A Guide to 2026 Chapter 13 Filing

immediately upon filing, through the automated stay. You lag on your mortgage and want 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 safeguard by paying its value into a plan rather of losing the assetYou have debts that endure Chapter 7 (particular taxes, some domestic assistance financial obligations) that you need structured time to payYou have actually submitted Chapter 7 too recently to file again (see timing rules listed below)The ways test under 11 U.S.C.

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Here's how it operates in plain terms: The U.S. Trustee Program publishes typical family earnings figures by home size, updated every April and November utilizing Census Bureau information. If your typical monthly income over the previous 6 months, annualized, falls at or listed below Colorado's mean for your family size, you pass the ways test immediately and may file Chapter 7.

Many above-median filers still receive Chapter 7 after these deductions. or you might still have options depending upon the type of debt you bring (the methods test just uses to filers whose financial obligations are mostly consumer financial obligations). Since the typical income figures and internal revenue service expense requirements change twice a year, the specific numbers that applied when a good friend or relative filed may not apply to your case today.

Chapter 13 isn't offered to everybody regardless of income there are statutory debt ceilings under 11 U.S.C. 109(e). As of the most current inflation change (effective April 1, 2025, through March 31, 2028), the limitations 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 streamline these limits into a single combined limit worth watching if you're near the existing ceiling, particularly if a big mortgage is what's pressing you over.

How to Stop Garnishment Through 2026 Bankruptcy

This is generally the deciding aspect for Colorado filers. Colorado's exemption statutes safeguard a set amount of equity in your house, vehicle, tools of trade, retirement accounts, and personal effects. If your equity in an asset surpasses the exemption, the trustee can offer it and pay you the exempt portion however for the big bulk of filers with average equity levels, everything is protected 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 suggests test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee charge)Frequently paid up front or shortly after filingFrequently paid through the strategy over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any major properties at riskSaving a home, curing arrears, above-median income Chapter 13 Chapter 7 You usually must wait 8 years for another Chapter 7 discharge, however might get approved for Chapter 13 quicker (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the cars and truck Often Chapter 13, though eligibility depends on the "routine income" requirement Chapter 13's co-debtor stay uses protection Chapter 7 does notI spent years administering cases as the Trustee -seeing direct which decisions held up and which ones backfired.

Submitting the wrong chapter, or filing properly however with an avoidable mistake, can imply losing home you might have kept or paying years longer than necessary. Every financial situation is different, and the "ideal" 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 situations alter, based on particular restrictions and court approval. Not always. If you're existing on your mortgage and your home equity is within Colorado's exemption limits, you can generally keep your home in Chapter 7.

It depends on your family earnings compared to Colorado's current mean figures for your household size, plus allowed expense reductions if you're above mean. Filing either Chapter 7 or Chapter 13 activates the automated stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

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