Choosing Chapter 7 for Your 2026 Benefit

right away upon filing, through the automatic stay. You're behind on your home loan and wish to keep your homeYour income is above the Colorado average and you do not pass the Chapter 7 means testYou have non-exempt equity you wish to protect by paying its worth into a strategy instead of losing the assetYou have debts that endure Chapter 7 (specific taxes, some domestic assistance arrears) that you need structured time to payYou've filed Chapter 7 too recently to file again (see timing rules listed 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 releases median family income figures by family size, updated every April and November using Census Bureau data. If your typical regular monthly income over the previous 6 months, annualized, falls at or below Colorado's average for your home size, you pass the means test immediately and may submit Chapter 7.

Many above-median filers still get approved for Chapter 7 after these deductions. or you may still have alternatives depending on the kind of financial obligation you bring (the ways test only uses to filers whose financial obligations are mainly customer financial obligations). Because the average income figures and internal revenue service expenditure requirements change two times a year, the specific numbers that used when a good friend or relative filed might not use to your case today.

Chapter 13 isn't available to everyone regardless of income there are statutory financial obligation ceilings under 11 U.S.C. 109(e). As of the most current inflation modification (reliable April 1, 2025, through March 31, 2028), the limits are different for secured and unsecured financial obligation, in the low seven figures integrated. There is active, bipartisan legislation pending in Congress that would raise and simplify these limitations into a single combined threshold worth seeing if you're near the present ceiling, especially if a big home mortgage is what's pressing you over.

Is Chapter 13 in 2026

This is normally the deciding element for Colorado filers. Colorado's exemption statutes protect a set amount of equity in your house, automobile, tools of trade, retirement accounts, and personal home. If your equity in a property surpasses the exemption, the trustee can sell it and pay you the exempt portion but for the large bulk of filers with average equity levels, everything is safeguarded and absolutely nothing is sold.

This is typically why higher-equity house owners or entrepreneur choose Chapter 13 even when they may technically pass the Chapter 7 indicates test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee fee)Frequently paid up front or shortly after filingFrequently paid through the plan over timeStays ten years from filingStays 7 years from filingUnsecured debt with no significant possessions at riskSaving a home, treating financial obligations, above-median earnings Chapter 13 Chapter 7 You usually should wait 8 years for another Chapter 7 discharge, however might qualify for Chapter 13 faster (timing guidelines are technical and case-specific) Chapter 13, to cure the default and keep the automobile Frequently Chapter 13, though eligibility depends on the "routine earnings" requirement Chapter 13's co-debtor stay uses security Chapter 7 does notI spent 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 suggest losing home you could have kept or paying years longer than needed. If you're weighing Chapter 7 vs.

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Key Impacts of 2026 Bankruptcy

Yes, in most cases a lot of can convert your transform from Chapter 13 to Chapter 7 if your circumstances changeSituations alter to certain restrictions particular court approval.

It depends on your household income compared to Colorado's present mean figures for your family size, plus allowed expense deductions if you're above average. Filing either Chapter 7 or Chapter 13 sets off the automated stay, which instantly stops most wage garnishments, collection calls, and claims.

Chapter 13 offers court-enforced security that personal financial obligation settlement does not offer, however it's a longer commitment. This post is for general informational purposes only and does not make up legal advice. Bankruptcy law is fact-specific, and outcomes depend on your individual situations. Contact our office to discuss your scenario directly.