Colorado Chapter 7 Bankruptcy: Liquidation & Discharge

Chapter 7 is liquidation bankruptcy: a trustee can sell nonexempt property to pay creditors, and the individual debtor receives a discharge of most unsecured debts (11 U.S.C. § 727). It requires the means test and credit counseling. Because Colorado's exemptions protect typical assets, most Colorado filers keep their property.

This is general information, not legal advice. Whether Chapter 7 is right for you depends on your income, debts, and property — talk to a Colorado bankruptcy attorney.

Chapter 7 is the liquidation form of bankruptcy. A court-appointed trustee can sell your nonexempt property to pay creditors, and in exchange the individual debtor receives a discharge of most unsecured debts (11 U.S.C. § 727).

What “liquidation” really means in Colorado

In theory the trustee sells property; in practice, most Colorado filers keep everything they own. That’s because Colorado’s exemptions protect typical assets — your home, a vehicle, household goods, and tools of the trade. If all your property is exempt, there is nothing for the trustee to sell. See the Colorado exemptions guide for the dollar figures (confirm current).

What gets discharged

A Chapter 7 discharge wipes out most unsecured debts — credit cards, medical bills, personal loans. Some debts are not dischargeable, including most recent taxes, student loans (absent undue hardship), child support and alimony, and debts from fraud. See Automatic Stay & Discharge.

Requirements before you file

The means test — your income is compared to the Colorado median for your household size (11 U.S.C. § 707(b)). Below median, you generally qualify. See The Means Test.
Credit counseling — a required briefing from an approved agency before filing.

Chapter 7 vs. Chapter 13

Chapter 7 discharges debt quickly without a repayment plan. If you need to cure a mortgage or car default and keep the property, Chapter 13 may fit better.

To get matched with a local Colorado bankruptcy attorney, connect with a lawyer.

Frequently asked questions

What does Chapter 7 actually do?

It's liquidation: a trustee can sell your nonexempt property to pay creditors, and you receive a discharge of most unsecured debts (11 U.S.C. § 727). Most Colorado filers keep their property because Colorado's exemptions protect typical assets.

Will I lose my house and car in Chapter 7?

Often no. Colorado's exemptions protect a homestead up to $250,000 and a motor vehicle up to $15,000 (confirm current), so typical assets are usually protected. See the Colorado exemptions guide for the figures that apply to you.

What do I have to do to file Chapter 7?

You must pass the means test and complete credit counseling (11 U.S.C. § 707(b)). The means test compares your income to the Colorado median for your household size.

Related guides

Chapter 13 Bankruptcy in Colorado Chapter 13 is a court-supervised repayment plan: 3 years if your income is below the state median, up to 5 years if at or above the median, and never longer than 5 years (11 U.S.C. § 1322(d), § 1325). It lets people cure a mortgage or car default and keep their property.

Colorado Bankruptcy Exemptions Colorado opted out of the federal bankruptcy exemptions (C.R.S. § 13-54-107), so Colorado filers use Colorado exemptions. Key protections include a homestead up to $250,000 (or $350,000 if elderly or disabled), a motor vehicle up to $15,000 (or $25,000 if elderly or disabled), household goods, clothing, tools of the trade, and limits on wage garnishment. Several figures were raised in 2022; confirm current.

The Automatic Stay & Discharge in Colorado Filing bankruptcy triggers the automatic stay (11 U.S.C. § 362), an immediate halt to most collection — lawsuits, wage garnishment, repossession, and foreclosure. A discharge (11 U.S.C. § 524, § 727) permanently bars collecting discharged debts, but some debts are non-dischargeable (11 U.S.C. § 523), including most recent taxes, student loans absent undue hardship, child support and alimony, and debts from fraud.

The Chapter 7 Means Test in Colorado The Chapter 7 means test (11 U.S.C. § 707(b)) compares your income to the median income for your household size in Colorado. Below median you generally qualify for Chapter 7; above median, a disposable-income calculation may create a presumption of abuse. Colorado median-income figures are updated periodically by the U.S. Trustee.

Chapter 7 Bankruptcy in Colorado