Can I Keep My House in Bankruptcy? Colorado’s Homestead Exemption Explained

• Colorado’s homestead exemption shields up to $250,000 of home equity—$350,000 if the owner, their spouse, or a dependent is elderly or disabled and lives in the home. 

• The homestead exemption does not increase if a married couple files for bankruptcy together. 

• The amount of home equity you can protect is capped at $214,000 if you acquired your home within 1,215 days (about 40 months) before filing, in cases that are filed between April 1, 2025, and March 31, 2028.

• The exemption takes effect once you live in the home. Colorado does not require you to officially declare that your home is your primary residence to claim the exemption. 

• Home sale proceeds remain protected for three years if they’re kept separate from your other money and you can prove they came from the sale or were reinvested in a new home. 

• Chapter 13 lets you spread past-due mortgage payments over a three-to-five-year plan to stop foreclosure. Chapter 7 discharges eligible unsecured debts but doesn’t give you a way to catch up on missed mortgage payments, which may not stop a foreclosure on its own. 

• Colorado law allows trustees to reverse home transfers made for less than fair market value up to four years before you file bankruptcy. Home sales to friends and family tend to draw the closest scrutiny from trustees. 

Under Colorado law, homeowners who have lived in Colorado for at least 730 days prior to filing for bankruptcy can protect part of their home’s equity. This protection, called the homestead exemption, shields a portion of your primary residence’s equity from creditors and bankruptcy proceedings. It’s an automatic protection that attaches to your primary residence. You don’t have to file a special form to claim it or officially record a declaration that your home is your primary residence to benefit from it. 

In Colorado, the homestead exemption protects up to $250,000 of the equity of your primary home or up to $350,000 for seniors and individuals with disabilities living in the home.

If you’re in the process of researching bankruptcy, you may have read that some joint filers can double certain state exemptions. However, homestead exemptions are a strict exception. In Colorado, married couples filing joint bankruptcy cannot double the homestead exemption on a shared home. 

A homestead can be a house, a lot, a mobile home, a trailer or trailer coach, or a farm. Changes to the homestead exemption rules in 2022 broadened the definition of a dwelling, making more people eligible for the benefit. In addition to conventional housing, a dwelling also includes personal property used as a residence, such as: 

• vehicles, including trailers

• vessels

• camper coaches

• anything permanently mounted on a vehicle

• railway cars

• sheds

• shipping and cargo containers

• yurts

• tiny homes, whether stationary or movable

Federal law, specifically 11 U.S.C. 522(p), caps how much you can exempt with Colorado’s homestead exemption. If you purchased your primary residence within 1,215 days (roughly three years and four months) of filing for bankruptcy between April 1, 2025, and March 31, 2028, you’re limited to $214,000 in equity protection.    

You can bypass the federal homestead cap under two additional exceptions:

• The property is a family farmer’s primary residence

• Your current equity rolled over from a prior home in the same state, purchased before the 1,215-day lookback period began. 

To avoid triggering the 1,215-day limit on the homestead exemption, I recommend waiting to reinvest equity into your new home until after you’ve filed for bankruptcy, unless you are rolling over proceeds from a previous principal residence in the same state. 

Are the Proceeds From Selling My Home Protected?

Yes, Colorado protects home sale proceeds from a creditor’s sale, as well as money paid by an insurer to restore or replace a home that has been destroyed. However, under C.R.S. 38-41-207, these protections only last three years from the time you receive the money. Using that money to purchase a new home extends the exemption to the new property, but you need to keep it separate from your other funds to maintain protection. 

Most of the time, yes. In Colorado, you can keep your home in a Chapter 7 bankruptcy so long as your equity does not exceed the state homestead exemption and you continue to pay your mortgage. 

When you file a Chapter 7 petition, the bankruptcy court assigns a trustee to administer your case on behalf of your creditors. The trustee’s job is to liquidate any unprotected assets you may own and pay your creditors with the proceeds. While this could include your house, it only applies if you have more home equity than Colorado’s homestead exemption allows. 

