If you’re considering filing bankruptcy in Colorado, or anywhere else for that matter, it’s important to understand that only a certain amount of real estate or personal property is protected when you file. If you own any unprotected property when you file, the bankruptcy trustee could force you to turn it over and distribute the proceeds from its sale to your creditors.
In Colorado, how much real estate is protected is dictated by the homestead exemption, which can be found at Colorado Revised Statute 38-41-101 et. seq. While the exemption is fairly straight forward, from time to time questions can arise as to what property is protected under the homestead exemption.
A recent Colorado bankruptcy court opinion issued by Judge Elizabeth Brown presented the question of whether or not the Colorado homestead exemption also protects other vacant land that is situated next to where the filers live.
In In re Soles, the debtors owned two pieces of property. Property 1 comprised three lots and included the debtors’ residence. Property 2 contained one lot, which was vacant, and in which the debtors’ neighbor had given them a half interest. The bankruptcy trustee objected to the debtors’ claim of exemption on Property 2, arguing that they did not occupy Property 2 as a home and that it was deeded to them separately from Property 1. The trustee seemed unconcerned with the fact that Property 1 was made up of three different lots.
Unfortunately for the trustee, Judge Brown found his argument unpersuasive and only had to go as far as the language of homestead exemption statute to strike the trustee’s objection. Colorado Revised Statute Section 38-41-205 specifically provides that a homestead may “consist of a house and lot or lots or of a farm consisting of any number of acres.” Judge Brown held that, “there is no requirement that the homestead consist of one parcel or legal description, or that all lots be purchased at the same time, or that a house touch every lot.”
You can read Judge Brown’s opinion here.
Although In re Soles presents a fairly clear cut issue with regard to the protection provided by the homestead exemption, not every case is as easy. If you have any questions about whether your real estate or personal property will be protected when you file bankruptcy, we hope you’ll come in to talk with an experienced bankruptcy lawyer. You can call 303.331.3403 to schedule an appointment or use our online scheduling system.