2022 Colorado Homestead Exemption Update
On April 7 2022, Colorado’s governor signed SB22-086 into law, which increased the Colorado homestead exemption by more than 300%. This is great news for Colorado homeowners. The new exemption amounts ensure that homeowners can protect their home equity from creditors and the Chapter 7 bankruptcy trustee. In other words, the new homestead exemption makes it harder for creditors and debt collectors to foreclose on a homeowner’s home for typical consumer debt.
What Is The Colorado Homestead Exemption?
The Colorado homestead exemption protects equity in a home from judgment creditors and the Chapter 7 bankruptcy trustee. It prevents judgment creditors from foreclosing on liens that may have arisen from unsecured debt, such as credit cards or medical bills. Let’s say a credit card company got a judgment against a 45 year old homeowner for $20,000.00. Further, the homeowner has $260,000.00 in home equity. If the credit card company tries to foreclose on the home, it has to: pay off the mortgage and give the homeowner $250,000.00 for the homestead exemption before it gets any money for its judgment lien. The credit card company will also have to cover any costs related to the foreclosure sale before it takes any money for the debt.
What Are The New 2022 Colorado Homestead Exemption Amounts?
The 2022 Colorado homestead exemption updated increased the exemption from $75,000.00 to $250,000.00. If you are older than 60 or disabled, or someone living in the home is older than 60 or disabled, the exemption went from $105,000.00 to $350,000.00. The change reflects the skyrocketing home values that homeowners saw during the post-Covid boom.
What Types Of Homes Does The 2022 Colorado Homestead Exemption Protect?
The 2022 Colorado homestead exemption also broadens what kinds of structures are protected. It expands the meaning of “homestead” to include a “dwelling”, and defines a dwelling as conventional housing and personal property that is actually used as a residence, including any vehicle, trailer, vessel, camper coach, mounted equipment, railway car, shipping or cargo container, shed, yurt, or tiny home.
This is great news for many Colorado bankruptcy filers who may be living in an RV or other non-traditional structure.
The 2022 Colorado homestead exemption also extends the amount of time that home sale proceeds can be protected from two years to three years. So, if you sell your home and segregate it from other funds, you can protect it from creditors and the Chapter 7 bankruptcy trustee for up to three years after you sold the house.
Further, the new law also protects insurance proceeds which are held to restore or rebuild homestead property.
What Happens If My Home Has More Equity Than The 2022 Colorado Homestead Exemption Protects?
Let’s say you have $300,000.00 in home equity and can only protect $250,000.00. First, judgment creditors can access that equity to collect its debt. Second, a Chapter 7 bankruptcy may not be a good idea for a homeowner in this scenario. The Chapter 7 trustee can sell the home and use any proceeds above the homestead exemption to pay unsecured creditors. In that instance, we would talk to the homeowner about Chapter 13 bankruptcy, which doesn’t involve selling a home to pay creditors.
Talk To A Top-Rated Colorado Bankruptcy Attorney About How To Protect Your Home
An experienced Denver, Colorado bankruptcy attorney will be able to safely guide you through the Chapter 7 or Chapter 13 bankruptcy process to make sure you can protect your home and other assets. We offer free consultations to people who are considering bankruptcy. The easiest way to schedule an appointment is by clicking here.
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