proceeds from a sale are exempt for 2 years, as long as the proceeds are not commingled with other money;

2. A portion of your wages, generally a creditor cannot take more than 25%, except for child support and maintenance arrears. There are some other less common exceptions;

3. Retirement accounts, including 401(k) and IRA accounts;

4. Clothing to the extent of $1,500;

5. Furniture to the extent of $3,000;

6. Provisions (such as food) and fuel to the extent of $600;

7. Jewelry, including watches, to the extent of $2,000;

8. Books, pictures, library to the extent of $1,500;

9. Tool, supplies, equipment, and other business material to the extent of $20,000;

10. One or more motor vehicles or bicycles in the aggregate value of $5,000 ($10,000 for elderly age 60 or older or disabled debtor), and twice that for a married couple filing jointly;

11. Income tax refund attributed to an earned income tax credit or child tax credit;

12. Any court-ordered domestic support obligation or payment, including child support or maintenance, paid to the debtor;

13. Personal injury awards, other than for property damage

14. Life insurance policy cash surrender value to the extent of $50,000;

15. Pension and compensation for serving in the military during a time of war or conflict;

16. Any claim for public or private disability benefits, up to $3,000 per month; and

17. Farm equipment and tools in the aggregate amount of $50,000

Doing Workouts and Paying Debts; Not in Bankruptcy

One of the biggest mistakes you can make is to pay bills with exempt assets. Particularly if you are withdrawing money from 401(k) accounts, IRAs, and other retirement assets to pay bills. Do not use exempt assets to pay bills. There may be an exception on rare occasions, but as a general rule, don’t use exempt assets to pay bills. Debt collectors often want you to pay bills with exempt assets. Don’t do it.

Exempt Assets in Bankruptcy

The above list of exempt assets will be yours to keep if you file bankruptcy. As a result, most people will usually keep all of their assets. Since bankruptcy filers will keep all of their exempt property, you should not use it to pay any bills.