Key Impacts of Filing Bankruptcy

right away upon filing, through the automated stay. You lag on your mortgage and desire to keep your homeYour income is above the Colorado typical and you do not pass the Chapter 7 indicates testYou have non-exempt equity you wish to protect by paying its worth into a plan instead of losing the assetYou have financial obligations that survive Chapter 7 (specific taxes, some domestic assistance arrears) that you require structured time to payYou have actually submitted Chapter 7 too just recently to submit again (see timing rules 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 mean household income figures by home size, upgraded every April and November using Census Bureau information. If your typical monthly income over the previous six months, annualized, falls at or listed below Colorado's mean for your household size, you pass the methods test automatically and might file Chapter 7.

Lots of above-median filers still receive Chapter 7 after these deductions. or you might still have alternatives depending on the type of financial obligation you carry (the ways test only applies to filers whose debts are mostly consumer financial obligations). Because the median earnings figures and IRS expenditure requirements alter two times a year, the precise numbers that used when a friend or relative filed might not apply to your case today.

Chapter 13 isn't offered to everyone despite income there are statutory financial obligation ceilings under 11 U.S.C. 109(e). Since the most recent inflation modification (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 simplify these limitations into a single combined limit worth seeing if you're near the current ceiling, particularly if a big home loan is what's pressing you over.

Key Impacts of 2026 Bankruptcy

This is normally the deciding element for Colorado filers. Colorado's exemption statutes safeguard a set amount of equity in your house, car, tools of trade, pension, and personal effects. If your equity in an asset exceeds the exemption, the trustee can sell it and pay you the exempt portion however for the big bulk of filers with average equity levels, everything is safeguarded and nothing is sold.

This is frequently why higher-equity property owners or entrepreneur select Chapter 13 even when they may 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)Often paid up front or shortly after filingFrequently paid through the strategy over timeStays ten years from filingStays 7 years from filingUnsecured debt with no significant properties at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You generally must wait 8 years for another Chapter 7 discharge, however might certify for Chapter 13 earlier (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 spent years administering cases as the Trustee -seeing firsthand which choices held up and which ones backfired.

Filing the wrong chapter, or filing properly however with a preventable mistake, can mean losing residential or commercial property you might have kept or paying years longer than required. Every financial circumstance is various, and the "best" chapter depends on numbers and realities special to your home. If you're weighing Chapter 7 vs.

Yes, in many cases you can transform your case from Chapter 13 to Chapter 7 if your circumstances change, based on certain restrictions and court approval. Not always. If you're existing on your home mortgage and your home equity is within Colorado's exemption limitations, you can normally keep your home in Chapter 7.

It depends upon your household earnings compared to Colorado's present median figures for your family size, plus permitted expense reductions if you're above typical. These figures change 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 activates the automated stay, which right away stops most wage garnishments, collection calls, and claims.

Chapter 13 offers court-enforced defense that private financial obligation settlement doesn't provide, but it's a longer commitment. This short article is for basic informational purposes just and does not make up legal recommendations. Bankruptcy law is fact-specific, and results depend upon your individual circumstances. Contact our workplace to discuss your scenario straight.