Filing for bankruptcy can be an overwhelming decision, especially when you're concerned about losing your home. If you're a Colorado homeowner facing financial difficulties, understanding how bankruptcy may affect your property is crucial. At the Law Offices of Andrew F. McKenna, P.C., we help individuals navigate bankruptcy law and understand their rights when it comes to their home.

Colorado’s Homestead Exemption

Colorado provides a homestead exemption that protects a portion of your home equity in bankruptcy. As of 2025, this exemption allows you to protect up to:

• $250,000 of equity in your primary residence, or
• $350,000 if you, your spouse, or a dependent is elderly (60+) or disabled.

This means that if your home equity is less than the exemption amount, you can typically keep your home, especially in a Chapter 7 bankruptcy. However, if your equity exceeds this amount, the bankruptcy trustee may be able to sell your home to pay creditors.

Chapter 7 vs. Chapter 13 Bankruptcy

• Chapter 7: Often called “liquidation bankruptcy,” this form discharges many unsecured debts. You may keep your home if you're current on your mortgage and your equity is within the homestead exemption. If not, the trustee could sell it.
• Chapter 13: This type allows you to keep your home while repaying some or all of your debts over 3–5 years. It's a helpful option if you're behind on mortgage payments but want to catch up through a court-approved plan.

What If You’re Behind on Payments?

If you’ve fallen behind on your mortgage, Chapter 13 may offer a way to avoid foreclosure by spreading out missed payments over time. Chapter 7 won’t stop foreclosure permanently but may delay it temporarily.

Second Mortgages and Liens

In some Chapter 13 cases, it's possible to eliminate junior liens (like second mortgages) if your home is worth less than the amount owed on the first mortgage. This can provide significant relief to struggling homeowners.

Important Considerations

• Filing for bankruptcy triggers an automatic stay, which stops foreclosure and collection efforts.
• You must continue paying your mortgage if you wish to keep the home.
• Every case is unique, and timing, type of bankruptcy, and property value all play a role.

At the Law Offices of Andrew F. McKenna, P.C., we assist Colorado residents in understanding how bankruptcy impacts their homeownership and help create a strategy that protects what matters most. If you're worried about losing your home, don’t navigate this alone—reach out for guidance tailored to your situation.