Important Legal Requirements for 2026 Bankruptcy

immediately upon filing, through the automated stay. You're behind on your mortgage and desire to keep your homeYour income is above the Colorado average and you don't pass the Chapter 7 suggests testYou have non-exempt equity you desire to protect by paying its value into a plan instead of losing the assetYou have financial obligations that survive Chapter 7 (particular taxes, some domestic assistance arrears) that you require structured time to payYou've submitted Chapter 7 too recently to file once again (see timing rules below)The means test under 11 U.S.C.

apfsc.org

Here's how it works in plain terms: The U.S. Trustee Program releases mean household earnings figures by household size, updated every April and November using Census Bureau information. If your typical month-to-month earnings over the prior six months, annualized, falls at or listed below Colorado's average for your household size, you pass the methods test instantly and may file Chapter 7.

Many above-median filers still get approved for Chapter 7 after these reductions. or you may still have options depending upon the type of financial obligation you carry (the means test only uses to filers whose financial obligations are mainly consumer debts). Because the average earnings figures and IRS cost standards change twice a year, the exact numbers that applied when a buddy or relative submitted may not use to your case today.

Chapter 13 isn't available to everybody despite earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most current inflation modification (reliable April 1, 2025, through March 31, 2028), the limits are separate for protected and unsecured financial obligation, in the low 7 figures combined. There is active, bipartisan legislation pending in Congress that would raise and simplify these limitations into a single combined limit worth enjoying if you're near the present ceiling, especially if a large home loan is what's pressing you over.

How to Stop Wage Garnishment Through 2026 Bankruptcy

This is normally the choosing aspect for Colorado filers. Colorado's exemption statutes safeguard a set amount of equity in your house, car, tools of trade, retirement accounts, and personal home. If your equity in an asset surpasses the exemption, the trustee can offer it and pay you the exempt part but for the large bulk of filers with typical equity levels, everything is secured and nothing is sold.

This is often why higher-equity homeowners or entrepreneur pick Chapter 13 even when they might technically pass the Chapter 7 suggests test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus continuous trustee cost)Often paid up front or quickly after filingFrequently paid through the strategy over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation with no major assets at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You typically must wait 8 years for another Chapter 7 discharge, but might get approved for Chapter 13 sooner (timing guidelines are technical and case-specific) Chapter 13, to treat the default and keep the vehicle Often Chapter 13, though eligibility depends upon the "routine income" requirement Chapter 13's co-debtor stay uses 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 properly but with an avoidable error, can mean losing property you could have kept or paying years longer than necessary. Every financial scenario is various, and the "right" chapter depends upon numbers and facts unique to your household. If you're weighing Chapter 7 vs.

Yes, most of the times you can convert your case from Chapter 13 to Chapter 7 if your scenarios alter, subject to particular restrictions and court approval. Not necessarily. If you're present on your home loan and your home equity is within Colorado's exemption limits, you can generally keep your home in Chapter 7.

It depends on your home earnings compared to Colorado's present typical figures for your home size, plus permitted expenditure reductions if you're above median. Filing either Chapter 7 or Chapter 13 sets off the automated stay, which instantly stops most wage garnishments, collection calls, and suits.

Chapter 13 offers court-enforced defense that personal financial obligation settlement doesn't offer, but it's a longer commitment. Bankruptcy law is fact-specific, and results depend on your individual scenarios.