Bankruptcy ✦ Chapter 7
The Debt Stops the Day You File.
Chapter 7 is the fastest form of debt relief federal law offers. Most Colorado cases are over in about four months, the unsecured debt is gone, and Colorado’s exemptions let most filers keep the house, the cars, and every dollar of retirement savings. North Star Law Firm handles Chapter 7 statewide for a flat fee, with a tax discharge analysis no ordinary bankruptcy firm can run.
Overview
What does Chapter 7 actually do?
Two things happen the moment your petition reaches the United States Bankruptcy Court for the District of Colorado. The automatic stay of 11 U.S.C. § 362 takes effect, and every garnishment, levy, repossession, lawsuit, and collection call has to stop that day. A trustee is then appointed to look for property worth selling for creditors. In most Colorado consumer cases there is none, because the exemptions cover it all. Those cases end with a discharge order under 11 U.S.C. § 727 wiping out credit cards, medical bills, personal loans, deficiency balances, personal guarantees on business debt, and older income taxes that meet the timing rules.
- Garnishments, levies, and lawsuits stop at filing (11 U.S.C. § 362)
- Typical Colorado case: 90 to 120 days from petition to discharge
- Flat-fee representation, quoted before you commit
- Tax discharge analysis from your actual IRS transcripts
- Colorado exemptions applied and planned before filing
- 341 meeting by Zoom; no courthouse trip for most clients
Eligibility
Do you pass the means test?
Chapter 7 eligibility runs through the means test of 11 U.S.C. § 707(b). Step one compares your household income for the six months before filing against the Colorado median for a household your size. At or below the median, you presumptively qualify. These are the figures the U.S. Trustee Program applies to Colorado cases filed on or after July 15, 2026:
| Household size | Colorado annual median income |
|---|---|
| 1 person | $87,940 |
| 2 people | $109,497 |
| 3 people | $130,850 |
| 4 people | $153,501 |
| Each additional person | add $11,100 |
Colorado’s medians are among the higher ones in the country, which helps: a two-earner Front Range household often lands under the line. Earning above the median is not a disqualification. It triggers the long-form calculation, where the IRS living-expense standards for Colorado, your secured payments, and priority taxes are netted against income. That form is arithmetic with legal consequences, and it is where an attorney-CPA earns the fee. If your debts are mostly business debts rather than consumer debts, the means test does not apply at all.
Your Property
What do you keep? Usually everything.
Exemption law decides what is off limits to the trustee. Colorado is an opt-out state under C.R.S. § 13-54-107, which means the federal exemptions in 11 U.S.C. § 522(d) are not available and Colorado’s own list controls. The General Assembly raised the main figures substantially in 2022, and for most filers the list now covers everything they own.
| Property | Colorado exemption | Statute |
|---|---|---|
| Homestead (house, condo, mobile or manufactured home you occupy) | $250,000 of equity; $350,000 if you, your spouse, or a dependent is 60 or older or disabled | C.R.S. § 38-41-201 |
| Motor vehicles (up to two) | $15,000 combined equity; $25,000 if elderly or disabled | C.R.S. § 13-54-102(1)(j) |
| Household goods | $6,000 | C.R.S. § 13-54-102(1)(e) |
| Tools of the trade (equipment, inventory, business materials of your primary occupation) | $60,000 | C.R.S. § 13-54-102(1)(i) |
| Clothing | $2,000 per person | C.R.S. § 13-54-102(1)(a) |
| Jewelry | $2,500 per person | C.R.S. § 13-54-102(1)(b) |
| Bank account | $2,500 | C.R.S. § 13-54-102(1)(w) |
| Retirement accounts (401(k), IRA, pensions) | Fully exempt | C.R.S. § 13-54-102(1)(s); 11 U.S.C. § 522(b)(3)(C) |
| Wages | 80% of disposable earnings, or 40 times the minimum wage, whichever protects more | C.R.S. § 13-54-104 |
| Life insurance cash value | $250,000 | C.R.S. § 13-54-102(1)(l) |
Two Colorado quirks matter. Married couples cannot double the homestead exemption, and there is no general wildcard, so cash, a tax refund, or a second vehicle that doesn’t fit an exemption needs planning before the petition is filed, not after. That is a normal part of our pre-filing work, and it is where a CPA’s habit of running the numbers first pays off.
The Attorney-CPA Difference
One professional. Both halves of the problem.
A Chapter 7 petition is a financial statement signed under penalty of perjury: income, expenses, assets, transfers, and every debt. Trustees in the District of Colorado read those schedules closely, and mistakes cost people exemptions, discharges, and occasionally more. Preparing them is accounting work with legal consequences.
The tax side is where the difference is starkest. Whether your IRS debt is discharged depends on dates buried in your account transcripts, and in the Tenth Circuit a return filed late generally does not count at all. We read the transcripts, run the timing, and tell you before filing which taxes go away.
- Schedules prepared by someone who prepares financial statements for a living
- Means-test long form built from the actual IRS Colorado expense standards
- Tax transcripts pulled and analyzed before the filing date is chosen
- Exemption planning that respects Colorado’s opt-out rules and no-wildcard gap
- Honest advice when Chapter 13 or a non-bankruptcy workout would serve you better
Questions & Answers
Chapter 7 questions, answered
Can I choose the federal bankruptcy exemptions instead of Colorado’s?
No. Colorado opted out of the federal exemption scheme under C.R.S. § 13-54-107, so a Colorado debtor uses the Colorado list. For most people that is good news: the $250,000 homestead and the fully protected retirement accounts are more generous than the federal figures. Where Colorado’s list is thinner (there is no wildcard, and household goods are capped at $6,000) we plan around it before filing.
I moved to Colorado recently. Do I still get Colorado’s exemptions?
Only if you have lived here for the 730 days before filing. Under 11 U.S.C. § 522(b)(3)(A), a newer arrival uses the exemptions of the state where they lived for the longer part of the 180 days before that two-year window, and if that state’s law can’t be applied to a nonresident, the federal list applies instead. Denver’s inbound migration makes this a live issue in Colorado cases, and it can change the answer on a house or a car, so we run it before anything is filed.
I have equity in my house above $250,000. Is Chapter 7 still possible?
Sometimes, but it needs a careful look. Equity above the homestead exemption belongs to the estate, and the trustee can sell the house to reach it. If you’re 60 or older or disabled, the exemption rises to $350,000. There is also a federal cap of $214,000 on homestead equity acquired within 1,215 days of filing (11 U.S.C. § 522(p)) that catches recent purchases. When Chapter 7 would put a home at risk, Chapter 13 usually protects it, and we’ll tell you which one fits.
How long does Chapter 7 take in Colorado?
Most consumer cases run 90 to 120 days from filing to discharge. The 341 meeting is by Zoom about a month after filing, and the discharge order follows about 60 days later if no one objects.
Will Chapter 7 stop a wage garnishment in Colorado?
Yes, the day the petition is filed. Colorado allows judgment creditors to take up to 20 percent of disposable earnings under C.R.S. § 13-54-104, and the IRS can levy without a judgment. The automatic stay ends both, and the employer must stop withholding once it has notice of the filing.
What debts does Chapter 7 not wipe out?
Domestic support obligations, most student loans absent undue hardship, recent income taxes, trust-fund payroll taxes, court fines and restitution, and debts incurred by fraud generally survive discharge under 11 U.S.C. § 523. Part of the free consultation is mapping which of your debts go away and which need a different strategy.
A fresh start is not failure. Find out if you qualify.
Free means-test and Colorado exemption review with an attorney-CPA. Flat fee quoted in writing if Chapter 7 is the right tool.