Here are two examples showing how the Colorado homestead exemption works in a Ch. 7:

Example One: A $500,000 Home

Assume that you file a Chapter 7 bankruptcy and that your house is worth $500,000 with $350,000 left on your mortgage. Here, a trustee will not try to sell your home, because your equity is less than the $250,000 homestead exemption. If you sold the house for $500,000, you can expect to pay roughly eight percent of the sale price in realtor fees and closing costs. After paying off the mortgage, you would net $110,000—less than the homestead exemption. 

Example Two: An $800,000 Home

Now, let’s assume your house sells for $800,000 with $350,000 left on the mortgage. After closing costs, fees, and paying off the mortgage, the net would be about $386,000. You keep $250,000—the maximum under the homestead exemption—and the remainder goes to your creditors. 

If you are behind on mortgage payments and face foreclosure, you might consider filing for Chapter 13. Unlike Chapter 7, Chapter 13 lets you propose a plan to repay a portion of your debts. The plan lasts between three and five years, and the payments are often determined by your disposable income.

Only you can decide if Chapter 13 is right for you. In my experience, Ch. 13 can be a good option for people who can afford ongoing monthly mortgage payments but who fell behind at some point and need more time to catch up. 

Second Mortgages in Chapter 13

If your situation involves multiple home loans, Chapter 13 bankruptcy may also be a good option for getting out of a second mortgage. As long as your property is worth less than the first mortgage, you can file a motion with the bankruptcy court to remove the second mortgage.

Note that if the value of your property is in question, you may need to get an appraisal to determine if a second mortgage strip-off is possible. This is a particularly valuable aspect of Chapter 13, as it can allow you to gain equity in your property as the real estate market improves.

Yes. Your attorney can file a motion with the court to remove qualifying judgment liens when it’s eating into the home equity Colorado law lets you keep. The court adds up your judgment lien, any mortgages or other liens, and your homestead exemption. If that total exceeds your home’s worth, the qualifying lien can be removed. This works in both Chapter 7 and Chapter 13. However, the homestead exemption protections only go so far. 

The homestead exemption, established under C.R.S. 38-41-201, protects an owner's home from execution and attachment of a lien arising from any "debt, contract, or civil obligation.” Judgment liens can stem from:

• Past-due credit card or personal debt

• A personal injury judgment

• Outstanding child support or maintenance

• Damages awarded in a lawsuit

• Unpaid federal taxes

• Delinquent mortgage payments

Many judicial liens can be avoided, but statutory liens cannot be removed. For instance, federal tax liens, mechanic’s liens, and HOA liens are classified as statutory liens. Also, federal bankruptcy rules prohibit the removal of judgments due to mortgage foreclosures.

To claim homestead exemption protections against judgment creditors, the property must be actively "occupied as a home by the owner thereof or his family." C.R.S. 38-41-203

Occasionally, I will get this question from a homeowner looking to protect equity from a bankruptcy proceeding. Whether it’s to keep the property in the family or to help a loved one, selling a property below market value before filing can trigger unwanted scrutiny from trustees and is almost always fraught with danger. Here’s what I suggest:

A good rule of thumb is to sell to a friend at the same price you’d sell to a stranger. We recommend involving a realtor—even if you know the buyer—as they can estimate a fair price and make sure the paperwork is completed correctly.

When you file, the court and trustee review your recent financial records—including property sales and transfers. Under the Colorado Uniform Fraudulent Transfer Act (CUFTA), the look-back period for fraudulent transfers is four years. If a trustee discovers a transfer was made for less than fair value, they can ask the court to undo it. In contrast, federal fraudulent-transfer law has a shorter, two-year window. It’s worth noting that transfers to friends and family receive the closest scrutiny by the court and trustees in bankruptcy cases.

People sometimes use a quitclaim deed to transfer property. When used properly, a quitclaim deed is fine, but you should not sign one over to a friend or relative without receiving any money in return, as the court may view this as fraudulent and undo the transfer. This could lead you to lose your home and any proceeds from the sale because you may not claim an exemption on your home if you transferred it to someone else. 

If you’re wondering which avenue you should take to get your debt under control, consider talking with an experienced attorney. Bankruptcy may be the option for you, but it’s possible there are other outlets you could take to rein in the debt. Call 303-688-0944 or book your consultation online now to begin.