Colorado State Bankruptcy Residence Rules
The federal Bankruptcy Code imposes residency requirements on Colorado debtors who file for personal bankruptcy. The debtor's state of residence plays an important role in determining whether the debtor will file for Chapter 7 bankruptcy or the amount of time the debtor will spend under Chapter 13 bankruptcy. If the debtor ends up filing for Chapter 7 bankruptcy, the debtor's state of residence could determine the fate of his property.
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Median Incomes by Family Size
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A Colorado debtor filing for personal bankruptcy must compare her family income to the median family income for a family of the same size in Colorado. The debtor can obtain information on the median family incomes for Colorado from the U.S. Department of Justice. The U.S. Department of Justice compiles median family incomes from annual data reported by the Census Bureau. The debtor must calculate her family income to compare it to the Colorado state median.
Debtor's Income in Chapter 7
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The debtor takes his income for the six months prior to filing for bankruptcy and multiplies that figure by two. Then he divides the total by 12 to come up with his family income. If the debtor's family income is less than Colorado's state median income for a family of the same size, the debtor can file for Chapter 7 bankruptcy. If the debtor's family income is more than Colorado's state median income for a family of the same size, the debtor needs to calculate his monthly net income to determine if he qualifies to file for Chapter 13 bankruptcy. The debtor calculates his monthly net income by subtracting his allowable monthly expenses from his monthly gross income.
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Debtor's Income in Chapter 13
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The debtor determines the amount of time she will spend in Chapter 13 bankruptcy by comparing her family income to the median family income for a family of the same size in Colorado. If the debtor's family income is less than Colorado's state median, the debtor will spend three years under the debt repayment plan. If the debtor's family income is more than Colorado's state median, the debtor will spend five years under the debt repayment plan.
State Exemptions
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In a Chapter 7 bankruptcy case, a bankruptcy trustee sells the debtor's property to pay creditors. If the debtor is filing for Chapter 7 bankruptcy, he can claim certain property as exempt from being sold to pay creditors. In order for a debtor to claim property that Colorado law has designated as exempt, the debtor must have resided in Colorado for two years prior to filing his bankruptcy petition. The debtor will be entitled to claim the exemptions designated by the state in which the debtor was domiciled for the 180 days prior to the two-year period.
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