Learn Colorado's Rules For Garnishment, Liens, and Foreclosure
A lender, collection agent or law firm that owns a collection account is a creditor. The law gives creditors several means of collecting delinquent debt. But before a creditor can start, the creditor must go to court to receive a judgment. See the Bills.com article Served Summons and Complaint to learn more about this process.
The court may grant a judgment to the creditor. A judgment is a declaration by a court the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, a lien on the debtor’s property, and in some states, ask a sheriff to seize the debtor’s personal property. The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which of these tools a judgment-creditor will use depends on the circumstances. We discuss each of these remedies below.
Colorado law is unique in how it treats the life of judgments. A county court judgment is valid 6 years and a district court judgment is valid for 20. Judgments may be renewed for 6 or 20 years, respectively (§ 13-52-102).
The most common remedy judgment-creditors use to enforce judgments is wage garnishment. The judgment-creditor will contact your employer and require it deduct a certain portion of your wages each pay period and send the money to the judgment-creditor.
Colorado exempts 75% of your net wages. A judgment-creditor must give a Colorado consumer notice of a garnishment, after which the consumer has 10 days to file for an exemption. Colorado wage garnishment orders have a six-month life, which can be renewed. Colorado law allows wage garnishment against the self-employed (Colorado § 13-54-104).
Colorado Bank Account Levy
A levy means the creditor has the right to take non-exempt money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied.
Colorado law offers few exemptions for property, including financial accounts (Colorado § 13-54-102). Other states will exempt a certain amount from from levy by judgment-creditors, but Colorado allows judgment-creditors to zero-out a consumer's checking or savings accounts unless the funds come from an exempt source (see the next section for a list of exemptions). A Colorado judgment-creditor must notify a consumer 10 days before a levy, during which time the consumer has the right to file an exemption.
A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinances the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.
In Colorado, a judgment lien can be attached to real estate or non-exempt personal property. Here are property exemption amounts for Colorado residents (Colorado § 13-54-102):
- A homestead with a value of $60,000 or less is protected from creditors' claims, or $90,000 if the homestead is occupied as a home by an elderly or disabled owner, an elderly or disabled spouse of an owner, or an elderly or disabled dependent of an owner.
- One or more automobiles with a value of up to $5,000. If the vehicle is "kept and used by any elderly or disabled debtor, or by any debtor with an elderly or disabled spouse or dependent" the exemption amount is $10,000.
- Clothing with a value of up to $1,500.
- Jewelry with a value of up to $2,000.
- Books and family pictures with a value of up to $1,500.
- Burial sites of any value.
- Household goods with a value of up to $3,000.
- Provision and fuel with a value of up to $600.
- Agriculture livestock and implements.
- Money from a pension or family or child support.
- A professional's library with a value up to $3,000.
- A life insurance policy with a cash surrender value of up to $100,000.
- Proceeds from personal injury claims.
- Federal or state tax refunds.
- Health aids prescribed by a professional.
- Domestic, family or child support payments.
A Colorado judgment that requires the payment of money becomes a lien upon the judgment-debtor's real property when the judgment-creditor files a transcript of the judgment in county where the real estate is located. A lien has a 6-year life, but may be renewed (Colorado § 13-52-102).
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Colorado Statute of Limitations
Each state or commonwealth has its own statute of limitations on civil matters. Here are some of Colorado’s statutes of limitations for consumer-related issues:
|Credit card||3 or 6||§ 13-80-101 or § 13-80-103.5|
|Spoken contract||6||§ 13-80-103.5 (See § 38-10-124)|
|Written contract||6||§ 13-80-103.5|
|Judgment*||6 or 20||§ 13-52-102|
|* Can be renewed for an additional 6 or 20 years.|
When the statute of limitations clock starts depends on the circumstances and the particular statute. Generally, it starts when the action accrues, which means the date of breach. For credit card debt, this means the date the payment was missed. A statute of limitations clock may be paused (called "tolled") under some circumstances.
A lender may foreclose judicially or non-judicially in Colorado. The common method is non-judicial. Colorado does not have a mortgage anti-deficiency law. Lenders must bid fair market value on the property in the event that total debt owed exceeds the property value less reasonable expenses; if the borrower can show lenders bid less than fair market value, the borrower can avoid a deficiency judgment. See Chapter 315, Property, which is found in Colorado Revised Statutes § 13-80-103.5 for details, and Colorado Title 38, Articles 37-39.
Colorado Collection Agency Law
Collection agents must be licensed in Colorado.
Two laws protect Colorado residents. The Colorado Fair Debt Collection Practices Act (CFDCPA) mirrors the FDCPA in almost all respects. The Colorado Uniform Consumer Credit Code prohibits original creditors, which includes original creditors and collection agents from engaging in "extortionate and unconscionable" debt collection practices. These include:
- Extending credit with the understanding that a delay in repayment will result in violence or harm against the consumer, the consumer's reputation or property
- Using or threatening to use force or violence against the consumer
- Harassing the consumer by calling the consumer frequently or at unusual hours
- Simulating legal process or appearing to be a governmental agency
- Causing or threatening injury to the consumer's reputation by threatening to disclose creditworthiness
- Communicating with the consumer's employer about the credit issue before a judgment has been reached
Violation of the CFDCPA or Colorado Uniform Consumer Credit Code are not criminal matters. You can take two actions if a collection agent or original creditor violates the CFDCPA or Colorado Uniform Consumer Credit Code:
- File a complaint with the Colorado Attorney General’s office
- File a lawsuit against the collection agent or original creditor on your own
Consult with a lawyer to discuss filing a civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you. Learn more about the CFDCPA in Colorado Revised Statutes § 12-14-101 to 12-14-137, and the Colorado Uniform Consumer Credit Code in Colorado Revised Statutes § 5-5-108 to 5-5-109.
Consult with a Colorado lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.