Jerry Kopel


"The general assembly shall pass liberal homestead and exemption laws."

Those ten words are the total of Section 1 of Article 18 in what is probably the shortest section in the state constitution.

The word "liberal" has nothing to do with politics. In Black's Law Dictionary it means "free in giving, generous, not mean or narrow-minded, not literal or strict."

Unfortunately, the legislature has ignored that language which was adopted in the original 1876 constitution and the legislature has been narrow-minded as to homesteads and exemptions ever since.

This year, with the preparation by, and backing of the Colorado Bar Association, Sen. Ed Perlmutter, D-Golden and Rep. Matt Smith, R-Grand Junction are trying to follow the constitutional precept in their bill SB 3, "Concerning Exempt Assets".

Back in 1868, while Colorado was still a territory, the homestead exemption was $2,000. It slowly increased to $5,000, and then $7,500 in 1973, more than a hundred years after it was set at $2,000. In 1981, in a bill sponsored by then-Sen. Sam Zakhem, the amount was raised to $20,000. And the present law (HB 1233) which I sponsored in 1991, increased the homestead exemption to $30,000.

The Perlmutter-Smith bill began as a $60,000 homestead exemption, but was unfortunately lowered in Finance Committee to $45,000, which is the figure used when the bill passed the Senate.

Of course, the homestead exemption only applies to the equity in the home, which may not even exist for many Coloradans who have both first and second mortgages.

Colorado ranks among the lower echelon of states as to the amount of homestead exemption permitted. Texas and Florida are on the other end, allowing persons who meet a statutory period of residence to claim huge multi-million dollar mansions and ranches complete with swimming pools and tennis courts as "homesteads" out of reach by unsecured creditors.

Meanwhile, Congress has a bankruptcy bill in conference committee. In the Senate version, the homestead exemption permitted in a bankruptcy filing would be $100,000. The House version is $250,000. Both are drastically lower than the Florida and Texas versions but much higher than anything Colorado has attempted. At the present rate of increase, Colorado won't reach $100,000 until 2030.

There are other exemptions for consumer-debtors in Colorado under CRS 13-54-102 and they are also not "liberal". Here are some examples comparing 1883 exemptions with the year 2000, a 117 year difference:

Farmers' animal and tools: In 1883, $250; in 2000, $2,000. Library of professional person: In 1883, $300; in 2000, $1,500. Tools of trade: In 1883, $200; in 2000, $1,500.

SB 3 raises the exemptions for much of the personal property needed to get a fresh start in life. If personal property is secured, the creditor gets the property. An exemption only applies to the equity above the debt. The last time there was a general repeal and re-enactment to raise most of the exemptions was 1981.

Some exemptions were doubled in the original SB 3, but a few others went higher. The exemption for farmers' stock and equipment was increased from $2,000 to $25,000. Considering the number of farms that have gone under in recent years, the higher exemption makes sense.

In the future, the exemption amounts would be tied to adjustments based on the Consumer Price Index for the Denver-Boulder area.

In 1981, Colorado gave up the right of its citizens to use exemptions provided in federal law for bankruptcy filings by passing CRS 13-54-107, in return for an increase in the exemptions provided by state law. The Colorado Revised Statutes footnotes summarized one federal court decision in Colorado that followed the 1981 law:

"When Colorado revised its exemption schedules (in 1981), it sought to meet congressional criticism that most of the state exemption laws are outmoded, designed for more rural times, and hopelessly inadequate to serve the needs of and provide a fresh start for modern urban dwellers."

Nineteen years later, the state exemption laws are again outmoded and hopelessly inadequate. SB 3 is a start in the right direction but it would certainly be proper to eventually raise state exemptions to a standard equivalent to federal law, or else repeal CRS 13-54-107.

One thing hasn't changed in 139 years. Farmers and miners and their wives lived hard lives back in 1861, so the territorial legislature included sites of burial of the dead without any statement as to cost, among items exempt from creditors. Today, the same exemption applies, only it is listed as "burial sites, including spaces in mausoleums, to the extent of one site or space for the debtor and each dependent.

There has been one distinct change over the past 139 years. In 1861, debtors were entitled to keep a seat or pew in any house or place of public worship. That is no longer in the statutes.

Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.

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