Long-Term Impacts of Filing Bankruptcy

immediately upon filing, through the automatic stay. You lag on your mortgage and wish to keep your homeYour earnings is above the Colorado median and you don't pass the Chapter 7 indicates testYou have non-exempt equity you wish to safeguard 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 have actually filed Chapter 7 too recently to submit once 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 average family earnings figures by family size, updated every April and November using Census Bureau data. If your typical regular monthly earnings over the prior 6 months, annualized, falls at or below Colorado's typical for your household size, you pass the methods test automatically and may submit Chapter 7.

Many above-median filers still receive Chapter 7 after these deductions. or you might still have options depending on the type of debt you carry (the ways test just uses to filers whose debts are mostly consumer debts). Because the median income figures and IRS cost requirements change twice a year, the precise numbers that used when a pal or relative filed might not apply to your case today.

Chapter 13 isn't available to everybody regardless of 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 limitations are different for protected and unsecured debt, in the low seven figures integrated. There is active, bipartisan legislation pending in Congress that would raise and simplify these limits into a single combined limit worth seeing if you're near the existing ceiling, particularly if a large mortgage is what's pushing you over.

Is Chapter 13 in 2026?

This is normally the choosing element for Colorado filers. Colorado's exemption statutes protect a set quantity of equity in your house, automobile, tools of trade, retirement accounts, and individual residential or commercial property. If your equity in a possession goes beyond the exemption, the trustee can offer it and pay you the exempt part however for the large bulk of filers with typical equity levels, everything is protected and nothing is sold.

This is often why higher-equity property owners or entrepreneur pick 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 properties at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You typically should wait 8 years for another Chapter 7 discharge, but might get approved for Chapter 13 quicker (timing rules 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 offers defense Chapter 7 does notI spent years administering cases as the Trustee -seeing direct which decisions held up and which ones backfired.

Filing the incorrect chapter, or filing correctly but with a preventable mistake, can suggest losing property you could have kept or paying years longer than necessary. If you're weighing Chapter 7 vs.

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Comparing Chapter 7 Vs Chapter 13 in 2026

Yes, in most cases you can convert your transform from Chapter 13 to Chapter 7 if your circumstances changeScenarios alter to certain restrictions specific limitations approval.

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

Chapter 13 deals court-enforced security that personal financial obligation settlement doesn't offer, however it's a longer dedication. This post is for basic educational functions only and does not make up legal recommendations. Bankruptcy law is fact-specific, and results depend upon your private situations. Contact our office to discuss your situation directly.