What Bankruptcy Exceptions Can Protect Property in Colorado and Connecticut?


One of the main benefits of filing for bankruptcy is the ability to protect your property. In a Chapter 7 bankruptcy, for example, a debtor's assets will be sold to pay back creditors. Thankfully, there are US federal bankruptcy laws that set up certain exceptions that can be made to protect certain kinds of property or income being forfeited to pay back creditors. However, these federal laws can be superseded by state laws regarding exceptions. Two states with very specific laws regarding these exceptions are Colorado and Connecticut.

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In the western state of Colorado there are many different kinds of income and assets that can be considered as exceptions. First, there are a number of kinds of property or income that can be one hundred percent free of the threat of liquidation. One of these completely protected items is insurance. This can include payments from regular life insurance and group life insurance. This even includes fraternal benefit society benefits given to members of groups such as the Elks or Masons. Also likely to be one hundred percent protected in Colorado is unemployment compensation.

Secondly, there are some assets that are only partly protected. For example, disability payments are only protected for up to two hundred dollars a month unless the debtor chooses to receive a lump sum. Another example is that real property is protected, but only up to forty five thousand dollars in equity. Unfortunately, this protection will not cover rental homes or vacation homes. Also, motor vehicles are protected but only for up to three thousand dollars in value. People with special needs, such as the disabled, may be able to protect up to six thousand dollars in value however.

The eastern state of Connecticut also has some very specific laws regarding bankruptcy exceptions. This state is thankfully more generous with certain exceptions. Things that are likely to be one hundred percent protected include payments from worker's compensation, unemployment benefits, retirement plans, life insurance, and certain kinds of physical property such as household furniture and tools that are used in a debtor's line of work.

The homestead exception in Connecticut is also much more generous. For a house, mobile home, or condominium, up to seventy five thousand dollars in equity can be protected. Unfortunately, the total claimed by two spouses who file cannot exceed this number.

Unlike the homestead exception, the exception for motor vehicles can sometimes be less than it would be in Colorado. In Connecticut, up to fifteen hundred dollars in value of a vehicle can be protected. However, if a person files with a spouse, up to three thousand dollars can be protected.

Connecticut law also allows for something called a wild card exception. Using this wild card exception, a debtor can protect one thousand dollars in value of any kind of property he or she owns. This kind of protection does not exist in Colorado.

There are many other exceptions in these two states, and laws regarding exceptions can change rather quickly. This is why it is suggested that if you live in either Colorado or Connecticut and are considering filing for personal bankruptcy that you set up a consultation with a law firm made up of experienced bankruptcy attorneys. This way, you can discuss exactly what property of yours can be protected during bankruptcy proceedings.


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