Navigating Between Chapter 7 and 7 for 2026

right away upon filing, through the automatic stay. You're behind on your home mortgage and desire to keep your homeYour income is above the Colorado average and you don't pass the Chapter 7 implies testYou have non-exempt equity you want to safeguard by paying its value into a plan instead of losing the assetYou have debts that survive Chapter 7 (specific taxes, some domestic assistance arrears) that you require structured time to payYou have actually submitted Chapter 7 too recently to file again (see timing rules listed below)The methods test under 11 U.S.C.

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Here's how it operates in plain terms: The U.S. Trustee Program releases mean family earnings figures by household size, updated every April and November using Census Bureau data. If your typical monthly earnings over the previous 6 months, annualized, falls at or below Colorado's typical for your family size, you pass the methods test instantly and might submit Chapter 7.

Many above-median filers still get approved for Chapter 7 after these reductions. or you might still have alternatives depending on the type of debt you bring (the ways test just uses to filers whose financial obligations are primarily customer debts). Since the median earnings figures and IRS expense standards change twice a year, the exact numbers that used when a buddy or relative filed may not apply to your case today.

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

Legal Support for 2026 Bankruptcy Filers

This is generally the deciding element for Colorado filers. Colorado's exemption statutes safeguard a set amount of equity in your house, lorry, tools of trade, pension, and individual property. If your equity in a property goes beyond the exemption, the trustee can sell it and pay you the exempt part but for the big bulk of filers with typical equity levels, whatever is secured and absolutely nothing is offered.

This is typically why higher-equity house owners or business owners pick 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 cost)Often paid up front or quickly after filingFrequently paid through the plan over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any major possessions at riskSaving a home, treating defaults, above-median earnings Chapter 13 Chapter 7 You typically should wait 8 years for another Chapter 7 discharge, however may get approved for Chapter 13 quicker (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the vehicle Typically Chapter 13, though eligibility depends on the "regular income" requirement Chapter 13's co-debtor stay provides security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which decisions held up and which ones backfired.

Submitting the incorrect chapter, or filing correctly however with an avoidable mistake, can imply losing residential or commercial property you might have kept or paying years longer than required. Every financial scenario is different, and the "ideal" chapter depends upon numbers and realities distinct to your family. 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 situations change, based on specific constraints and court approval. Not always. If you're current on your mortgage and your home equity is within Colorado's exemption limitations, you can generally keep your home in Chapter 7.

It depends on your home earnings compared to Colorado's existing median figures for your household size, plus permitted expense deductions if you're above typical. Filing either Chapter 7 or Chapter 13 triggers the automated stay, which instantly stops most wage garnishments, collection calls, and claims.

Chapter 13 deals court-enforced defense that personal financial obligation settlement doesn't offer, but it's a longer commitment. This article is for general informational functions just and does not make up legal advice. Bankruptcy law is fact-specific, and results depend on your private scenarios. Contact our workplace to discuss your situation straight.