Chapter 7 bankruptcy can offer a fresh start for individuals in Colorado who are overwhelmed by debt. Sometimes called “liquidation bankruptcy,” this legal process allows qualified debtors to eliminate most unsecured debts such as credit card balances, personal loans, and medical bills. However, qualifying for Chapter 7 is not automatic—you must meet specific criteria under federal and Colorado bankruptcy laws.

At the Law Offices of Andrew F. McKenna, P.C., we assist individuals throughout Colorado in determining their eligibility for Chapter 7 bankruptcy and guide them through each step of the process.

Step 1: Meeting the Means Test

The primary requirement for qualifying for Chapter 7 is passing the means test. This test compares your household income to the median income for a similar household in Colorado.

• Median Income Levels: If your income is below the state median, you automatically qualify.
• Above-Median Income: If your income exceeds the median, additional calculations involving your allowable expenses and debts will be required to determine if you have enough disposable income to repay your debts through a Chapter 13 repayment plan instead.

As of 2025, the median income levels are adjusted periodically, so working with a bankruptcy attorney is crucial to interpreting the latest figures.

Step 2: Evaluating Your Assets

In Chapter 7, a trustee may sell non-exempt assets to repay creditors. However, Colorado offers generous bankruptcy exemptions that may allow you to keep most, if not all, of your property, such as:

• A portion of the equity in your home (homestead exemption)
• Personal vehicles up to a certain value
• Necessary clothing, household goods, and retirement accounts

Understanding which assets are protected under Colorado law is vital to determining whether Chapter 7 is right for you.

Step 3: Credit Counseling Requirement

Before filing, you must complete a credit counseling course from an approved provider within 180 days prior to submitting your bankruptcy petition. This is a mandatory step and proof of completion must be included in your filing.

Step 4: No Recent Bankruptcy Discharges

To qualify for Chapter 7, you must not have received a Chapter 7 discharge in the last 8 years or a Chapter 13 discharge in the last 6 years. If you’ve filed bankruptcy in the past, your eligibility will depend on the dates and type of previous filings.

Step 5: No Evidence of Fraud

Bankruptcy is intended to help honest debtors, so any indication of fraudulent behavior—like hiding assets or running up large debts shortly before filing—can lead to disqualification or case dismissal.

We Can Help You Determine Eligibility

The process of qualifying for Chapter 7 bankruptcy in Colorado involves several detailed steps. At the Law Offices of Andrew F. McKenna, P.C., we are committed to helping you understand your legal options and move forward with financial confidence. We can evaluate your situation, explain exemptions, and ensure you meet all procedural requirements.