Recent Legislation – Colorado’s Homestead Exemption and Other Debtor Exemptions Increased
On April 7, 2022, Governor Polis signed SB22-086 into law. The amendments to the exemption laws are good news for debtors and disappointing for creditors. The bill raises Colorado’s homestead exemption from the present $75,000 to $250,000. The increase is even greater for the elderly (defined as age 60 and above) or disabled; from the current exemption amount of $105,000 to $350,000. Additionally, the changes expand what may be considered a “dwelling” to include personal property that is actually used as a residence beyond manufactured homes, mobile homes, trailers and trailer coaches. Now, certain vehicles including any trailer, vessels, camper coaches, mounted equipment, railways cars, shipping or cargo containers, sheds, yurts and tiny homes may be deemed a homestead and subject to the homestead exemption.
An eligible homestead “is exempt from execution and attachment arising from any debt, contract or civil obligation not exceeding in actual cash value in excess of any liens or encumbrances on the homesteaded property in existence at the time of any levy of execution thereon” in the exemption amounts specified above. As an overly simplified example, a 40 -year-old debtor who is not disabled owns a homestead worth $650,000 subject to a first mortgage of $350,000 and a judgment lien of $50,000. If the judgment lienor attempts to levy and execute upon its judgment lien and sell the homestead at a sheriff’s sale, the first $350,000 of equity would be used to pay the first mortgage, the judgment lienor would need to tender the next $250,000 of equity to the debtor at sale and the judgment lienor is entitled to the last $50,000. If there were not sufficient equity beyond the first mortgage and the homestead exemption amount, the judgment debtor would not execute upon the homestead.
The proceeds from the exemption amount are likewise exempt from execution or attachment for three years after receipt if they are maintained separate and apart from other money so that the proceeds may be identified by the person entitled to the exemption.
In addition to the increase in the homestead exemption, the exemption from attachment or execution upon household goods owned and used by the debtor or debtor’s dependents has doubled from $3,000 to $6,000 in value. The debtors’ exemption in personal property used in the debtor’s primary gainful occupation increased from $30,000 to $60,000 and in any other gainful occupation in the aggregate value from $10,000 to $20,000. The exemption for up to two motor vehicles or bicycles kept and used by any debtor was increased to an aggregate value of $15,000. There are additional higher exemption amounts contained within the bill. The above is a sampling of the increases. These higher exemptions are especially beneficial to debtors in bankruptcy as the bankruptcy code defaults to the Colorado exemptions. For questions about this article, please contact Liz Marcus.