Find out if your income and assets are protected from creditors.
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For many people, filing for bankruptcy can feel scary. However, bankruptcy is a legal tool. For some people, it is their best choice for a fresh start.
This guide is for people who are struggling with debt and want to understand how Chapter 7 bankruptcy works. It explains:
- What debts can be cleared
- What property you can keep
- What to expect from the process
What does Chapter 7 bankruptcy do?
It clears out most debts, including:
- Medical bills
- Credit cards
- Repossessions
- Foreclosure deficiencies
- Loans
- Rental debt
- Past-due utilities
The court issues a final order called a discharge that means you don’t have to pay.
What debts can't be cleared?
Some debts cannot be cleared in bankruptcy. These debts include:
- Child support
- Spousal support (also called maintenance)
- Most taxes
- Criminal restitution
- Debts from drunk driving injuries
- Debts not listed
- Debts you created after filing
Creditors can also challenge the discharge of debts involving fraud or intentional harm.
Can student loans be included in Chapter 7 bankruptcy?
Student loans are not automatically cleared in a Chapter 7 bankruptcy. You must file a separate court action and get a judge's order to clear student loans.
Can I keep my property?
All property becomes property of the bankruptcy estate when you file. Your property will be reviewed by a judge to see if it is protected or not. Colorado law protects certain property, including:
- $250,000 ($350,000 if elderly or disabled) in the debtor’s home
- $15,000 ($25,000 if elderly or disabled) in 2 vehicles
- $6,000 in household goods
- $60,000 in tools for your job
- $2,000 in clothing
- $2,500 in jewelry
- Up to $2,500 in bank accounts
- Public assistance
- Social Security benefits
- Most pensions
- Most of your wages
Property that is not covered by these limits may be taken and sold to pay creditors. This includes cash gifts, stocks, and property above the exemption limits.
Important!
If you are behind on a car loan or mortgage, the lender can ask the court for permission to repossess or foreclose even during bankruptcy.
What is the automatic stay?
The moment you file, the court issues an automatic stay. This immediately stops garnishments, repossessions, lawsuits, and creditor contact. It can also pause a divorce or other court case.
Tip:
The automatic stay is temporary. It buys you time—not a permanent solution.
What happens to people who co-signed my debts?
They may still owe the full balance after your discharge. Filing bankruptcy protects you, not your co-signers.
How does bankruptcy affect my credit?
A Chapter 7 filing stays on your credit report for 10 years. The accounts with your debt are not erased, but the balance should show as $0. Many people use the fresh start to begin rebuilding credit right away.
How long does Chapter 7 bankruptcy take?
Most Chapter 7 cases are finalized in 2 to 6 months.
Important!
You must wait 8 years after a previous Chapter 7 discharge before filing again.
Need more help?
If you are low-income, a senior, or a veteran, you may qualify for free legal help from Colorado Legal Services (CLS). To apply or ask if you might qualify, go to the CLS website and find the office that serves your area. If you call or visit, CLS can help you in your native language.
You can get help from the courts. Every judicial district has staff called “Sherlocks” to help people with their legal questions. To find the Sherlock in your county, visit the Judicial Department’s Sherlock webpage.