A Step-By-Step 2026 Chapter 13 Support

right away upon filing, through the automatic stay. You're behind on your home loan and want to keep your homeYour income is above the Colorado median and you do not pass the Chapter 7 indicates testYou have non-exempt equity you want to safeguard by paying its worth into a plan rather of losing the assetYou have financial obligations that endure Chapter 7 (certain taxes, some domestic assistance financial obligations) that you require structured time to payYou have actually filed Chapter 7 too recently to file again (see timing guidelines below)The means test under 11 U.S.C.

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Here's how it works in plain terms: The U.S. Trustee Program publishes median household earnings figures by household size, updated every April and November using Census Bureau information. If your average monthly income over the previous six months, annualized, falls at or below Colorado's mean for your household size, you pass the methods test automatically and may file Chapter 7.

Many above-median filers still get approved for Chapter 7 after these reductions. or you might still have alternatives depending upon the kind of debt you bring (the methods test just uses to filers whose debts are mainly customer debts). Due to the fact that the mean earnings figures and internal revenue service expense requirements change twice a year, the specific numbers that applied when a friend or relative filed may not use to your case today.

Chapter 13 isn't available to everybody no matter earnings there are statutory financial obligation ceilings under 11 U.S.C. 109(e). Since the most current inflation change (effective April 1, 2025, through March 31, 2028), the limits are different for secured and unsecured debt, in the low seven figures combined. There is active, bipartisan legislation pending in Congress that would raise and streamline these limitations into a single combined limit worth enjoying if you're near the existing ceiling, particularly if a big mortgage is what's pushing you over.

Legal Support for 2026 Bankruptcy Filers

This is generally the deciding element for Colorado filers. Colorado's exemption statutes protect a set quantity of equity in your house, car, tools of trade, retirement accounts, and personal residential or commercial property. If your equity in a possession exceeds the exemption, the trustee can offer it and pay you the exempt part however for the big bulk of filers with average equity levels, everything is secured and nothing is sold.

This is often why higher-equity property owners or company owner choose Chapter 13 even when they might technically pass the Chapter 7 means test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee cost)Typically paid up front or quickly after filingFrequently paid through the strategy over timeStays ten years from filingStays 7 years from filingUnsecured debt without any major possessions at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You typically must wait 8 years for another Chapter 7 discharge, however may receive Chapter 13 earlier (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the cars and truck Often Chapter 13, though eligibility depends upon the "regular income" requirement Chapter 13's co-debtor stay offers security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which choices held up and which ones backfired.

Submitting the wrong chapter, or filing correctly but with a preventable mistake, can imply losing residential or commercial property you could have kept or paying years longer than necessary. If you're weighing Chapter 7 vs.

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Choosing Chapter 13 for Your 2026 Needs

Yes, in most cases you can convert your transform from Chapter 13 to Chapter 7 if your circumstances changeScenarios subject to certain restrictions and court approval.

It depends on your home income compared to Colorado's existing average figures for your family size, plus enabled cost deductions if you're above mean. These figures alter two times a year, so a precise answer needs examining the chart in result on your filing date. Yes. Filing either Chapter 7 or Chapter 13 triggers the automatic stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

Chapter 13 deals court-enforced protection that private financial obligation settlement does not provide, but it's a longer commitment. Bankruptcy law is fact-specific, and results depend on your private circumstances.